VOLV AB Volvo (MM)

Regulatory News: -- Strong sales increase in the fourth quarter, up 25% to SEK 84.6 billion (67.6) Net sales for the full year increased by 10% to SEK 285.4 billion (258.8) -- In the fourth quarter, operating income rose 12% to SEK 5,775 M (5,170) Operating income for the full year rose 9% to SEK 22,231 M (20,399) -- In the fourth quarter, income for the period rose 11% to SEK 4,094 M (3,701) Income for the year declined by 8% to SEK 15,028 M (16,318) -- In the fourth quarter, diluted earnings per share rose to SEK 2.00 (1.83) Diluted earnings per share for the full year amounted to SEK 7.37 (8.03) -- The Board of Directors proposes an ordinary dividend of SEK 5.50 per share -- In the fourth quarter, the Industrial Operations had a very strong operating cash flow amounting to SEK 12.4 billion (7.4) -0- *T Volvo Group Fourth quarter Year SEK M 2007 2006 2007 2006(1) Change Net sales Volvo Group 84,556 67,627 285,405 258,835 10% Operating income Volvo Group 5,775 5,170 22,231 20,399 9% Operating income Industrial operations 5,397 4,798 20,583 18,713 10% Operating income Customer Finance 378 372 1,649 1,686 (2%) Operating margin Volvo Group 6.8 7.6 7.8 7.9 Income after financial items 5,609 5,226 21,557 20,299 6% Income for the period 4,094 3,701 15,028 16,318 (8%) Diluted earnings per share, SEK 2.00 1.83 7.37 8.03 Return on shareholders' equity, % 18.1 19.6 1) 2006 included a reversal of a valuation reserve for deferred taxes and an adjustment of goodwill. As an effect, operating income in 2006 was negatively affected in the amount of SEK 1,712 M, while income taxes decreased by SEK 2,048 M. The total effect on income for the period was positive in the amount of SEK 336 M. *T CEO's comments - strong growth and favorable profitability The Volvo Group concluded an intense 2007 with a fourth quarter in which sales and operating income reached record levels. During the year we carried out several major acquisitions, established a strong presence in Asia, advanced our positions in important product segments, launched many new products and managed widely shifting demand trends in our main markets - continued growth in Europe and Asia and a sharp decline in North America. Following the acquisitions of Nissan Diesel, Lingong and Ingersoll Rand's road development division, we now have a significant industrial structure in Asia, with a presence in Japan, China and, when the expected cooperation with Eicher Motors is in operation, also in India. These are rapidly growing markets and we want to be part of that growth. Favorable level of underlying profitability In the fourth quarter, sales increased by 25% to SEK 84.6 billion and operating income rose 12% to SEK 5.8 billion. The operating margin of 6.8% was negatively affected by the development in North America, integration expenses, which initially yield lower profitability in acquired companies, and a provision for engine-related warranty expenses in North America amounting to SEK 370 M. The underlying profitability remained at a favorable level, which is a reflection on the positive development in most of our markets. During the fourth quarter, our industrial operations also had a very strong operating cash flow of SEK 12.4 billion. For the full year, the Group's sales increased by 10% to slightly more than SEK 285 billion, while operating income was up 9% to more than SEK 22 billion. The split market conditions are most apparent in our truck operations, in which nearly all markets continued to show favorable development, with the exception of North America and Japan. We have good stability and high profitability in Europe, where we increased deliveries during the autumn, despite already strained production. We are expanding production capacity, particularly against the background of very high demand in Eastern Europe. Following the acquisition of Nissan Diesel, Asia has grown to become our second largest truck market and we have continued high expectations about development there. In Asia, truck deliveries tripled in the fourth quarter. In North America, we introduced a new generation of engines during the year that comply with the world's most stringent emission legislation, and simultaneously implemented adaptations in the industrial system. Combined with weak demand, these measures affected profitability. We have adapted the operations to suit market conditions and have a high level of preparedness for handling changes in demand. On February 1, the members of the UAW union at the New River Valley plant decided to go on strike, and production at the plant has been halted. In the Group's other engine and truck plants in North America there is a temporary agreement since the old agreement expired. We estimate that the truck market in Europe will grow by 5-10% compared with 2007, with the industry's delivery capacity as the limiting factor. The North American truck market is difficult to assess, but we estimate that it will be on about the same level as in 2007. Intensive year for Construction Equipment Construction Equipment made major advances in Asia following the acquisition of Lingong and Ingersoll Rand's road development division. Product renewal was substantial during the year. The product offering increased by 100 products from acquired companies, while at the same time new generations of existing machinery were launched - a total of 46. During the fourth quarter, Volvo CE had a very strong growth but profitability was impacted by increased production costs and costs related to the integration of acquired companies. Buses have the new Euro 4-engines based on the new engine platforms in place and are far ahead in the environment area, including hybrid buses in the commercial phase. Buses are now being integrated closer to the truck companies and Volvo 3P, with a focus on joint solutions, reduced costs and increased profitability. Volvo Penta continues to capture market shares in the marine segment and Volvo Aero ended the year strongly. Volvo Financial Services has stable profitability and delivered a return on equity of 15.9%. Profitability generates shareholder value In 2007, Volvo transferred slightly more than SEK 20 billion to shareholders through dividends and share redemptions. For 2007, the Board of Directors proposes an ordinary dividend of SEK 5.50 per share, corresponding to 74% of the year's profit. If the Annual General Meeting approves the dividend proposal, it would mean that the ordinary dividend has continuously increased by an average of 21% annually for the last 15 years. Profitability for the Volvo Group during 2007 will also benefit employees. They work hard for the continued successful development of the Group and will receive a distribution of SEK 450 M in the profit-sharing system. We have entered 2008 with strong order books, a very strong product program and with an overall good demand in our main markets outside North America. The focus is now on ensuring our delivery capacity with a competitive cost base and on increasing productivity. -0- *T Leif Johansson President and CEO *T This information was brought to you by Cision http://newsroom.cision.com Regulatory News: � Strong sales increase in the fourth quarter, up 25% to SEK 84.6 billion (67.6) Net sales for the full year increased by 10% to SEK 285.4 billion (258.8) � In the fourth quarter, operating income rose 12% to SEK 5,775 M (5,170) Operating income for the full year rose 9% to SEK 22,231 M (20,399) � In the fourth quarter, income for the period rose 11% to SEK 4,094 M (3,701) Income for the year declined by 8% to SEK 15,028 M (16,318) � In the fourth quarter, diluted earnings per share rose to SEK 2.00 (1.83) Diluted earnings per share for the full year amounted to SEK 7.37 (8.03) � The Board of Directors proposes an ordinary dividend of SEK 5.50 per share � In the fourth quarter, the Industrial Operations had a very strong operating cash flow amounting to SEK 12.4 billion (7.4) Volvo Group � Fourth quarter � Year SEK M 2007 � 2006 2007 � 20061) � � Change Net sales Volvo Group 84,556 67,627 285,405 258,835 10 % Operating income Volvo Group 5,775 5,170 22,231 20,399 9 % Operating income Industrial operations 5,397 4,798 20,583 18,713 10 % Operating income Customer Finance 378 372 1,649 1,686 (2 %) Operating margin Volvo Group 6.8 7.6 7.8 7.9 Income after financial items 5,609 5,226 21,557 20,299 6 % Income for the period 4,094 3,701 15,028 16,318 (8 %) Diluted earnings per share, SEK 2.00 1.83 7.37 8.03 Return on shareholders' equity, % 18.1 19.6 1) 2006 included a reversal of a valuation reserve for deferred taxes and an adjustment of goodwill. As an effect, operating income in 2006 was negatively affected in the amount of SEK 1,712 M, while income taxes decreased by SEK 2,048 M. The total effect on income for the period was positive in the amount of SEK 336 M. CEO�s comments � strong growth and favorable profitability The Volvo Group concluded an intense 2007 with a fourth quarter in which sales and operating income reached record levels. During the year we carried out several major acquisitions, established a strong presence in Asia, advanced our positions in important product segments, launched many new products and managed widely shifting demand trends in our main markets � continued growth in Europe and Asia and a sharp decline in North America. Following the acquisitions of Nissan Diesel, Lingong and Ingersoll Rand�s road development division, we now have a significant industrial structure in Asia, with a presence in Japan, China and, when the expected cooperation with Eicher Motors is in operation, also in India. These are rapidly growing markets and we want to be part of that growth. Favorable level of underlying profitability In the fourth quarter, sales increased by 25% to SEK 84.6 billion and operating income rose 12% to SEK 5.8 billion. The operating margin of 6.8% was negatively affected by the development in North America, integration expenses, which initially yield lower profitability in acquired companies, and a provision for engine-related warranty expenses in North America amounting to SEK 370 M. The underlying profitability remained at a favorable level, which is a reflection on the positive development in most of our markets. During the fourth quarter, our industrial operations also had a very strong operating cash flow of SEK 12.4 billion. For the full year, the Group�s sales increased by 10% to slightly more than SEK 285 billion, while operating income was up 9% to more than SEK 22 billion. The split market conditions are most apparent in our truck operations, in which nearly all markets continued to show favorable development, with the exception of North America and Japan. We have good stability and high profitability in Europe, where we increased deliveries during the autumn, despite already strained production. We are expanding production capacity, particularly against the background of very high demand in Eastern Europe. Following the acquisition of Nissan Diesel, Asia has grown to become our second largest truck market and we have continued high expectations about development there. In Asia, truck deliveries tripled in the fourth quarter. In North America, we introduced a new generation of engines during the year that comply with the world�s most stringent emission legislation, and simultaneously implemented adaptations in the industrial system. Combined with weak demand, these measures affected profitability. We have adapted the operations to suit market conditions and have a high level of preparedness for handling changes in demand. On February 1, the members of the UAW union at the New River Valley plant decided to go on strike, and production at the plant has been halted. In the Group�s other engine and truck plants in North America there is a temporary agreement since the old agreement expired. We estimate that the truck market in Europe will grow by 5-10% compared with 2007, with the industry�s delivery capacity as the limiting factor. The North American truck market is difficult to assess, but we estimate that it will be on about the same level as in 2007. Intensive year for Construction Equipment Construction Equipment made major advances in Asia following the acquisition of Lingong and Ingersoll Rand�s road development division. Product renewal was substantial during the year. The product offering increased by 100 products from acquired companies, while at the same time new generations of existing machinery were launched � a total of 46. During the fourth quarter, Volvo CE had a very strong growth but profitability was impacted by increased production costs and costs related to the integration of acquired companies. Buses have the new Euro 4-engines based on the new engine platforms in place and are far ahead in the environment area, including hybrid buses in the commercial phase. Buses are now being integrated closer to the truck companies and Volvo 3P, with a focus on joint solutions, reduced costs and increased profitability. Volvo Penta continues to capture market shares in the marine segment and Volvo Aero ended the year strongly. Volvo Financial Services has stable profitability and delivered a return on equity of 15.9%. Profitability generates shareholder value In 2007, Volvo transferred slightly more than SEK 20 billion to shareholders through dividends and share redemptions. For 2007, the Board of Directors proposes an ordinary dividend of SEK 5.50 per share, corresponding to 74% of the year�s profit. If the Annual General Meeting approves the dividend proposal, it would mean that the ordinary dividend has continuously increased by an average of 21% annually for the last 15 years. Profitability for the Volvo Group during 2007 will also benefit employees. They work hard for the continued successful development of the Group and will receive a distribution of SEK 450 M in the profit-sharing system. We have entered 2008 with strong order books, a very strong product program and with an overall good demand in our main markets outside North America. The focus is now on ensuring our delivery capacity with a competitive cost base and on increasing productivity. Leif Johansson President and CEO This information was brought to you by Cision http://newsroom.cision.com