GOTEBORG, Sweden, April 22, 2002 (PRIMEZONE) -- Volvo (Nasdaq:VOLVY):
2002 2001
Net sales, SEK M 40 385 43 750
Operating income (loss)
excluding restructuring
costs, SEK M (362) 502
Operating income
(loss), SEK M (362) (817)
Income (loss) after
financial items, SEK M (618) (1 251)
Net income (loss), SEK M (746) (801)
Sales growth, % (8) 55
Income (loss) per share
during most recent
12 months period, SEK (3.40) 6.40
Return on shareholders' equity, % (1.6) 2.9
-- The first quarter was characterized by the previously announced
intense efforts to phase in new products and ramp-up production.
This applied particularly to Volvo Trucks and Construction
Equipment with an adverse effect on earnings.
-- The reported operating loss in the first quarter of 2002 was SEK
362 M, compared with a loss of SEK 817 M in the year-earlier
period. Excluding restructuring costs, operating income in the
first quarter of 2001 was SEK 502 M.
-- More than 20,000 orders have been signed for the new Volvo FH and
Volvo FM trucks. The introduction of the new truck ranges has
recently started in Volvo Trucks' International markets. Mack,
Renault and Volvo CE also noted positive trends in order bookings.
-- Cash flow was negative in the first quarter of 2002 as a result of
inventory build- up relating to product introductions. Cash flow
continues to be a priority area within the Volvo Group.
Comments by the Chief Executive Officer
The general market trend continued to affect the Group in different ways during the first quarter. Volvo Penta had another quarter of very strong performance, with increasing sales compared to the first quarter last year. Volvo Penta is successfully creating added value within our engine operations, and continues to compensate the weaker demand by gaining market shares.
In North America, our truck operations were still under pressure. Our competitors large inventories of used trucks continued to hamper prices and sales of new trucks. A slight increase of order intake could indicate that the market has bottomed out. In Europe, the market slowed down, but not as much as the consensual outlook of the industry has anticipated.
The first three months were also characterized by intensive efforts to phase in the new products that were launched in the second half of 2001. This particularly applied to Volvo Trucks, which is currently implementing the most extensive model replacement program ever. As previously announced, this replacement resulted in extensive ramp up activities in both production and for our suppliers. The most intensive part of the replacement process is over and production will start to catch up with orders in the second quarter. The strong demand for the trucks is of course a very positive sign, even if it has not improved earnings yet. More than 20,000 orders have been received since the Volvo FH and Volvo FM models were launched in November 2001. Also Renault Trucks' new model range, with the new Renault Magnum among others, has increased customer demand and increased market shares. This is particularly evident within heavy-duty trucks in France, where Renault Trucks reached a record level in February.
Volvo CE is also going through an important product replacement phase, as the new generation of wheel loaders and excavators are set in production. Volvo CE showed for the first time its extended product range at the ConExpo exhibition in Las Vegas in March. The extended range of compact equipment has been very well received. Volvo CE's order intake increased significantly during the first quarter.
We still suffered from weak demand for new trucks, primarily in North America. The major changes in production had a further adverse effect on deliveries during the quarter. It also affected cash flow during the first quarter. The North American recession also affected Financial Services and Volvo CE in a large extent. Volvo CE was also affected of the downturn in Europe where Germany is particularly weak. Volvo Aero's sales and operating income dropped, mainly depending on the effects from September 11, which started to affect aerospace services during the first quarter. September 11, has also affected Volvo Buses with lower demand for coaches.
All in all, this resulted in 8% lower sales volumes and a clearly unsatisfactory performance for the Group in the first quarter. Order bookings are beginning to improve, however as a result of the extensive product renewal that has been carried out throughout the entire Volvo Group.
To sum up, we are in the middle of a difficult business cycle and are going through an intensive period of ramp up activities. The business environment will continue to be difficult across the Group during 2002. There are few firm signs of immediate recovery. Rising political tensions in the Middle East, and increasing oil prices add concern about the strength and timing of the economic recovery of North America. Consequently, our focus on Business Cycle Management will continue with a specific emphasis on inventory and cash flow. The closing of the truck plant in Winnsboro, US, is proceeding according to plan, as well as the integration process within the truck operations. The readiness to make additional production adjustments and structural adaptations remains.
This is of course also a period of opportunities. We are going to take full advantage of our new products. We are also going to capitalize on increased productivity and structural improvements. Our aim is definitely to further strengthen our position during this recession.
Significant events during the first quarter of 2002
New Structure for Volvo's Truck Operations
Since Volvo's acquisition of Renault V.I. (now named Renault Trucks) and Mack Trucks, a large part of the operations has been focused on immediate integration programs and development of a strategy for the future comprising product plans for both vehicles and engines. Most of this work is now completed and the years immediately ahead will be characterized by implementation of approved strategies and product plans in order to take advantage of the synergies created through the acquisition. A clear focus on customers, based on distinct and powerful brand names, will be decisive. A new organization and management was thus necessary. As of January 7, 2002, Volvo, Mack and Renault Trucks are separate business areas reporting to the Volvo Group Headquarters.
Volvo CE Launched New Products
Volvo Construction Equipment launched its B-series of excavators; a new generation of machines designed to provide more power and productivity and improved operator comfort. Volvo CE also launched the new Volvo E-series of wheel loaders. The new wheel loaders combine high productivity, low fuel consumption and low environmental impact, making them the ideal machines for rock, rehandling and log-handling applications.
Newly developed Volvo Backhoe Loader at the ConExpo
As announced in December 2001, Volvo Construction Equipment showcased its newly developed backhoe loader at the ConExpo tradeshow in Las Vegas, US, March 19-23, 2002. The machines represents the company's new entry into the competitive, worldwide backhoe loader market, where Volvo is entering the most popular size class for these machines.
Volvo Delivers 200 City Buses to Johannesburg
Volvo Bus South Africa Pty began delivery of 200 city buses to Metrobus in Johannesburg, South Africa. The delivery comprises 150 B7TL double-decker buses and 50 standard B7R buses. The delivery marks an important modernization of the city's fleet of buses and also represents a new element on the urban scene prior to this year's major UN summit meeting, where world leaders will discuss environmental and economic development.
Volvo Aero Engine Services lands major overhaul order from Aeroflot Volvo Aero signed an agreement with the Russian airline Aeroflot, whereby Volvo Aero will overhaul Aeroflot's JT9D-59A engines, powering its DC 10-40 aircraft. The initial value of the contract is USD 60 M, making it the largest overhaul contract signed by Volvo Aero since 1998. There is also a potential for a total order value of USD 120 M if Aeroflot decides to add more DC 10-40's to its fleet.
Volvo Penta introduced the new Ocean Series propulsion system During the first quarter of 2002, Volvo Penta introduced the Ocean Series, a new composite marine propulsion system, intended primarily to approach the US saltwater fishing market. The Ocean Series offers unparalleled performance in this segment, which traditionally has relied on outboard propulsion. During the Miami International Boat show in February, the new propulsion system was awarded the prestigious "Innovation Award" for its product excellence.
Net Sales
Net sales of the Volvo Group for the first quarter of 2002 amounted to SEK 40,385 M, compared with SEK 43,750 M in 2001, down 11% adjusted for changes in currency rates and group structure. Ramp-up of production of the newly introduced products within Trucks and Construction Equipment adversely affected deliveries during the first three months of 2002 and were the main reason for the decline in sales. Continued weak volumes in North America also affected net sales.
Net sales of Trucks' amounted to SEK 26,558 M, a decline of 13% adjusted for currency effects compared with the year earlier period. Deliveries of Volvo trucks within Europe declined by 43%, mainly related to the ramp-up of production of the completely new Volvo FH and Volvo FM trucks. Initial start-up effects in production, resulting in delayed deliveries, also affected sales adversely in the first quarter. Deliveries of Renault trucks above 16 tons declined by 11% compared with the year earlier period. The development in North America continued to be weak and the deliveries of Mack trucks declined by 31% and Volvo trucks by 19%.
Net sales of Buses for the first three months of 2002 amounted to SEK 3,165 M, a decline of 1% adjusted for currency effects and the effect of consolidating Prevost/Nova Bus using the proportional method as of the fourth quarter 2001. Net sales for Volvo CE declined by 12%, excluding currency effects, in part due to a negative geographical mix and ramp-up issues relating to the production start of new models. Volvo Penta's sales remained strong in the first quarter with an increase of 9%, excluding currency effects. As a result of the downturn in the airline industry, Volvo Aero's net sales declined by 10%.
During the first quarter of 2002, the Group's net sales in Western Europe declined by 11%, mainly due to the production start of newly introduced products. Net sales in North America were down 13% and South America declined 12%, while significant growth was noted in Eastern Europe, Asia and on other markets.
The distribution of net sales by market is further specified in the table below:
Net sales by market area First three months Change SEK M 2002 2001 in % % of total Western Europe 21 097 23 697 -11 52 Eastern Europe 1 318 1 199 +10 3 North America 11 738 13 441 -13 29 South America 1 211 1 379 -12 3 Asia 2 650 1 941 +37 7 Other markets 2 371 2 093 +13 6 Total 40 385 43 750 (8) 100
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