A Volvo Fact Book

A Volvo Fact Book

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198687

VOLVO

VOlVO FINANCIALAND OPERATING STATISTICS

Contents

No tes

Volvo i n brief

Financial Statistics, Consolidated Financial Statistics, AB Volvo Operating Statistics, Consolidated Administration

Page

9

19

25

In the financialstatements and accompanying tables in the nates, parentheses are used to indicate negative figures.

In toe narrative text, parentheses enclose figures related to 1985 operations.

All amounts are in millions of Swedish kronor (SEK M) un- /ess otherwise indicated.

Last year's edition of Volvo Financial and Operating Statistics contalned a number of changes designed to make this annual presentation more useful and easier to hand le. In the present edition on ly minor changes have been made.

We hope that you will find also this year's issue to be of helpin form i ng your view ofVolvo's total operations and welcome your comments and suggestions for further improvements of this publi- cation.

First quarter figures for 1987 and major events up to May 31,1987 are included.

May 31,1987

Figures in Swedish kronor (SEK) may be transialed at the approximate 1986 year-end exchange rates as follows:

GBP 1.00=SEK 9.99 USD 1.00=SEK 6.82 DEM 1.00 = SEK 3.49 FRF 1.00=SEK 1.06 BEC 1.00=SEK 0.17 CHF 1.00=SEK 4.18 NLG 1.00=SEK 3.09

c

During the years 1976-1986, inflation in Sweden occured at the following annual rates, based upon the Consumer Price Index published by statistiska Centralbyrån:

1976 1 O percent 1982 1977 13 percent 1983 1978 7 percent 1984 1979 1 O percent 1985 1980 14 percent 1986 1981 9 percent

10 percent 9 percent 8 percent 6 percent 3 percent

UJlvo in brief

Htstory and bust!less Pag~ 2 Transport eqLIIpmant

Summary of Group stru~ture, early i987 4

Sales org8.mzshon 5

Capttll e;<pendJtures and fmanc1ng

~rsom1el 6

Researc1"1 and davetopment SuppiJBrs Shareholders

OL/0 IN BRIEF

General

Volvo, which in 60 years has grown to be the targest industrial group, measured by sales, in the Nordie region (Sweden, Norway, Denmark, Finland and lceland), began operations as a ear manufacturer.

History and business

Volvo was incorporated in 1915 as a sub- sidiary of AB SKF, the Swedish ball bearing manufacturer; commenced business in 1926, assembling cars and trucks; and became an independent company in 1935.

Following three years of development work, the first series-produced Volvo roiled out of the Hisingen plant in Göteborg, in April1927. A year later the first cars we re exported to Finland.

Today, Volvo products are sold throughout the world, and more !han 80 percent of Volvo Group sales ofindustrial products are to customers outside Sweden. Western Europe and North America are Volvo's most important markel areas.

Volvo's targest operating seetars are Cars and Trucks. In recent years Food has become a substanfial sector.

The Group also has operations in such other seetars of the transport equipment industry as Aerospace (aircraft and space engines), Marine and industrial engines, and Buses. In addition, the Group is active in Trading and Finance, and has large

holdings in publicly-traded campanies in the areas of pharmaceuticals and biotech- nology, oil and gas, and investment companies.

There has been a considerable broaden- ing and internationalization ofVolvo's oper- ations during the past ten years, accom- panied by strong growth and increased profits. The Group now has a complete and self-sufficient truck operation in the United States and a well-developed ear productian program with in the European Community. A large nu m ber of trucks is also produced in Belgium and Brazil.

Volvo's continuous investments in product development, im proved productian sys- tems, marketing, service, and logistics have reached a new and higher leve l. As in the past, the greater part of capital expenditures has been made in Sweden.

Volvo's strategy is to broaden ils opera- tions with in the product and markel seg- ments of each operating sector. Qualily and safety are guiding principles for Volvo.

The Group also emphasizes the continuous development of its employees to manage technology, participale in the growth of the organization and increase productivity.

The Group's financial strength has increased as a resull of the favorable protitabil ity trend.

Volvo's organization is based on far- reaching decentralization. The re are on ly 130 persons in its Corporate Headquarters.

All operations are carried out through separate campanies serving the various product groups and markel areas.

Volvo's financial objective is consistent profilabil ity with in each operating se et or, and an average minimum return of 20 percent on capital employed in the Group as a whole over an economic cycle.

At year-end 1986, Volvo had approximately 73,150 employees, of whom 54,300 were in Sweden and about 18,850 in other countries.

Volvo has approximately 160,000 share- holders. Volvo shares are trad ed on the Stock Exchanges in St')Ckholm, Tokyo, London, Paris, Frankfurt am Main, Dussel- dorf, Hamburg, Brussels, Antwerp and Oslo, and in the U.S. via NASDAQ.

Volvo shares are also expected to be list- ed du ring the autumn of 1987 on the Zurich, Basel and Geneva, Switzerland stock exchanges.

Transport equipment -Production In Sweden

AB Volvo still has ils headquarters and ils largest plant in Göteborg, Sweden. The first Volvo ear lett the assembly Iine on April14, 1927, and the tirs! truck in 1928. The origi- nal productian models were designed to withstand the rigors of Sweden's rough roads and cold temperatures. This empha- sis on durability has been a feature of Volvo products ever since.

Following the acquisition in 1931 of Sköfde Gjuteri och Mekaniska Verkstad AB (now part ofVolvo Components Corporation),

L . _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ . . , r~

_ _ ___.., - - - ---.a-:- . - - -. .-

2

which manufactures engines for the Volvo vehicles, the Company developed its business from an assembfy to a manu- facturing operation. This was the tirs! of a number of acquisitions of manufacturing companies, form i ng the foundation for the development of the Volvo Group. In 1941 AB Volvo acquired a majority holding in Svenska Flygmotor AB (now Volvo Flyg- motor AB). Köpings Mekaniska Verkstads AB (now part of Volvo Components Corpo- ration) was acquired in 1942, AB Bolinder- Munktell (now Volvo BM AB) in 1950 and Olofström AB (now part of Volvo Car Cor- poration) in 1969.

In the 1960'sVolvo's Swedish carassembly, parts handling and Corporate Headquarters were transferred to a new camplex atT ors- landa, Göteborg, which has since been ex- panded in several steps. The smaller Kalmar assembly plant, designed for com- pletely different productian methods and new forms of work organization, which in effect do awaywith assembly Iine tech- niques, was completed in 1974.

In 1985 it was decided to build an assem- bly plant in Uddevalla. Construction start- ed in 1986. Productian is scheduled to start in the autumn of 1988.

Volvo Trucks are assembled at the Lund by Plant, Göteborg since the late 1920s.At the end of 1981 assembly operations starled in the new ly constructed plant in the Tuve area, Göteborg. Truck cabs are manu- factured in the Umeå plant.

The first Volvo bus chassis we re produced in 1932 and a separate bus chassis plnnl

VOLVO IN BRIEF

in Boråsstarted productian in 1978. A body productian plant in Säffle was included in 1982.

Volvo Penta marine and industrial engines has its orig in in Skövde where the engines are produced. They are converted to the i r special use in Göteborg.

Ever since Volvo Flygmotor was founded in 1930, aircraft engines for the Swedish Arrned Forces have been produced;

som e of t hem under licence agreements with foreign producers such as Pratt &

Whitney Aircraft and General Electric Company.

Cooperation agreements with these com- panies, as weil as the Garrett Corporation, emphasizes the productian of commercial aircraft engines.

Volvo Flygmotor alsodelivers the combus- tion chambersfor the Arian e s pace racket program.

Through other agreements Volvo Flyg- motor has secured a leading position in the markel for ear and boat heaters as weil as hydraulic mach1nery and transmission systems.

The principal productian facilities are located in Sweden, where Volvo has as- se m bly plants for cars, trucks, buses, marine, industnal and aircraft engines, as weil as factorias for productian of such vital components as engines, gearboxes, axles, brakes and bodies.

Volvo starled productian of farm Iraetars in 1944, acquired Volvo BM in 1950 and the two productians were merged.The last farm Iraetor model was out of productian in the summer of 1983.

Volvo BM now is a company specializing in construction e~giJ2ment, supplemented by productian of components for farm tractors and forest machinery for OyVal- met that started in 1982.

After a merger with Clark Michigan Co ear ly in 1985, Volvo B M is no longer con- solidaled in the Volvo Group, but construc- tion equipment is sold through some Volvo sales companies.

Productian outside Sweden

lncreased emphasis on productian outside Sweden in the form of assembly opera- tions, with the main components being delivered from the Group's Swedish fac- torias is a response to the need for close con ta et with major markets. lt al so reflects the natural desire of same countries to have part of the manufacturing or as- semblywork carried out locally.

Volvo has established wholly-owned assembly plants in Belgium, Great Britain, the United States, Canada, Brazil and Australia, and partly owned plants in the Netherlands,lran, Malaysia, Thailand and Peru.

Assemblywork is also earriad out in other local facilities in Greece, Portugal,

Morocco, Kenya, Mozambique, Venezuela and lndonesia.

In cooperation with Peugeot and Renault, Volvo has a factoryat Douvrin in France for the manufacture of ear engines.

Following a cooperation agreement con- cluded in November, 1972, Volvo acquired a one-third interest in DAF Car BV, the Netherlands, in the beginning of 1973. In January 1975, Volvo acquired additional shares in the company and the name was ch ange d to Volvo Car B V.

In May 1981 the Dutch Government in- creased its shareholding in Volvo Car BV to 70 percent through a special issue of newshares and Volvo Car Corporation's holding was reduced to 30 percent Volvo Ca r BV thus achieved an independent position but it continues to conduct its operations in close cooperation with Volvo Car Corporation.

At the end of 1979, Volvo concluded an agreement on industrial cooperation in the passenger ear field with Regi e Nationale des Usines Renault, France. Through this agreement, Renault assumed a minority interest in Volvo Car Corporation. Renault's interest was reduced in 1983 from 15 per- cent to nine percent In December 1985, Volvo acquired the remaining shares from Renault.

A truck and bus assembly plant partially owned byVolvo and Brazilian interests was constructed in Brazil. Assembly of bus

chassis starled at the end of 1979 and truck assembly operations starled in the seeond part of 1980. Since the end of 1985, Volvo do Brasil is a Volvo subsidiary.

The first stage of a planned assembly plant in Chesapeake, Virginia, in the United States was rea dy in 1976. The premises are used as an inspection and transshipment point for im porled Volvo cars and trucks for the eastern part of the United States.

In 1981 Volvo acquired most of the truck manufacturing assets of White Motor Corp.

in the United states and formed a new company, Volvo White Truck Corp., now headquartered in Greensboro, North Carol i n a. The company has two assembly plants (Dublin, Virginia and Og den, Utah) and a cab fadory (Orrville, Ohio).

With a view to further strengthening its position through cooperation with another truck manufacturer,Volvo and General Motors Corporation signed an agreement late in 1986, with respect to coordinating the two companies' heavy truck operations in the North American marketWhile the operations of the U.S. company include both productian and marketing, the Ganadian companywill be exclusively a sales company. Volvo currently owns 76 percent of the s hares of each company.

General Motors has, however, been grant- ed an option to i nerease its holdings to 35 percent Volvo has management re- sponsibility for both companies.

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4

VOLVO IN BRIEF

Summary of Group Structure, early 1987

Transport Equipment-Cars. Volvo's ear business includes the design, manufac- ture, assembly and marketing of a wide range of quality cars; prestige modets, upscaled medium-size family cars, a Iine of smaller family cars, and a sports model.

Volvo cars are manufactured mainly through Group subsidiaries, at three prin- cipal assembly plants, two ofwhich are in Sweden. Early in 1985 Volvo announced its intention to plan for an expansion of its ear operations through a new plant in Sweden.ln addition, the smaller ear Iine is manufactured in the Nerherlands by Volvo Car BV.

Transport Equipment- Truclcs. Volvo is on e of the world' s l argest producers of heavy (Glass 8) trucks. Through Volvo Truck Corporation, a Group subsidiary, Volvo designs, manufactures, assembles, markels and services four basic ranges of trucks.

Transport Equipment-Buses. Through the Group subsidiaryVolvo Bus Corpora- tion, Volvo is one of the leading manu- facturers of heavy bus chassis within the OECD area. The Company generally de- signs, manufactures and markels bus chassis, and also manufactures bus bodies mainly for the Swedish market.

Transport Equipment-Marine and lndustrial Engines. AB Volvo Penta, also a Group subsidiary, designs, manufactures, markels and services engines, transmis- sions, accessories and equipment for the marine and industrialengine markets.

Transport Equipment-Aerospace.

Through the Group subsidiaryVolvo Flyg- motor AB, Volvo is engaged in the pro- ductian of jetengines and components for military and commercial aircraft and for space projects. Volvo Flygmotor also has a growing nu m ber of commercial nonavia- tian products, including specialized hydraulic machinery, transmission systems and heaters for boats and vehicles.

Trading and Energy. STC Scandinavian Trad i ng Company AB and ils subsidiaries tagether engage in trad i ng activities- principally in oil and fruit. STC subsidiaries also trade certain other commodities. As of May 1985, STC became a wholly-owned subsidiary of the Group upon the reacqui- sition by Volvo of shares it had previously offered to the public.

Volvo's interests in the energy seetar are concentraled in the shareholdings in Hamilton Oil Corporation in the U.S. (49.9 percent) and in Saga Petroleum a.s. in Norway (20 percent).

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Food. As a part of the merger of Beijer- invest early 1981, Volvo acquired a group of food companies. The food activities of Volvo are conducled through Provendar AB, a Group subsidiary. Provendar is a holding company and conducts its activi- ties through subsidiaries which are pri- marily active in Europe. The Provendar campanies tagether conslitute the seeond targest food group in Sweden. This group manufactures brand name consumer products, including processed meats and fish products, mineral water, preserved and deep-froozen vegetables and con- venience foods. Since April1, 1986, the group also includes Sockerbolaget AB (The Swedish Sugar Company), Hi lieshög AB (plant breeding), and W Weibull AB (garden seeds).

lnvestment Activities. Volvo's im portant holdings are as follows:

(1) a 43 percent interest in the voting power (24 percent of the equity) in Pharmacia AB, a Swedish pharmaceutical and biotechnical group;

(2) a 47 percent interest in lnvestment AB Card o, including five percent of the voting power (two percent of the equity) of AB Volvo;

(3) a 18 percent interest in the voting power (15 percent of the equity) in AB Custos, an investment company with

substantial interests in publicly-traded Swedish industrial companies, consfruc-.

tian and real estale campanies and banks, which also owns six percent of the voting power (three percent of the equity) of AB Volvo;

(4) a 48 percent interest in AB Catena the operations of which include a deal er network that retails Volvo's transport equipment and other products in the Nordie region;

(5) a 50 percent interest in VME Group NV, a holding company formed by Volvo and Clark Equipment Company.VME includes the former construction equipment businesses of Volvo and Clark;

(6) a 47 percent interest in the voting power (32 percent of the equity) in Gambro AB a specialized technical medical equipment company; and (7) a 21 percent interest in Protorp Förvalt- nings AB, an investment company with substantial interests in publicly-traded Swedish construction and building ma- terials campanies which also owns four percent of the voting power (two percent of the equity) of AB Volvo.

Energy lnvestments. From September 1982 through October 1984 Volvo acquired in several transactions, approximately 49.9 percent of the outstanding common stock

VO~\.) IN BRIEF

of Hamilton Oil Corporation, a United states company principally engaged in o il and gas exploration and development activities. The Hamilton shares are held by Volvo North America Corporation, a subsidiary of Volvo. Hamilton shares are traded in London and in the United States through NASDAQ.

Hamilton has a substanfial productian of o il in the British seetar of the North Sea.

Productian of gas from the Esmond field was begun in mid-1985. Hamilton owns 36 percent of the Argyii/Duncan field s and 60 percent of the Esmond field. In 1986 Hamilton Oil Corporation had sales of USD 274M and income before laxes of USD 21M.

In 1983, Volvo acquired 20 percent of the capita! of Saga Petroleum a.s. a publicly- traded Norwegian company. In 1985 and 1986, Volvo contributed additional capita l to Saga by subscribing for ils 20 percent share of newshare issues and convertible debentures. Saga participales in 26 con- cessions in the Norwegian seetar of the North Sea and is the operator of ten of these con cessions. Saga's sales in 1986 amounted to NOK 1,122 M, and the com- pany had income before allocat1ons and taxes of NOK 533 M.lncome was affected lavarably by higher net financial income resulting from foreign exchange gains.

Other Operations. AB Fortas combines certain ofVolvo's business activities in the area of finance including managing a por- tion ofVolvo's liquid lunds through invest- ments and trading in the Swedish money and capita! markets. Fortas also manages all foreign currency transactions for the Swedish seetar of the Volvo Group.

The Group also conducts activities in other areas, including ear insurance; the development, marketing and installation of advanced computer systems for traffic planning and management; the develop- ment, manufacturing and marketing of carrier systems that employ self-propelled carts and the distribution of construction equipment.

Sales organization

Volvo starled exporting cars already in its seeond year of operation. TodayVolvo products are sold throughout the world and 81 percent of the Group's sales excluding oil trading were to customers outside Sweden in 1986.

The Transport Equipment business seetar of the Volvo Group has a worldwide sales network with its own sales campanies in Sweden, Den mark, Finland, Norway, Great Britain, West Germany, Switzerland, Bel- gium, The Netherlands, France,ltaly, Spain, the United States, Canada, Argentina, Brazil, Peru, Japan and Australia. AB Catena (formerly AB Volvator), in which company Volvo has a 48 percent interest, has inter- ests in a nu m ber of dealerships in the Nordie countries, enabli ng it to participale directly in the structural changes and growth of sales in !hese im portant m arket areas.

Around 2,400 dealers, same of whom have more than one outlet, se il Volvo cars to the ullimate customer.Approximately7 percent of the dealerships are located in the Nordie area, 62 percent in Western Europe (excluding the Nordie area), 22 percent in North America, 3 percent in

Australia and 6 percent in other markets.

Volvo has 1,200 independent outlets for truck sales in Western Europe and the United States.

The Group generally does not provide financing to wholesale or retail entities out- side the Group or retail financing to indi- vidual purchasers. Dealers normally obtain any required financing from local banks, which often also provide retail financing when necessary, except in certain coun- tries, where bank financing is augmented by f1nancing from Volvo subsidiaries or af- filiates. The Group provides its own tinanc- i ng for completed products and carries them as inventory until such products have been purchased by unaffiliated distri- bulors or by dealers from Volvo-owned distributors.

The bulk of oil trad i ng is abroad, mainly in Western Europe and the United States.

The food campanies have !arge horne- market shares in Sweden, Denmark and Austria. The re is a marked strategy to en- large business abroad and markels out- side Sweden now account for 40 percent of food sales.

In 1986 Group sales by markel area were as follows:

SEKM Percent

Sweden 13,846 17

Nordie area,

excluding Sweden 7,448 9 Europe, excluding

Nordie area 22,170 26

North America 22,988 27

Other markets 5,669 7

Total, excluding

oil trading 72,121 86

Oil trading 11,969 14

Group total 84,090 100

The Group considers that its marketing organization is weil equipped to handie the increasing volume of sales expected in the future.

Capita l expenditures and financing Over the five-year period 1982-1986, the Group invested some SEK 14,200 M in property, plant and equipment, the bulk or approximately73 percent of il in Sweden.

Most expenditures has related to the gradual expansion of produclive capacity, b ut expenditures in newfacilities for techno- logical development, and for the strengthen- ing of the marketing organization, has also been significant.

Capita! expenditures by operating seetar in 1986 were as follows:

SEKM Percent

C ars 2,092 61

Trucks 509 15

Buses 68 2

Marine and

industrialengines 104 3

Aerospace 133 4

Trading and Energy 21 1

Food 334 9

Other operations and corporate capita!

expenditures 164 5

Total 3,425 100

Capita l expenditures which had been approved but not yet implemented

amounted at year-end 1985 to SEK 6,300 M.

Projects totaling approximately SEK3,700 M are scheduled for 1987 and approximately SEK 2,600 M for 1988 or later years.

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VOLVO IN BRIE F

The distribution of the se capita l expendi- tures, by operating sector, was as follows:

Ca r s

Trucks and Buses Aerospace

Trading and Energy Other operating seetars and earparate investments Total

SEKM 4,200 1,000 400 250 450 6,300 Operattng resulls and the Group's policy of consolidatian have made possible a l arge measure of interna! ly generate d financing of investments. The Group' s untaxed reserves rase by same SEK 13,100 M between 1982 and 1986.

Person n el

At year-end 1986,73,150 persons were employed in the Volvo Group. The newly acquired food campanies were respon- sibia for an i nerease of about 4,600. In addition, the work force expanded by a bo ut 700 persons, most of who m we re employed in the cars operating sector.

Wages, salaries and social costs totaled SEK 12,847 M in 1986.

Of the total nu m ber of employees 54,300 were in Sweden and 18,850 outside Sweden.The distribution by operating seetar was as follows at year end 1986:

C ars Trucks Buses

Marine and industrial engines Aerospace

Trading and Energy Food

Other operations and central serv1ces Group total, approx.

Research and development

33,600 17,900 1,550 2,600 3,450 200 9,550 4,300 73,150

Volvo maintains an extensive and contin- uing research program, including a sepa- rate research center for transport equip- ment.ln each of the three years in the period ended December 31,1986 product development expenditures were SEK 3,304 M, SEK 3,817 M and SEK 4,563 M, respectively.

In addition to research and development related to automottve products, the Com- pany has devoted substanfial efforts to im proving the working environment of ils employees. In particular, new methods of assembly and new materials handling systems have been developed. The Com- pany believes !hat il has significant exper- tisa in the design and operation of assam- bly plants.

Suppliers

Through Group subsidiaries, Volvo manu- factures certain major automotive compo- nents, mcluding engines, transmissions

and rear axles. In addition, Volvo and Volvo Car BV purchase raw and semi-finished materials, many components (including several major components) and numer- ous parts for ils automotive products from outside suppliers (including other aulamo- bile manufacturers).

Cerlain ofVolvo's suppliers produce com- ponents pursuant to cooperation agree- ments.Aithough the failure of a significant supplier to provide Volvo with components or parts could disrupt vehicle productian to a material extent, the Company believes such an occurrence is unlikely and !hat ils supplier arrangements afford il flexibility to respond to occasional shortages.

Volvo purehasas many components from independent manufacturers; a large pro- portion of ils components for transport equipment is purehasad outside of Sweden.ln 1986, approximately 28 per- cent of the value of the Group's total pur- chasas for transport equipment produc- tion purposes came from Sweden, four percent from other countries in the Nordie Area, 45 percent from other European countries, 16 percent from the United states and seven percent from elsewhere.

For technical and economic reasons, Volvo-designed components are often manufactured near the Volvo plant in which the part is to be used. Some parts designed in ca-operation with certain spe- cialist suppliers are distributed to manu-

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facturers in all countries in which the Group assembles products. Group cam- panies select the i r suppliers carefully and strive to maintain good working relation- sh i ps with them.

Shareholders

Volvo has approximately 160,000 share- holders. Same 13 percent of the Volvo share capita! is owned by persons or insti- tutions outside Sweden. The company has no dom i nating owner interests.

Volvo's shares have been Iisted on the Slackholm Stock Exchange since 1935, on the London Stock Exchange since 1972, on the Frankfurt am Mai n, Di.lsseldorf and Hamburg Stock Exchanges since 1974 and on the Oslo Stock Exchange since 1979.

Since the autumn of 1984, Volvo shares are traded on the Paris Bourse and, Volvo's nonrestricted B shares in the form of American Depositary Receipts (ADRs) are traded in the over-the-counter markel in the U.S., through the NASDAQ electronlc quotation system.

Late in 1985, Volvo's nonrestricted B shares were Iisted in Brussels and Antwerp and a lurther step in the inter- nationalization ofVolvo's shares was taken with the listing on the Tokyo Stock

Exchange in December1986.

NQrtiS

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Financial Stalistics, Consolidated

statements of lncome 1976-1986 ^Page 10 Balance Sheet::. December 31 1976-1986 11

Capttal exper.dttures 1976-1986 Resear ch and development costs 1980-1986

statements of C hanges :n Fmanc.tal Posttton 1976-1986 12 Quarterly sales and mcome 1976-1987 13

Sales by operattng sector 1976-1986 14 Sales by m8.rket area 1976-1986

Exports from Sweden 1976-1986 lncome by gecgraph1cal area 1980-1986 Assets by geographtcal area 1980-1986

Operattng tncome by ^sector 1979-1986 15 Assets by seeter 1979-1986

Return on capttal 1977-1986 16

K€y Ftnanctal Rat1os 1976-1986

Cap ttaltzatt on Dec 31, 1986 17

'i 'IJANCIAL STATISTICS, CONSOLIOATED

statements of In come for 1976-1986 (SEK M)

1976 1977 1978 1979 1980 1981 1982 1983 1984 1985

Sales 15,743 16,168 19,133 23.472 23,803 48,017 75,624 99,460 87,052 86,196

Less: Cost of operations 14,430 14,935 17,625 21,521 22,081 45,039 70,992 93,385 79,022 77,996

Operating income before depreciation and amortization 1,313 1,233 1,508 1,951 Less: Provision for deprec1ation and amortizalion 558 599 658 649

Operating income 755 634 850 1,302

Add: Interest received less paid (173) (170) (175) (72)

Other income (expense) 40 2 2

Foreign exchange gain (loss}'l (153) (31) 12

lncome alter tinancia l income (expense) 582 351 646 1,244

Extraordinary items

Provision for employee bonus

lncome before allocations. laxes and minority interests 582 351 646 1,244 Less: (AIIocation to) reallocation from:21

General inventory reserves Extra depreciation lnvestment reserves 31 Other allocations••

In come before taxes and minority interests Less: Taxes

Minority interests in (income) losses Net income

11 Exchange dilferences on loans for the y ear 1976 are includ·

ed 1n Cosi of operalions.

2) All allocations re present untaxed reserves provid ed by lhe legtslauon in Sweden and same other countnes.

3) lncluding special investmenl reserve for 1983 and following years.

(343) (49) (122) (460)

(3) 21 74 11

o

(91) (103) (223)

14 (6) (20) (2)

159 317 475 669

112 130 151 240

16 11 (12) (13)

63 198 312 416

41 Work enwonment reserve, extra appropriation to in- surance reserve, noncurrent asset replacement reserve, exchange reserve and as of 1985 development reserve.

lncludes payroll reserve from 1986.

51 lncludes allocations to development reserves of SEK 581 M and exchange reserves of SEK 353 M.

1,722 2,978 4,632 6,075 8,030 8,200 676 1,012 1,297 1,573 1,402 1,725 1,046 1,966 3,335 4,502 6,628 6,475 (56) (427) (564) (417) 249 421

3 132 195 86 138 11"

14 (246) (721) (226) (551) 759 1,007 1,425 2,245 3,945 6,464 7,765

235 1,363

(40) (166) (180) (163) 1,007 1,425 2,440 3.779 7,647 7,602

(177) (347) (794) (104) 919 (374)

(252) (42) (32) 1 141 370

(296) (279) (434) (2,845) (5,386) (2,315) (149) (36) (88) (33) (58) (1,011)51

133 721 1,092 798 3,263 4,272

83 222 508 752 1,624 1,713

(12) (46) (88) 158 (74) (13)

38 453 496 204 1,565 2,546

61 lncludes allocations to payroll reserves of SEK 1,057 M and exchange reserves of SEK 268M.

1986 84,090 75,534 8,556 2,062 6.494 345 218 445 7,502 193 (165) 7,530

887 790 (2.965) (1 ,406)61

4,836 2,249 (36) 2,551

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FINANCIAL STATISTICS, CONSOLIDATED

1976 1977 1978 19791) 1980 1981 1982 1983 1984 1985 1986

Balance Sheets at year-end Assets 1976-1986 {SEK M)

Cash in banks and marketable seeurities 1,837 1,868 2,385 3,515 3,592 5,476 7,250 11,625 11,900 14,394 17,777

Receivables, etc. 3,336 3,929 3,888 4,450 4,618 8,546 10,528 10,706 13,265 11,244 12,346

lnventories 6,015 6,643 6,903 7,921 8,783 11,580 14,341 15,415 15,462 16,044 18,235

Current assets 11,188 12,440 13,176 15,886 16,993 25,602 32,119 37,746 40,627 41,682 48,358 Restricted deposits

in Bank of Sweden 93 115 54 64 38 208 221 264 1,762 2,823 1 180

Other assets 4,424 4,435 4,482 5,042 6,088 10,835 13,935 15,496 15,240 18,288 22,644

Total assets 15,705 16,990 17,712 20,992 23,119 36,645 46,275 53,506 57,629 62,793 72,182 Liabilities and shareholders' equity

Current liabilities 6,898 7,174 7,295 8,897 9,635 17,388 21,484 26,631 26,066 26,856 31,548

Long-term liabilities 2,923 3,661 3,867 4,086 4,600 8,535 10,904 9,706 9,005 9,285 9,398

Untaxed reserves 3,984 4,019 4,194 4,848 5,717 6,458 7,846 10,832 14,973 17,738 20,980

Minority interests 65 185 199 238 327 451 732 757 229 116 132

Shareholders' equity 1,835 1,951 2,157 2,923 2,840 3,813 5,309 5,580 7,356 8,798 10,124

Totalliabilities and shareholders' equity 15,705 16,990 17,712 20,992 23,119 36,645 46,275 53,506 57,629 62,793 72,182

Assets pledged 2,361 2,833 2,758 2,665 2,921 5,149 5,500 5,915 3,516 3,033 2,959

Conlingent liabilities 531 855 1,304 1,667 1,972 2,060 3,289 3,182 2,620 2,106 2,830

Capita! expendltures for By markel area

property, plant and Sweden 407 448 418 729 1,405 1,311 1,332 1,665 1,874 2,830 2,713

equipment Nordie area, excluding Sweden 4 19 66 32 22 69 33 64 26 21 50

1976-1986 {SEK M) Europe, excludrng Nordie area 197 153 170 184 203 147 206 275 374 384 392

North America 86 . 19 11 9 13 883 747 354 134 189 178

Other markels 1

o

Total 704 656 668 962 1,657 2,514 2,346 2,397 2,589 3,506 3,425

By operating seetar

C ars 265 342 654 1,013 688 575 678 1,017 1,594 2,092

Trucks and Buses 261 188 174 299 505 388 443 499 635 577

Construction equipment 74 65 48 57 70 98 137 106

Marine and industrial engines 19 27 23 18 55 17 37 81 96 lO~

Aerospace 25 36 50 242 157 217 80 207 203 13'3

lndustrial equipment campanies 119 115 180

Trading and Energy 754 846 560 284 137 21

Food 47 46 76 97 105 334

Other operations and earparate capita! expenditures 12 10 13 28 119 44 206 298 736 164

Total 656 668 962 1,657 2,514 2,346 2,397 2,589 3,506 3,425

Research and development

costs, 1980-1986 (SEK M) 1,593 1,617 2,002 2,508 3,304 3,817 4,563

1) See note 1, page 12.

Il

12

F NANCIAL STATISTICS, CONSOLIDATED

1976 1977 1978 197911

statements ofChanges in Funds provided

Financial Position 1976-1986 lncome before allocations,

(SEKM) laxes and minority interests 582 351 646 1,246

Depreciation and amortization 558 599 658 650

Minority interest in income 16 11 (12) (13)

Taxes (112) (130) (151) (240)

Withdrawals from (deposits in) restricted

deposits in Bank of Sweden 22 (22) 61 (11)

Funds provided by the year's operations21 1,066 809 1,202 1,632

Decrease in long-term receivables 9

lncrease in long-term liabilities 340 739 206 250

Minority interest in shareholders'

equity in subsidiaries (15) 120 13 14

Share issue 137 212

C hanges in composition of Group etc. 7 33 (14)

o

Total lunds provided 1,535 1,701 1,407 2,117

Application of funds

Capita! expenditures for property, plant and

equipment, including company acquisitions 740 656 677 962 Less: Residua! value of assets sold and scrapped (57) (67) (40) (53)

Changes in shares and participations 10 26 24 66

lncrease in long-term receivables 21 5 25

Dividends paid 94 106 106 124

Total lunds applied 808 726 792 1,099

Ch ange in working capita/ 727 975 615 1,018

Specification of changes in working capita/

lnventories 878 628 260 960

Current receivables 418 592 (41) 562

Current liabilities (minus indicates an increase) (817) (276) (121) (1,634) Cash in banks and marketable seeurities 248 31 517 1,130

- --

Total change in working capilat

11 Effective from 1980. new prrnciples are used '"Iransiating the accounts of tore1gn subsidiarles to Swedish kronor.

Balance sheet figures for 1979 above have been Iransiated in accordance w1th the new pnnciples. For further infor- mation, see page 38 in Volvo Annual Report t980.

727 975 615 1,018

2) In evalusting lunds provid ed by the year's operations and the degree of self·fmancing, it should be noted that income before atlocations, laxes and minority interests has been charged with write-ups on long-term toan liabilities. (See Foreign exchange ga1n (loss)1n the statements of In come on page 10.)

1980 1981 1982 1983 1984 1985 1986

1,007 1,425 2,440 3.779 7,647 7,602 7,530 676 1,012 1,297 1,573 1,402 1,725 2,062

(12) (46) (88) 158 (74) (13) (36)

(83) (222) (508) (752) (1,624) (1,713) (2,249) 26 (170) (13) (43) (1,498) (1.061) 1,643 1,614 1,999 3,128 4,715 5,853 6,540 8,950

457 4 114

412 3,935 2,369 (1 ,198) (701) 280 113

1!9 124 281 25 (528) (113) 16

482 608 304 237

;:~ (209) 18 (34) 49 (1,039) 51

~.21' 6.33 6,404 3,812 5,367 5,672 9,244

1,665 4,841 2,467 2,865 2,613 4,230 5,164

(32) (1,360) (737) (285) (3,306) (719) (553) 122 1,390 1,624 (262) 2,215 1,485 1,988

21 435 378 674

169 169 251 340 399 411 660

1,945 5,475 3,983 3,332 1.921 5,407 7,259

267 856 2,421 480 3,446 265 1,984

863 2,797 2,761 1,074 47 582 2,191 168 3,928 1,982 178 2,559 (2,021) 1,102 (841) (7,753) (4.096) (5,147) 565 (790) (4,692)

77 1,884 1,774 4,375 275 2,494 3,383

267 856 2,421 480 3,446 265 1,984

rl 'i.\ JCIAL STATISTICS, CONSOLIDATED

Quarterly sales and income 1976-1987

Sales (SEK M) 1st quarter 2nd quarter 3rd quarter 4th quarter Wholeyear

lncome before allocations,

taxes and minority interests (SEK M) 1st q u arter

2nd quarter 3rd quarter 4th quarter Wholeyear

lncome per share⁵1 (SEK) 1st quarter

2nd quarter 3rd quarter 4th quarter Wholeyear

Approximate net income in accordance with U.S. generally accepted accounting principles (SEK M)

Approximate net in come per sh are in accordance with U.S. generally accepted accountrng principles (SEK)

11 Alter allocation of a specoal grant from the Dutch Govern- ment to Volvo Car B.V. in total SEK 193 M, with 25% to each quarter.

21 Alter allocation of a special grant from the Dutch G overn- ment to Volvo ear B.V. SEK 199M with 25% to each quarter.

3) lncluding a special grant from the Dutch Government to

Volvo ear B.V., SEK 104 M with SEK 32M for the three first quarters and SEK 72 M tar the fourlh quarter.

41 lncluding a special grant from the Dutch Governmenl to Volvo ear BV, SEK 129 M.

1976 1977 1978 1979 1980

3,461 3,428 4,260 5,320 5,921 3,858 4,123 4,854 6,376 5,651 4,099 3,826 4,367 5,128 5,578 4,325 4,791 5,652 6,648 6,653 15,743 16,168 19,133 23,472 23,803

162 81 151 235 385

184 123 235 410 220

144 25 112 216 201

92 122 148 383 201

582 35111 64621 1,24431 1,007⁴1

2.30 1.10 2.00 3.00 4.10 2.70 1.50 3.00 5.30 2.40 1.90 0.40 1.40 2.30 2.10 1.20 1.50 1.90 4.10 2.20 7.50 4.50 8.30 15.30 10.80

419

9.00

1981 1982 1983 1984 1985

5,76161 14,946 23,631 21,687 21,809 13,089 19,168 26,269 21,930 20,470 12,320 17,392 21,583 19,091 20,060 16,847 24,118 27,977 24,344 23,857 48,017 75,624 99,460 87,052 86,196

28061 516 1,025 2,600 2,167 424 1,004 1,392 3,466 2,001

286 408 793 921 1,552

435 512 569 660 1,882

1,425 2,440 3,779 7,647 7,602

3.00⁶1 3.90 7.00 15.60 13.10 2.70 7.50 8.80 21.90 12.40 2.30 2.60 4.80 5.60 9.40 2.90 2.20 3.70 3.40 14.30 11.60 15.70 24.30 46.50 49.20

687 850 1,496 4,100 4,47871

11.90 12.70 19.80 52.90 57.7071

6) Not including Volvo ear BV nor the Beljerinvest group.

7) lncludes extraordinary in come of SEK 744 M, equal to SEK 9.60 per share.

1986

20,661 21,519 18,798 23,112 84,090

2,41

o

2,238 1,283 1,599 7,530

15.50 14.40 8.10 10.20 48.20

2,95681

38.1081

51 lncome pershare is calculated as income divided by the weighted average number of shares outstanding du ring the year.lncome includes income betare allocat1ons, taxes and minority interesls, reduced by minority interests and laxes assuming a standard lax charge. The standard tax charge is determined by applying a 50 percent tax rale to pretax in come ad Justed for tax-tree dividends received.

Adjustments have been made for the stock split and for new issues of shares.

Bl In come in 1986 was charged with a write-down of s hares of SEK 500 M, equat to SEK 6.40 per share.

1987

2'1,635

1,982

12.70

~---~~·t~--~'l---~~----~~~--- 13

FINANCIAL STATISTICS, CONSOLIDATED

I':INANCIAL STATISTICS, CONSOLIOATED

Operating income bysector11

1979-1986 (SEK M)

Assets by sector 1979-1986 (SEK M)

C ars Trucks Buses

Constructlon equipment Marine and industrialengines Aerospace

In dustrial equipment campanies Trading and Energy

Food

Other operations

Discontinued operations21 Total

Interest income on receivables and advances included above as weil as earporale expensesJJ

Operating income

Cars Trucks Buses

Construction equipment Marine and industrial engines Aerospace

lndustr1al equipment campanies Trading and Energy

Food

Other operations Discontinued operations Corporate assets41 GroupTotal

11 lncome before allocations, taxes and minority mteresls by operating seetar lor the years 1976-1984 may be obtained bywritmg to AB Volvo, Financial Relations, S-405 08 Göteborg, Sweden.

21 In 1966, includes operating losses in Centro-Morgårds- hammar AB and costs in connectionwith the planned divestment atthat company.Aiso includes operating re- su Ils of Kock u m s Jernverksakti ebolag the operations of which were divested during the year.ln 1985, includes, in addition to the campanies cited, mainly costs related to terminating the produclian of bus bodies in the U.S. and the sal e of STC Recycling.

1976 1977 1978 1979 1980

500 (3)

892 1 '119 170 184

22 83

79 92

54 (16)

1,717 1,459

(415) (413) 1,302 1,046

8,273 8,363 4,691 6,019 2,126 2,096 828 1,062 826 1,042

603 702 3,645 3,835 20,992 23,119

3) Corporate expenses in 1965 include Group elimination of profils on interna! sales of shares, write-off of goodwill, and costs of contributlons to foundations, in all SEK 351 M.

4) Corporate assets consist of cash in banks, markatable securities, other investments and restricted d epasits in the Bank of Sweden. Receivables in 1964 included a nate re- lated to the sate of investments.

1981 736 1,005 70 136 118 139 188 (9) 89 (15)

2,457

(491) 1,966

8,069 7,882 2,074 1,092 1,301 2,295 3,413 1,380 1,831

7,308 36,645

1982 1963 1964 1985 1986

1,801 4,805 5,737 6,138 5,574 1,188 393 1,122 921 1,069

72 44 114 60 104

158 164 190

187 316 351 330 178

113 99 133 187 228

226 233

3 (1,175) (22) (146) 7

128 174 152 167 38

(81) {111) (39) 276 {5) (202) (470) (176) 3,795 4,942 7,536 7,463 7,017

(460) (440) (908) (988) (523) 3,335 4,502 6,628 6,475 6,494

10,255 11,493 11,795 14,267 16,177 8,898 7,718 7,526 8,667 9,238 987 874 1,020 1,160 2,355 2,353 2,377

1,182 1,322 1,569 1,378 1,487 1,562 1,585 1,672 2,034 2,194 2,586 3,409

4,916 5,337 4,818 2,152 1,566 1,529 1,788 1,842 2,047 6,092 2,286 2,695 2,759 6,290 6,030

279 826 402

10,706 14,819 22,11 B 24,112 27,836 46,275 53,506 57,629 62,793 72,182

15