Financial targets until 2011
The Volvo Group's financial targets were established by the Board in September 2006. The Board focuses on three targets comprising growth, operating margin and capital structure for the Group's Industrial Operations and return on shareholders’ equity for Customer Finance.
Financial targets for the Industrial Operations
Growth
The growth target is that net sales should increase by a minimum of 10% annually.
Operating margin
The Volvo Group’s profitability target is that operating margin for the Industrial operations is to exceed an average of 7% annually over a business cycle.
Capital structure
The capital structure target is set to a net debt including provisions for post-employment benefits for the Industrial operations of a maximum of 40% of shareholders’ equity under normal conditions.
Financial targets for Customer Finance
The target for Customer Finance is a return on shareholders’ equity of 12-15% and an equity ratio above 8.0%.
Further information about the financial targets including outcome is presented in the latest annual report:
http://www3.volvo.com/investors/finrep/ar10/eng/finacialgoals/introduction.html
Financial targets from 2012
In September 2011, the Board of Directors of AB Volvo decided to implement new financial targets for the Volvo Group starting in 2012. The financial targets for the Group are:
- The annual organic sales growth for the truck, bus and construction equipment operations, as well as Volvo Penta, shall be equal to or exceed a weighted-average for comparable competitors.
- Each year, the operating margin for the truck, bus and construction equipment operations, as well as Volvo Penta, shall be ranked among the top two companies when benchmarked against relevant competitors.
- Volvo Aero has an ROE target of 15-25%. When calculating the ROE, Volvo Aero will be assigned the same equity/assets ratio as that for the Group’s Industrial Operations.
- The capital structure target is set to a net debt, including provisions for post-employment benefits, for the Industrial Operations of a maximum of 40% of shareholders’ equity under normal conditions.
- The Customer Finance Operations, has a target of 12-15% return of equity (ROE) and an equity/assets ratio exceeding 8%.
The Board of Directors has decided which competitors the benchmarking during 2012 will be performed against. To facilitate comparisons, the truck operations will be measured jointly with the bus operations and the construction equipment operations will be measured jointly with Volvo Penta. The comparisons will be made in accordance with the table below:
|
Trucks and buses
|
Volvo CE and Volvo Penta
|
| Daimler |
Brunswick |
| Iveco |
CAT |
| MAN |
CNH |
| Navistar |
Cummins |
| Paccar |
Deere |
| Scania |
Hitachi |
| Sinotruk |
Komatsu |
|
Terex |
Further information about the new financial targets is available in a press release of September 22, 2011:
http://www.volvogroup.com/group/global/en-gb/newsmedia/pressreleases/_layouts/CWP.Internet.VolvoCom/NewsItem.aspx?News.ItemId=109113&;News.Language=en-gb