Volvo Group’s strong growth continues

The Volvo Group’s strong growth continued during the second quarter of 2008, while operating income improved and reached its highest level to date for a single quarter.

The Volvo Group’s net sales rose by 13% to SEK 80.4 billion (£ 6.7bn). The sales trend was particularly strong in Eastern Europe, South America and Asia – markets in which the Group has advanced its positions considerably in recent years. However, the markets in North America and Japan remained weak.

The Group also performed well in the aftermarket business as a result of the recent years’ investments in expansion of the distribution and service network. Operating income improved by 17% to SEK 7.2 billion (£ 600.7m) and the operating margin rose to 8.9% due to favourable development in the truck business, Construction Equipment and Volvo Penta.

In Europe, the trend that was noticed in the first quarter toward increased caution among our customers and in certain markets, strengthened, which was reflected in order bookings in the truck operations. However, demand for long-distance transport remains high, but there is a weakening in construction transport and construction equipment.

The caution among customers is attributable to increased concern about the future economic trend in Europe, and at the same time the increasingly higher fuel prices are putting pressure on their profitability in the short term.

The high fuel prices mean that it is even more important for the Group to continue investing in fuel efficient engines and alternative drivelines, such as hybrids – areas in which Volvo are already at the leading edge today. Field tests are in progress on the new generation of hybrid trucks and, in the United States; customers are already testing the engines that will be launched to meet the new emissions requirements that will come into force in 2010. The customers are very satisfied with the engines’ new SCR technology, which has effects such as enhanced fuel efficiency.