The Board of Directors’ of AB Volvo has in its annual review decided to introduce new financial targets for the Volvo Group.
Financial targets
- The Group’s operating margin shall exceed 10% measured over a business cycle.
- Financial Services’ target remains unchanged with a return on equity of 12-15% at an equity ratio above 8%.
- The Industrial Operations shall under normal conditions have no net financial indebtedness excluding pension liabilities.
Rationale
The Volvo Group has in recent years gone through a substantial restructuring process in order to reduce structural costs and increase efficiency and is currently in a phase where focus is on organic growth and improved profitability through continuous improvement and innovation. A clear and straightforward operating margin target supports the efforts to drive performance across the Group. The target also better aligns with the way the Group and its business areas today are challenged and measured internally. The Board has therefore decided to introduce an operating margin target of above 10% over a business cycle.
A debt-free industrial balance sheet enables the Volvo Group to better manage cyclicality in a capital-intensive industry and to secure competitive cost of funds for the Financial Services’ operation.
The new financial targets are valid from August 31, 2017.
