At its scheduled board meeting, and as part of its annual review, AB Volvo's board of directors last week decided to adopt new financial targets for the company. Its previous operating margin was 5 to 7 percent over a business cycle including the operations within Volvo Financial Services. The board said its new annual growth target is more than 10 percent and includes all operations within the group except Volvo Financial Services, which currently contributes approximately another 1 percent.
The decision was based on the board's assessment that Volvo today has a structurally higher profitability, stronger cash flow and a lower risk. The board focuses on three external financial targets covering growth, operating margin and capital structure. The board took a positive view of opportunities to increase the return of funds to shareholders at the next annual general meeting. However, it said it wants to consider possible acquisitions before taking a definitive position. The board also said the importance of a strong credit rating would also be considered.
In the board's opinion, Volvo today has a structurally higher profitability, more stable cash flow and a lower risk. Accordingly, the restricting ratio for net debt to equity has also been increased from 30 percent of shareholders equity to 40 percent of shareholders equity.
The Volvo Group is an international manufacturer of trucks, buses and construction equipment, drive systems for marine and industrial applications, aerospace components and services. The Group also provides complete solutions for financing and service. The Volvo Group is a publicly held company headquartered in Goteborg, Sweden.