Difficult market conditions impacted profitability in Volvo Buses

In the first quarter, Volvo Buses' operating income declined to SEK 62 M (303). Operating income was negatively affected by pricing pressure in Europe as well as low capacity utilization in the manufacturing system in Europe and Brazil. Net sales increased by 10% and were driven by significantly higher deliveries in Brazil in connection to the new, stricter emission regulation.
The global bus market is recovering in varying degrees. In Europe, volumes are lower compared to 2011. The number of registrations in southern Europe has declined significantly. The market is characterized by tough competition in all tenders.

In North America, the overall bus market remained weak and operators are restrictive with their investments. The South American market displayed a decline following the prebuy of buses in 2011 prior to the introduction of the Euro V emission regulations at the end of the year. The bus market in Mexico remained weak and largely reflects the trend in the US.

In Asia and the Pacific area, dampened demand for new buses was reported. China continued to grow in all segments. In India the market for heavy buses increased 38% during the first quarter of 2012.

Lower order intake
Deliveries during the first quarter of  2012 amounted to 2,800 buses, compared with 2,533 in the year-earlier period, up 11%. South America also accounts for the largest increase in this quarter. One of the reasons is higher deliveries of the front-engine buses that were introduced in 2011.
 
The order intake for the first quarter amounted to 2,256 buses, compared with 2,369 in the year-earlier period, down 5%. During the first quarter, 184 hybrid orders were signed in the UK, of which the largest order to date is 77 double-decker buses for Arriva in London.

Higher sales but lower operating income
In the first quarter, net sales increased by 10% to SEK 5,224 M (4,742). Adjusted for currency fluctuations, net sales increased by 7%. The increase was driven by significantly higher deliveries in Brazil in connection to the new, stricter emission regulation.

Operating income declined to SEK 62 M (303). Operating income was negatively affected by pricing pressure in Europe as well as low capacity utilization in the manufacturing system in Europe and Brazil. Compared with the first quarter of 2011, currency fluctuations had a positive impact on operating income in an amount of SEK 101 M. The operating margin declined to 1.2% (6.4).

The first quarter of 2011 included a positive impact of SEK 80 M from the recognition of VAT credits in Brazil relating to previous years.

• Operating margin declined to 1.2%
• Order for 184 hybrids for the UK


Net sales by market area

First quarter

SEK M

2012

2011

Change in %

Europe

1,197

1,322

(9)

North America

1,831

1,656

11

South America

1,110

349

218

Asia

669

892

(25)

Other markets

417

524

(20)

Total

5,224

4,742

10