Volvo gives new financial targets, seen against competitors

September 22, 2011
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, STOCKHOLM, Sept 22 – Sweden’s Volvo Group, the world’s second-largest truck maker, said Thursday it would begin using new financial targets measuring not only its own growth but also ranking it against competitors.

“This new method of measuring the performance of our business areas and the new targets enable us to annually implement a distinct benchmarking of our operations in relation to the competition,” Volvo chairman Louis Schweitzer said in a statement.

The company said it next year would replace the financial targets adopted in 2006, calling among other things for 10-percent annual sales increases and operating margins of seven percent or more, with a system mainly comparing its performance to its main competitors.

“The annual organic sales growth for the truck, bus and construction equipment, as well as Volvo Penta, shall be equal to or exceed a weighted-average for comparable competitors,” was the top item on its list.

As for margins, they should now for all its businesses “be ranked among the top two companies when benchmarked against relevant competitors,” Volvo said.

The Swedish company meanwhile said it would maintain its 12-15 percent return of equity target and still aimed for an annual equity to assets ratio of over eight percent.

It also said it would stand by its target that net debt not exceed 40 percent of shareholder equity under normal conditions.

Swedbank analyst Niclas Hoeglund described the new targets as a bit “vague,” but told Dow Jones Newswires that “when you look at what they are really trying to say, it’s still a pretty strong signal.”

The new sales target of equal to or above the average of comparable competitors was on the low side, but nothing markets should be too concerned about, he said.

Following the announcement, the company saw its stock price slump 2.69 percent to 70.50 kronor per share in early trading on a Stockholm stock exchange down 2.66 percent.

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