Volvo Aero – increased sales and profitability

Increased sales, Positive productivity trend, favorable product mix and currency tailwinds. Volvo Aero to be divested to GKN

Strong quarter for Volvo Aero
For Volvo Aero, net sales during the second quarter increased by 26 % to SEK 1,945 M (1,547). Adjusted for currency fluctuations, net sales during the second quarter increased by 13%.

Operating income amounted to SEK 305 M compared to SEK 62 M in the same quarter of 2011. The improvement is a result of a positive trend with higher productivity, fewer disturbances in the production facilities, and a favorable product mix. Earnings were also positively impacted by a stronger US dollar. Compared with the second quarter of 2011, operating income was positively impacted by changes in currency exchange rates in an amount of SEK 61 M. Operating margin was 15.7% (4.0).

First components delivered to PW1100G engine
In late June, Volvo Aero delivered its first components to the new PW1100G engine. The components were sent to Pratt & Whitney in the USA where they will be installed in the first engine to be tested during the autumn. One application for the PW1100G is the Airbus aircraft A320neo which is planned to enter service in 2015.

Volvo Aero to be sold to GKN
On July 5, AB Volvo announced that Volvo Aero will be sold to the British industry group GKN for an enterprise value of SEK 6.9 billion. The transaction, which requires approval from relevant authorities, is likely to be completed during the third quarter.

Air traffic continues to grow
Global passenger traffic increased by 4.5% in May compared to the same month last year, according to the International Air Transport Association (IATA). Global air freight traffic declined 1.9% In May. IATA’s June industry net profit forecast for 2012 remained unchanged at USD 3 billion compared to the forecast in March. However, the regional composition of the profit forecast has changed with larger losses expected in Europe but more profit projected for US and Latin American airlines.

Airbus and Boeing reported 729 orders in the first two quarters of this year, down 28% compared to the first two quarters of 2011. The backlog for large commercial aircraft increased from 8,208 aircraft at the end of 2011 to 8,312 at the end of June. The aircraft manufacturers delivered 566 aircraft in the first six months of this year, up 18% compared to the first six months of last year.