DBRS Rts AB Volvo, Conf Volvo Treasury Cda A(low) R-1(low)

Dominion Bond Rating Service (“DBRS”) has today assigned ratings to AB Volvo (“Volvo” or the “Company“) as indicated above with a Commercial Paper rating of R-1 (low) and an Issuer Rating of A (low); the trends are Stable. In addition, DBRS has confirmed the ratings of Volvo Treasury Canada Inc., based on its parent and guarantor Volvo, with the trends remaining Stable.

The ratings recognize Volvo’s strong balance sheet, above-average liquidity and business profile, and strengthening profitability. In 2004, strong generation of internal cash flow due to robust earnings provided the basis for a significant improvement in the Company’s credit profile. The Company used the funds to significantly reduce debt and therefore its leverage, to fund moderate share repurchases, and to strengthen its available liquidity. The balance sheet is now strong and debt free, and net debt amounted to SEK (20.6 billion) as of December 31, 2004. DBRS expects the Company’s balance sheet to remain strong and that internally generated funds will be sufficient to fund ongoing increased dividend and capital expenditures levels.

Profitability in 2004 was very strong, attributed to healthy market conditions in virtually all of the Company’s main businesses. Earnings at Volvo Trucks and Construction Equipment reached record levels, driven by higher unit deliveries and new products, which were underpinned by continuing economic growth in key regions. After enduring a number of years of losses, Volvo Buses returned to profitability, a sign that the Company’s restructuring efforts in the face of lacklustre demand and pricing pressures has begun to materialize. The profit outlook remains very favourable, with a rebound in capital spending and a line-up of new Volvo Group products serving as the basis for the continuing strength in earnings. The Truck Group’s results are expected to remain at favourable levels as a result of a healthy order backlog, benefits from the integration of Renault VI, and improving profitability in the segment’s North American operations. Overall, the Company’s focus and success in reducing its cost structure should also support the current uptrend in profitability.

Note:
The ratings of Volvo Treasury Canada Inc. are based on parent and guarantor AB Volvo.
Issuer ratings apply to all general senior unsecured obligations of the issuer in question.

The full report providing additional analytical detail is available by clicking on the link under Related Research at the right of the screen or by contacting us at info@dbrs.com.

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