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2009 Proved to Be a Challenging Year For Volvo
by Ronnie Tanner
The corporate offices of Volvo will probably not remember fiscal year 2009 very fondly as the company moves forward. The company slugged its way through the year by trying to eliminate unnecessary inventory and making their cash flow stronger. A heavy decrease in sales, however, forces even the most optimistic analyst to not look highly as Volvo moves into the new decade.
For the entire year 2009, Volvo recognized a loss in net sales of 28% compared to fiscal year 2008. When combined with the companies relatively high operational losses, the future of the company continues to look bleak. Inventory and residual value write-downs are the main causes for the company's recognition of losses in fiscal 2009, but the restructuring and layoff costs also weighed heavily on the company's bottom line.
One of the biggest indicators of the company's financial struggles is the loss incurred in the shareholders equity section of the balance sheet. In 2008, Volvo touted a 12.8% return on shareholder's equity. However, 2009 brought about a 32.5% decrease in return on shareholder's equity to -19.7%. This is an alarming number for both those heavily invested in the company as well as market analysts on Wall Street. The financial solvency of the company continues to be an issue of great debate and even greater concern as experts wonder if the aforementioned inventory reduction is going to play a big enough role in additional value being recognized by shareholder's equity in the company.
With the global economy showing slight improvement, car sales for Volvo should improve over 2009 numbers, but potential stockholders still show a great deal of concern relating to how strong Volvo is in the marketplace. Another year of substandard numbers like 2009 will put Volvo in a serious amount of trouble and render the company a basic non-factor.
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Learn more about Volvo engines, Volvo transmissions and other industry specific topics by visiting the company website.
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