DBRS changes Volvo outlook to stable

DBRS said it confirmed the long- and short-term ratings of AB Volvo and Volvo Treasury Canada Inc. at BBB (high) and R-2 (high), respectively, and changed the trend to stable from negative.

Following these rating actions, the agency discontinued all ratings of Volvo Treasury Canada as well as the senior unsecured and short-term debt ratings of Volvo.

DBRS said the rating reflects the company’s solid business profile as Volvo is firmly entrenched among the world’s largest truck manufacturers and is the third-largest global player in construction equipment.

The rating was previously on a negative trend (as of August 2014) amid weaker-than-expected earnings improvement and negative free cash flow generation (significantly attributable to substantial working capital absorption).

The trend change reflects Volvo’s stronger earnings and free cash flow generation over the past 12-month period as global industry conditions in Volvo’s core truck segment continue to improve in aggregate (notwithstanding substantial disparities across certain regional markets); moreover, the company’s ongoing cost-reduction efforts have further benefited margins, the agency said.

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