Fitch: Volvo outlook positive

Fitch Ratings said it changed AB Volvo's outlook to positive from negative and affirmed its long-term issuer default and senior unsecured ratings at BBB- and short-term issuer default rating at F3.

The change in outlook reflects gathering evidence that Volvo's financial profile is recovering following 2009's severe downturn in truck and construction equipment markets, according to the agency.

The improvement in earnings and cash flows has translated into a recovery in credit metrics, with gross leverage of 3.3x and net leverage of 2.2x, the agency said.

Ratings remain constrained by Volvo's exposure to highly cyclical end-markets, the mature and competitive nature of truck markets in Europe and North America, profit margins that continue to lag peers, a history of negative free cash flow generation at the industrial operations and evidence of shareholder friendly actions, the agency said.

Ratings also reflect Volvo's sound liquidity position, the agency noted.

Volvo's ratings are supported by its strong market positions, its broad diversification in terms of geography and business line, an increasing exposure to high growth emerging markets and its relatively large, stable income, Fitch said.

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