Fitch affirms Volvo

Fitch Ratings said it affirmed AB Volvo's long-term issuer default rating and senior rating at BBB and short-term issuer default rating at F2. The outlook is stable.

The agency said the affirmation reflects its expectation that Volvo's credit profile will remain commensurate with its current ratings. In particular, Fitch believes that key credit metrics will remain within the agency's guidance for the current ratings following a SEK 5 billion reduction in net debt from the sale of Volvo Aero, the company's airplane and rocket engine division, and despite the somewhat deteriorating profitability and underlying cash generation.

The ratings are supported by Volvo's geographic and business diversification, its top-three market positions in major truck markets and an increasing exposure to high-growth emerging markets through long-term joint ventures and partnerships, Fitch said.

At the same time, the agency said it does not expect Volvo's earnings to return to 2011 levels, as profitability will be challenged by increased price pressure, unfavorable business mix and lower capacity utilization in the second half of 2012.

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