...Diversified but Cyclical Business: The ratings are supported by AB Volvo's geographic and business diversification as a full-line truck maker, its leading market positions in major markets and growing exposure to high-growth emerging markets. The group's services business (26% of sales in 2014) provides stable income and mitigates the inherent volatility of its end-markets. Cost Cuts Help Profitability: Fitch Ratings believes earnings and funds from operations have reached a trough and will be supported by improved demand in Volvo's core truck operations and self-help measures that focus on reducing costs and investments. Hybrid Improves Leverage Metrics: In addition to a strengthened operational profile, Volvo's hybrid issue improved the company's maturity profile and leverage metrics at end-2014 to a level that provides additional headroom for weak market conditions in emerging markets. Fitch forecasts adjusted FFO net leverage to remain around 1.1x-1.3x in the medium term, with additional...
