Volvo to sell consumer goods and drugs arms

Click to follow
The Independent Online
VOLVO, Sweden's biggest industrial group and one of the biggest truck makers in the world, is to sell its drugs and consumer goods business and concentrate on car and truck manufacturing. Soren Gyll, managing director, told shareholders that stakes in Branded Consumer Goods and Pharmacia, which were to have been increased had the planned link-up with Renault gone ahead, will be liquidated.

BCP and Pharmacia formerly made up Procordia, a company jointly owned by Volvo and the Stockholm government. BCP is a food, drink and tobacco company, while Pharmacia is the country's second-biggest pharmaceutical group. Last year Procordia made a SKr2.06bn ( pounds 178m) pre-tax profit, against a loss for the group of SKr2.64bn.

When Volvo announced it was merging its car and truck operations with Renault last September, it said it wanted to take over BCP. Analysts reckoned that Pehr Gyllenhammar, former chairman, believed this would give Volvo a focus if the automotive operations were in effect out of its control.

Mr Gyllenhammar resigned last December after a shareholders' revolt forced him to pull out of the Renault merger. Since then analysts have expected the group to switch its attention back to the motor side.

Volvo is expected to go ahead with the full takeover of BCP and then sell it, while the 39 per cent stake in Pharmacia will be sold directly. It is expected to raise about SKr20bn from the transactions, which will allow it to continue developing its car and truck ranges.

'It's a good short-term move to give the company the funds it needs while it puts together a long-term strategy,' said Garel Rhys, motor industry professor at Cardiff Business School.

Mr Gyll said the year had started well for Volvo cars. Sales in the first quarter were up 35 per cent in Europe and 18 per cent in the US.