Volvo Cars lifted its profit margins substantially last year as it seeks to convince investors it is becoming a fully-fledged premium manufacturer ahead of a potential return to the stock market.

The Swedish carmaker posted a two-thirds increase in operating profits to SKr11bn in 2016. But in the fourth quarter, operating profits fell by about 10 per cent to SKr3.3bn due to high investments and costs from changing factories to produce its new vehicles.

Volvo, which is owned by China’s Zhejiang Geely, reported an operating margin of 6.1 per cent last year, still behind the 10 per cent regularly posted by the German trio of Audi, BMW and Mercedes but ahead of the 4 per cent it recorded in 2015.

Volvo issued its first equity under Geely ownership at the end of last year, touted within the company as a precursor to a broader share sale some time in the future.

The Swedish company, which was bought by Ford Motor after being spun out of the truckmaker Volvo Group, is also seeking to change its business model ahead of any flotation by not only manufacturing cars but also going deeper into software and electrification and unveiling technology joint ventures with Uber and Autoliv.

Hakan Samuelsson, Volvo’s chief executive, said 2017 should see another record year of sales after they rose 6 per cent to 534,000 cars in 2016.

“Volvo is going from strength to strength. The new models are successful, sales are at record levels and profits are up substantially reflecting the contribution of all our employees. On the back of these achievements, I foresee that 2017 will also be a record year in terms of sales.”

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