Volvo posts strong earnings

Volvo, the world's number two heavy duty truck manufacturer, on Friday posted strong first-quarter profits boosted by heightened demand in all markets except North America.

In the January-March period, the Swedish company saw its net profit increase 12 percent to 4.2 billion kronor ($701 million), up from 3.8 billion kronor in the same quarter a year ago, according to its earnings statement.

The group also increased its growth forecast for the overall European heavy duty truck market this year to 10 percent, up from the “5.0 to 10 percent” increase it said it expected in February.

“Volvo Trucks developed well with very good profitability in Europe and in the international region but … the situation was significantly more difficult in North America,” Volvo president and chief executive Leif Johansson said in the statement.

He said growth in most of its markets had “more than well offset the weaker trend in North America,” which had nonetheless dealt a blow to both deliveries and profitability.

Volvo said its net sales for the quarter had grown 26 percent to 76.7 billion kronor, up from 61 billion kronor in the year-ago quarter, slightly missing analyst expectations of 77.1 billion kronor, according to a poll by SME Direkt.

Volvo said its operating income had ticked in at its highest quarterly level ever at 6.5 billion, a 22 percent increase over the 5.3 billion it posted for the first three-month period of 2007.

Its operating margin however slipped slightly to 8.5 percent from 8.7 percent a year earlier, the company said.

“After a second half of 2007 in which the group’s profitability was affected by production disturbances internally as well as at suppliers, production is now flowing better and we are delivering at a very high rate,” Volvo president and chief executive Leif Johansson said in the statement.

The market welcomed the results, sending Volvo’s share price soaring 5.16 percent to 91.75 kronor a share in mid-morning trading on the Stockholm stock exchange, which on average was up 2.72 percent.


Sweden’s Volvo regains strength after pandemic puts brakes on earnings

Swedish truck maker Volvo Group was hit by a sharp drop in earnings due to the coronavirus pandemic, but business rebounded at the end of the year.

Sweden's Volvo regains strength after pandemic puts brakes on earnings
Volvo Group CEO Martin Lundstedt. Photo: Adam Ihse/TT

In 2020, the group saw “dramatic fluctuations in demand” due to the Covid-19 pandemic, chief executive Martin Lundstedt said in a statement.

For 2021, Volvo raised its sales forecasts in its trucks division – its core business – in Europe, North America and Brazil.

However, it said it also expected “production disturbances and increased costs” due to a “strained” supply chain, noting a global shortage of semiconductors across industries.

The truck making sector is particularly sensitive to the global economic situation and is usually hard hit during crises.

In March, as the pandemic took hold around the world, Volvo suspended operations at most of its sites in 18 countries and halted production at Renault Trucks, which it owns, in Belgium and France.

Operations gradually resumed mid-year, but not enough to compensate for the drop in earnings.

With annual sales down 22 percent to 338 billion kronor (33.4 billion euros, $40 billion), the group posted a 46 percent plunge in net profit to 19.3 billion kronor (1.9 billion euros).

Operating margin fell from 11.5 to 8.1 percent.

However, the group did manage to cut costs by 20 percent.

“We have significantly improved our volume and cost flexibility, which were crucial factors behind our earnings resilience in 2020,” the group said.

Volvo's business regained strength in the second half of the year.

“Customer usage of trucks and machines increased when the Covid-19 restrictions were eased during the summer and this development continued during both the third and fourth quarters,” it said.

“Both the transport activity and the construction business are back at levels on par with the prior year in most markets.”

For the fourth quarter alone, the company reported a 38-percent rise in net profit from a year earlier.