Volvo trucks profits on downhill roll

Volvo trucks took a major stock market hit on Friday morning on news that third quarter profits were down 35.5 percent on last year.

Volvo trucks took a major stock market hit on Friday on news that third quarter profits were down 35.5 percent on last year.

The Swedish truck maker cut market growth forecasts for this year, saying that orders had fallen 55 percent for two quarters running.

The company said demand for heavy trucks, a leading indicator of the general economic climate, had slowed far faster than expected because of the deepening impact of the global crisis.

Net profit for the quarter fell on a 12-month comparison by 36.5 percent to 2 billion kronor ($255 million) and operating profit fell 36.6 percent to 3.17 billion kronor even though sales edged up 2 percent to 69.6 billion kronor.

Chief executive Leif Johansson said that after record sales and profits in the first two quarters, sales growth had slowed down far faster than expected.

The economic slowdown had been particularly exacerbated by the global financial crisis.

Demand was weak on the company’s main market in Europe, and also in Japan, and signs were emerging that the economic climate was weakening in other parts of the world.

Orders taken in the third quarter had fallen by 55.0 percent as in the second quarter.

Volvo said it now expected growth of the European market for heavy trucks this year to be zero to 5 percent from the level last year. In the second quarter it had forecast the market would grow by 10 percent this year.


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.