Volvo profits up, cautious on outlook

Sweden's Volvo Group, the world's second-largest truck maker, reported strong second quarter earnings Friday but kept its forecasts unchanged on caution at the global economic outlook.

Volvo profits up, cautious on outlook

For the three months to June, Volvo Group — which owns of Volvo Trucks, Renault Trucks and Mack — said its earnings rose 62 percent from the same period last year to 5.12 billion kronor ($814 million).

Analysts surveyed by Dow Jones Newswires had expected a net profit of 4.93 billion kronor.

Sales jumped 15 percent to 79 billion kronor, slightly below analyst forecasts for 79.9 billion kronor.

Volvo chief executive Leif Johansson said the company maintained its sales outlook for the year, but that it remained vigilant as the world economy was showing signs of sluggishness.

”Going forward, I am convinced that the Group will continue its positive development. Our intensive efforts to develop and launch a large number of new products that will reach the market in the next few years continue” said Volvo Group President and CEO, Leif Johansson, in a comment on the report.

The results pushed the Volvo share price up nearly five percent in early trading.

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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.