Volvo Trucks slashes 450 jobs

Volvo, the world's second-largest truck maker, reported Tuesday a lower-than-expected third quarter profit and forecast a shrinking market in Europe next year but growth in North America.

Volvo Trucks slashes 450 jobs

Volvo’s net profit for the July-September period totalled 3.89 billion kronor ($595 million), weaker than the 3.93 billion kronor expected by analysts polled by Dow Jones Newswires but up from the 2.85 billion kronor Volvo posted in the same period a year ago.

The group’s sales rose to 73.3 billion kronor, above forecasts of 71.2 billion kronor and far higher than the 63.9 million kronor reported a year ago. Adjusted for currency fluctuations, the year-on-year sales increase was 22 percent.

Operating income improved to 5.8 billion kronor from 4.9 billion kronor a year ago, corresponding to an operating margin of 7.9 percent.

The group said it had noted a “slight slowdown” in Europe recently, and was therefore “preparing to reduce manufacturing rates in the European production

system in the beginning of next year.”

While it expected the total market for heavy trucks in Europe this year to be in line with its previous forecasts of around 240,000 trucks, it predicted a 10-percent decline in 2012 but noted that the situation was difficult to assess given the “uncertain macroeconomic situation”.

In North America, Volvo saw the opposite trend: it reduced its forecast for the overall market from 230,000-240,000 heavy trucks to 210,000 this year, but predicted a 20-percent increase in demand next year.

“The reduction this year is primarily due to the production ramp-up for the industry as a whole taking longer than we anticipated,” Volvo said.

“Our positive view of demand in 2012 is based primarily on the fact that it is becoming uneconomical to keep parts of the old truck fleet in operation compared with the new trucks we launched in 2010 which have significantly lower fuel consumption,” it said.

Meanwhile, the company saw rising demand in Japan “as reconstruction begins following the earthquake and tsunami earlier this year.”

Volvo’s share price was down by 0.57 percent to 78.80 kronor on the Stockholm stock exchange in early trading, on a market down by 0.10 percent.

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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.