Profits plummet for Sweden’s Volvo Group

Swedish truck and heavy vehicles maker Volvo AB saw fourth quarter profits plunge, landing well below expectations, with year-end results also down compared to 2011.

Profits plummet for Sweden's Volvo Group

On Wednesday, Volvo reported pre-tax profits of 660 million kronor ($103.8 million) for the fourth quarter 2012, down from 6.39 billion kronor for the same period the year before.

Analysts had expected Volvo’s quarterly results to land at 1.77 billion kronor, according to poll carried out by the Reuters news agency.

Overall for 2012, Volvo’s pre-tax profits amounted to 15.36 billion kronor, compared to 24.93 billion kronor for 2011.

And Volvo expects the tough times to continue.

“On a Group level the first quarter of 2013 will also be difficult as a result of the low order intake in many markets during the fourth quarter of 2012. Profitability will be affected by low capacity utilization, high spend levels in research and development and costs associated with the launch of new products,” CEO Olof Persson said in a statement.

“However, we expect market conditions to gradually improve during the course of 2013 when economic growth across the world gains momentum.”

Fourth quarter turnover came to 71.79 billion kronor, compared with 86.51 billion kronor in the fourth quarter of 2011.

The board has recommended a 3.00 kronor per share dividend, the same as last year.

According to Persson, the lower turnover is a result of reduced economic activity in Volvo’s main markets and continued uncertainty about the future, causing customers to exercise caution.

“However, overall we have maintained our market positions with some regional variations,” the Volvo CEO added.

TT/The Local/dl

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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.