Volvo cheers profit boost thanks to strong European demand

Volvo cheers profit boost thanks to strong European demand
Volvo trucks. Photo: Thomas Johansson/TT
Swedish truck makers Volvo notched up a larger than expected profit boost on Tuesday thanks to strong demand in Europe and Japan.

Profit was 4.82 billion kronor ($544 million), and adjusted operating profit was 7.03 billion, exceeding the 5.31 billion mean forecast by analysts in a poll by the SME Direkt agency.

Gothenburg-based Volvo Group delivered fewer lorries than a year before (-4 percent in volume), a period when its clients rushed to buy them just before new and more expensive environmental norms were implemented. This was off-set by 34 percent higher volumes of construction equipment.

“The good order trend from the end of last year continued, with order intake for trucks being up by 11 percent to 55,600 vehicles,” Volvo Group CEO Martin Lundstedt said in a statement.

Volvo CEO Martin Lundstedt and finance boss Jan Gurander. Photo: Noella Johansson/TT

The first quarter was helped by sales of construction equipment (Volvo CE), where volumes delivered as well as orders increased by 34 percent, which Volvo attributed to the “recovery in the mining industry”.

Overall, turnover jumped by eight percent to 77.37 billion kronor for Volvo, whose cost trimming in recent years boosted its profitability in the first quarter.

The operating margin, at 9.1 percent, climbed 1.6 percentage points in one year.

“Demand for trucks in Europe remained high. Our customers continue to benefit from a good freight environment and we see good demand also in the construction segment,” Lundstedt said.

Volvo said it saw its main brand's European market share drop slightly (-0.3 points to 17.6 percent in January-February) while Renault Trucks' share jumped (+0.3 points to 8.7 percent).

Lundstedt had a positive outlook on the year ahead, but noted a concern about unpredictable world politics. “There's an election in France, a discussion about what's going to happen to Brexit,” he said.

He said more discussion was needed on how to make the EU more open and transparent.

“I meet many employees who are asking these questions, not least young people. I believe we have a role to play there, so that we maintain flexibility and competitiveness in Europe.”