With overall sales up by a fifth, Volvo Group's net profit leapt by 38.6 percent to 7.46 billion kronor (720 million euros, $825 million). It also managed to increase its adjusted operating margin to 11.1 percent, beating the average of 10.4 percent expected by analysts surveyed by the SME Direkt agency.
“Although this is the best third quarter ever for the Group, it does not mean that we have reached our full potential,” chief executive Martin Lundstedt said in a statement. “There is more to do to improve profitability and drive cash flow,” he added.
Overall, sales of trucks rose by 23 percent in monetary terms, while those of heavy construction equipment rose by 24 percent, increases which investors may interpret as a signal the transportation and construction sectors are strong.
“The high activity level in the North American economy translates into a strong freight environment with high transport volumes and good freight rates,” said Lundstedt.
“This leads to customers both renewing and expanding their fleets, a development which is expected to continue into 2019,” he added. However, the company did acknowledge the strong sales in North America were stretching its supply chain.
Volvo CEO Martin Lundstedt during his statement at Stockholm's Tampere Palace. Photo: Claudio Bresciani / TT
For 2019, the firm expects stable overall demand, although truck sales are expected to slide by five percent in Europe.
On Tuesday, Volvo Group disclosed it had discovered a problem in the emissions control systems for trucks and busses that are primarily sold in Europe and North America, which caused its share price to tumble. The premature wearing out of a component could cause engines to exceed emissions limits for harmful nitrogen oxides, the company said.
“A full analysis of the issue is not completed and it is not possible to assess the financial impact at this stage; however, the cost could be material,” it said in a statement.
The firm generates more than two-thirds of its sales in Europe and North America, selling trucks under the Volvo, Mack, and Renault Trucks brands.
Its shares were down 2.7 percent in morning trading on the Stockholm stock exchange, which was up down 0.9 percent overall.