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Volvo profits plummet on rising material costs

Swedish automaker Volvo Cars said on Thursday that rising raw material costs and inflation had driven down profits in the third quarter.

Volvo profits plummet on rising material costs
Volvo cars are seen on the forecourt of a Volvo dealership in Reading, west of London. Photo: Ben Stansall/AFP

The group posted a net profit of 665 million kronor ($61 million) in the July-September period, a drop of 71 percent compared to 2.3 billion kronor during the same quarter a year ago.

The figure was far below analysts’ forecasts of between 2.15 and 2.19 billion kronor, according to Bloomberg and Factset.

The company’s share price was down by around seven percent in midday trading on the Stockholm stock exchange.

Chief executive Jim Rowan said the company was hit hard by rising raw material prices, record inflation, higher interest rates and the war in Ukraine.

“The macroeconomic uncertainties around the world weighed on our third quarter performance”, he said in a statement.

Revenue meanwhile rolled in slightly higher than analysts’ expectations, rising by 30 percent to 79.3 billion kronor, boosted by “robust” demand for the company’s SUVs.

Analysts had predicted third quarter sales of between 78.1 and 78.7 billion kronor.

Retail sales declined however in some markets, including its main markets Europe and the United States, where the number of vehicles sold fell by 14 and 32 percent respectively.

The carmaker insisted however that its order book remained solid.

Volvo Cars, which aims to have an all-electric fleet by 2030, also reported “sharp pick-up” for its fully-electric vehicles at the end of the quarter, especially in September.

It said sales of fully-electric cars soared by 87 percent in the third quarter, accounting for seven percent of its total sales during the period.

The company, a subsidiary of Chinese group Geely, said manufacturing output continued to improve in the third quarter, but “unforeseen factors” such as power outages and Covid-19 related lockdowns in China “slowed down the pace of normalisation”.

It expected production, wholesale and retail growth in the second half of the year.

“For the full year 2022, we expect slightly lower wholesale volumes than 2021, assuming no further major supply chain disturbances. Wholesale and retail volumes will be on similar levels”, it said.

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BUSINESS

Spotify posts net loss of 430 million euros – but beats expectations

Swedish music streaming giant Spotify reports deepening losses, but for the first time climbed past 200 million paying subscribers.

Spotify posts net loss of 430 million euros – but beats expectations

The Swedish company, which last week announced it was cutting almost six percent of its workforce to reduce costs, posted a net loss of 430 million euros ($465 million) for the year.

Analysts had forecast a loss of 441 million euros, according to Factset.

Revenue for the full-year also slightly beat forecasts, coming in at 11.7 billion euros or a rise of 21 percent from a year earlier.

The number of paying subscribers climbed by 14 percent to 205 million, beating analysts’ expectations of 202 million, which the group attributed to strong growth in all regions, especially in Latin America.

It is the first time Spotify has surpassed 200 million paying subscribers.

Among other things, the company said it had benefited from promotional campaigns, a strong holiday season, and robust growth among Gen Z users.

The total number of monthly users, including subscribers using the free version, totalled 489 million at the end of the year and should hit the 500 million mark in 2023, Spotify said.

The platform, based in Stockholm but listed in New York, has only occasionally posted a quarterly profit since its launch.

It has regularly posted annual losses, despite strong subscriber growth and having had a headstart on its rivals such as Apple Music and Amazon Music.

Spotify founder and chief executive Daniel Ek last week announced the group was cutting around 600 jobs, out of around 10,000, following other similar moves by tech industry giants.

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