Volvo posts record Q1 as sales beat forecasts
AB Volvo reported record firstquarter profit, a preliminary filing showed late on Tuesday, as the truck maker boosted its revenue and margins despite supply bottlenecks and cost inflation.
Its adjusted operating profit rose 45% to 18.4bn Swedish crowns (R33bn) for the January-March quarter, well above the 12.9bn crowns (R23bn) expected by analysts polled by Refinitiv Eikon.
The Swedish company had said as recently as January it expected disturbances, stoppages and extra costs to persist, with soaring inflation and the energy crisis adding to the pain.
Volvo did not elaborate on what had spurred its turnaround and did not provide a profit outlook.
It will report full first-quarter earnings on April 20.
“We believe this quarter was influenced by price increases and a much better supply chain situation leading to less stop and go on the production line, allowing the firm to deliver very strong results,” analysts at JPMorgan said in a research note.
Volvo and rivals such as Germany’s Daimler Truck and Traton have struggled with semiconductor shortages and broader supply chain issues and strained freight capacity stemming from the Covid-19 pandemic and the war in Ukraine.
Volvo’s results could signal a broad improvement for the industry, with a particularly positive “read across” to Daimler Truck, Traton and Italy’s Iveco as well as for their suppliers, JPMorgan
said. Jyske Bank in a research note said that while the earnings were strong, the brokerage still worried that Volvo’s order intake could fall and that the truck maker’s customers could see stagnant activity amid global economic weakness.
Volvo’s preliminary net sales for the quarter rose to 131.4bn crowns (R233bn) from 105.3bn (R187bn) and topped the 118.6bn (R210bn) expected by analysts.
Its adjusted operating margin rose to 14% from 12% and earnings at the group’s two major divisions, truck making and construction equipment, both showed progress.
Net sales in the truck segment rose to 89.6bn (R159bn) from 69.6bn (R23bn), beating a forecast of 79.7bn (R141bn).
The division’s operating profit jumped to 12.7bn crowns (R23bn) from 8.7bn (R15bn) while analysts expected a decline to 8.4bn (R15bn).
Daimler Truck last month said its outlook had improved and that its profit would grow this year, but the company’s share price still fell amid concerns that inflation would weigh on its margins.
Volvo shares are up 3.1% year to date, lagging a rise of 8.2% in Stockholm’s benchmark share index.