Top Stories
Truck maker Volvo posts record Q1 as sales, margins beat forecasts
Global Banking & Finance Review®
Company
By Terje Solsvik
OSLO (Reuters) – AB Volvo reported record first-quarter profit, a preliminary filing showed, as the truck maker boosted its revenue and margins despite supply bottlenecks and cost inflation, sending its shares up 9.6% in early trade on Wednesday.
Its adjusted operating profit rose 45% to 18.4 billion Swedish crowns ($1.76 billion) for the January-March quarter, well above the 12.9 billion 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 in its preliminary earnings which were released late on Tuesday. It declined to comment further.
“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 shares were up 8.0% at 210 crowns as of 0725 GMT versus a 0.8% rise in Stockholm’s benchmark share index.
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.
Shares in Daimler Truck and Traton were up 3.5% while Iveco was 2.3% higher.
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 131.4 billion crowns from 105.3 billion and topped the 118.6 billion expected by analysts.
Its adjusted operating margin rose to 14.0% from 12.0% 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 89.6 billion crowns from 69.6 billion, beating a forecast of 79.7 billion.
The division’s operating profit jumped to 12.7 billion from 8.7 billion while analysts expected a decline to 8.4 billion.
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.
($1 = 10.4303 Swedish crowns)
(Reporting by Terje Solsvik; editing by Sonali Paul and Jason Neely)
Operating profit is the income generated from normal business operations, excluding expenses associated with non-operational activities. It reflects the company's efficiency in managing its core business activities.
A supply chain refers to the entire system of production, processing, and distribution of goods, from the acquisition of raw materials to the delivery of the final product to consumers.
Cost inflation occurs when the prices of goods and services rise due to increased costs of production, which can affect profit margins and overall economic stability.
Adjusted operating margin is a financial metric that measures a company's operating income as a percentage of its revenue, adjusted for non-recurring items to provide a clearer picture of operational efficiency.
Net sales refer to the total revenue from goods sold or services provided, minus returns, allowances, and discounts. It provides a more accurate measure of a company's sales performance.
Explore more articles in the Top Stories category
