Volvo Group – 4th quarter and full year 2015 results

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AB Volvo Press Release / February 5, 2016

2015 was a year of largely unchanged volumes, with the exception of construction equipment, where demand declined considerably. Our profitability improved with the operating margin excluding restructuring charges going from 3.0% in 2014 to 8.2% in 2015. This was thanks to cost reductions, but was also helped by positive currency development and capital gains from selling shares.

THE FOURTH QUARTER 2015

In the 4th quarter of 2015, net orders from Volvo Group’s truck operations decreased 20 percent [from 61,222] to 49,088 vehicles, compared with the 4th quarter of 2014.

In Europe, Volvo brand net orders rose 24 percent to 14,090 units, while Renault brand net orders increased 15 percent to 11,596 units.

In North America, Volvo brand net orders decreased 55 percent [from 12,023] to 5,414 units, while Mack brand net orders fell 61 percent [from 12,601] to 4,905 units.

• In the fourth quarter net sales increased by 3% to SEK 79.6 billion (77.5). Adjusted for currency movements and acquired and divested units sales decreased by 1%.

• Operating income amounted to SEK 5,382 M (-1,429) excluding restructuring charges of SEK 871 M (830). Currency movements had a positive impact of SEK 1,201 M.

• Operating income includes a positive impact from an arbitration case of SEK 809 M. The fourth quarter of 2014 was negatively impacted by provisions of SEK 3,790 M relating to the EU antitrust case and SEK 660 M for credit losses in China. Adjusted for these three items operating income excluding restructuring charges amounted to SEK 4,573 M (3,021) corresponding to an operating margin of 5.7% (3.9).

• Operating cash flow in the Industrial Operations amounted to SEK 14.7 billion (10.6).

THE FULL YEAR 2015

For full year 2015, net orders from Volvo Group’s truck operations decreased 10 percent {from 219,791} to 198,057 vehicles, compared with full year 2014.

In Europe, Volvo brand net orders rose 12 percent to 49,882 units, while Renault brand net orders leaped 22 percent to 43,023 units.

In North America, Volvo brand net orders decreased 20 percent [from 39,132] to 31,365 units, while Mack brand net orders fell 41 percent [from 32,330] to 19,226 units.

• For the full year 2015 net sales increased by 10% to SEK 312.5 billion (282.9).

• Operating income amounted to SEK 25,652 M (8,393) excluding restructuring charges of SEK 2,333 M (2,569).

• The operating margin excluding restructuring charges amounted to 8.2% (3.0).

• Operating cash flow in the Industrial Operations amounted to SEK 18.3 billion (6.4).

• The Board of Directors’ proposes a dividend of SEK 3.00 per share (3.00)

For a PDF version of the report, please click here: Volvo Group Q4 2015 PDF

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Worse than expected by Volvo

Goteborgs-Posten / February 5, 2016

Vehicle manufacturer Volvo made a profit before tax of SEK 3.9 billion for the fourth quarter of this year.

It was worse than expected and Volvo now expects to sell fewer heavy trucks this year than the group previously forecast.

During the final three months of last year reached the Volvo sales of 79.6 billion crowns - three percent better than for the corresponding quarter last year.

Yet, the financial report, a mixed picture of the market. Demand for trucks increased in Europe, but was weaker in Brazil and North America.

Profit before tax 3,901 million was a significant improvement compared with the fourth quarter of 2014, when Volvo recorded a loss of 2.286 billion crowns.

But when Volvo took large one-off costs and the analysts who follow the group had, according to Reuters, on average expected a profit of 4.328 billion crowns.

In North America, order intake declined during the fourth quarter by 20 percent. Volvo has now chosen to lower its previous forecast of delivering 280,000 heavy trucks this year to 260,000.

For the full year 2015 Volvo reports a profit before tax of SEK 20.4 billion, compared to 5.1 billion in 2014.

The Board proposes a dividend of three crowns per share, unchanged from the previous year's dividend.

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Volvo readies for U.S. slowdown as fourth-quarter profit just lags

Reuters / February 5, 2016

Swedish truck maker Volvo forecast a steeper than expected slowdown in the North American heavy-duty truck market this year and said it would cut production there after posting a slightly smaller than predicted rise in fourth-quarter earnings.

Volvo, a rival of Germany’s Daimler and Volkswagen's truck brands, is contending with falling demand for commercial vehicles in the United States and Brazil and a plunge in purchases of its construction equipment in China.

While European truck sales are growing, the group's ability to parry downturns elsewhere is a test for the leaner and meaner company Volvo has sought to create through years of cost cuts, targeted to reach 10 billion crowns ($1.17 billion) this year.

Sweden's biggest company by revenues said adjusted operating profit rose to 4.57 billion crowns ($543.76 million) from 3.02 billion a year ago, just lagging a mean forecast of 4.72 billion in Reuters poll of analysts.

Gothenburg-based Volvo said the cost cuts to lift profitability closer to the level of nimbler rivals such as VW's Scania, and which have seen about 5,000 jobs cut across the group, were nearing their end.

"We now enter the next phase," said new Volvo CEO Martin Lundstedt, the former Scania boss appointed last year after Olof Persson was sacked amid impatience over progress on the vast efficiency drive.

A slowing U.S. economy, weak freight data and destocking have hit truck orders in recent months though Volvo's sales, working off a hefty backlog, have so far held up well. In Europe, a recent bright spot for many manufacturers, orders remain robust.

Volvo, which sells trucks under the Mack, Renault and UD brands as well as its own name, raised its European truck market outlook but scaled back expectations for both Brazil and North America, where it now forecasts a 14 percent fall.

The North American outlook chimed with that of its rivals, with Germany's Daimler forecasting a 10 percent decline for class 6-8 trucks and Paccar predicting a 12 percent drop in retail sales of class 8 trucks alone, the heaviest segment.

"During the first quarter we will adjust production to the new lower level of demand in North America and Brazil," Lundstedt said.

Volvo said new orders for its trucks fell 20 percent in the quarter versus a 16 percent decline seen by analysts, hit by steep declines in the western hemisphere.

But in Europe, where the group had been expected to show some of its strongest margins, order bookings rose 20 percent.

"It is positive that they had an order intake rise of 20 percent in Europe," Handelsbanken Capital Markets analyst Hampus Engellau said. "That is better than both Scania and Daimler in the quarter, showing they are winning market share."

At its other major arm, its construction equipment business which accounts for a fifth of group sales, Volvo slumped to a loss versus an expected slim profit and retained a forecast for a continued slump of 10-20 percent in the Chinese market.

The company proposed an unchanged dividend of 3.0 crowns per share, below a forecast 3.18 crowns.

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Volvo AB to Cut Production on Lower North American Truck Demand

Bloomberg / February 5, 2016

Volvo AB, the second-biggest truckmaker, cut this year’s forecast for the North American market by 7 percent, and said it will reduce production after demand weakened at the end of 2015.

Fourth-quarter earnings excluding interest, taxes and costs related to restructuring were 5.38 billion kronor ($640 million), compared to a loss of 1.43 billion kronor a year earlier, Volvo said Friday in a statement. Sales rose 3 percent to 79.6 billion kronor.

Volvo shed 5,000 jobs as part of a cost-cutting program to spend 10 billion kronor less this year than it did in 2012.

The effort comes as the North American market, the company’s second-biggest, is expected to shrink to 260,000 units this year.

Daimler AG, the biggest truckmaker, pointed toward the slowdown Thursday as the reason its earnings will probably be flat this year.

“The question is whether this will be enough in the current market,” Hans-Peter Wodniok, an analyst at Fairesearch GmbH & Co. KG, said by phone from Kronberg, near Frankfurt. “They’re likely to announce another round of cost cuts this year.”

With mostly new trucks on the roads in the U.S., sales there may decline for the next year or two, Wodniok said. Europe may partly compensate for those declines. Volvo is predicting that the European heavy-duty truck market will surpass that of North America this year as the world’s second-biggest, behind China. It’s predicting a flat market in China this year after last year’s 26 percent drop.

“During the first quarter we will adjust production to the new lower level of demand in North America and Brazil,” Martin Lundstedt, who took over as chief executive officer in October, said in the statement.

Advance sales contracts for trucks declined 20 percent to 49,088 vehicles in the fourth quarter, while orders for construction equipment dropped 18 percent. The company is proposing a dividend of 3 kronor per share, unchanged from last year.

Operating income excluding restructuring charges at Volvo’s truck unit was 5.15 billion kronor during the fourth quarter, compared with a loss of 542 million kronor last year. Its construction equipment business had a loss of 191 million kronor, compared with a previous loss of 815 million kronor.

[kscarbel2]

Volvo profit disappoints on N. American slowdown

Market Watch / February 5, 2016

The world's second largest truck maker, Sweden's Volvo AB, on Friday cut its forecast for the North American truck market this year as it reported a lower than expected fourth-quarter profit.

Volvo, which makes trucks under its Volvo, Renault, Mack and UD brands, said order intake in the fourth quarter fell 20% from a year earlier to 49,088 trucks. This drop was mainly driven by North America, which saw a slowdown in the market from an exceptionally high order intake in the fourth quarter of the previous year, the company said. The outlook for the North American market was cut to 260,000 trucks from 280,000 previously

"Production cutbacks will be implemented in North America in the first quarter to adapt to a slowing market and expected destocking among dealers," Volvo said.

In Europe, demand continued to strengthen, while Brazil saw a weakening trend, Volvo said. The outlook for the European truck market in 2016 was raised to 280,000 trucks from a previous forecast of 275,000 trucks, while the forecast for the Brazilian market was lowered to 35,000 trucks from 40,000 previously.

Volvo said it expects the Chinese market for medium and heavy trucks to reach about 750,000 vehicles in 2016, up from a previous forecast of 720,000.

The company, which is nearing the end of a four-year restructuring program targeting 10 billion Swedish kronor ($1.19 billion) in annual cost savings by the end of 2016, said measures are delivering expected results and that the number of employees in the group has been reduced by approximately 5,000 people for the full year.

Handelsbanken analyst Hampus Engellau said the company's shares are likely to trade slightly higher Friday as the fourth-quarter result was mainly held back by losses in the group's construction equipment unit. "The main thing is that the operating margin in the company's truck business was 7.9% in the fourth quarter, which is very good," he said. Volvo's truck business makes up about two-thirds of its sales.

Net profit for the October to December period rose to 2.60 billion kronor, compared with a net loss of 2.96 billion kronor a year earlier. This missed analyst expectations of 3.23 billion kronor in net profit.

The fourth quarter of 2014 was negatively affected by provisions of 3.79 million kronor to an EU antitrust case and 660 million kronor for credit losses in China.

Sales in the fourth quarter totaled 79.64 billion kronor, up from 77.48 billion kronor in the same period of 2014. Operating profit totaled 4.51 billion kronor, compared with an operating loss of 2.26 billion kronor.

[kscarbel2]

Renault versus Volvo in “delivered trucks” for 2015

What is the most valuable (highest performing) brand in Volvo Group?

Actually, it isn’t the namesake Volvo brand. Rather, it’s Renault.

Since 2012 (http://www.bigmacktrucks.com/index.php?/topic/43897-how-the-mack-name-ended-up-where-it-is-today/), Volvo has completely owned Renault's truckmaking unit (aka RVI). However, with attention to French pride and politics (and part of the original backroom deal), Volvo gives Renault a tremendous amount of autonomy.

Let’s take a look at Renault and Volvo worldwide truck deliveries in year 2015, versus the same period in 2014:

January 2015 Renault up 24%

Volvo down 4%

February 2015 Renault up 26%

Volvo down 13%

1st quarter 2015 Renault up 35%

Volvo down 8%

April 2015 Renault up 12%

Volvo up 9%

May 2015 Renault up 5%

Volvo down 1%

2nd quarter 2015 Renault up 7%

Volvo down 4%

July 2015 Renault up 8%

Volvo down 5%

August 2015 Renault up 60%

Volvo down 6%

3rd quarter 2015 Renault up 20%

Volvo down 2%

October 2015 Renault up 16%

Volvo down 1%

November 2015 Renault up 54%

Volvo down 10%

4th quarter 2015 Renault up 29%

Volvo down 7%

Full Year 2015 Renault up 22%

Volvo down 4%

Renault brand truck sales rose in every month of 2015. Renault brand truck sales rose in excess of 10% during 9 of those months.

Volvo brand truck sales fell in all but one month in 2015, even though Volvo Group gives its namesake brand priority over Renault (and Mack) in the global market (outside Western Europe).

The Renault brand is on fire, and their trucks and organization tell the story.

But the Volvo brand, ................................................

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[TeamsterGrrrl]

I suspect a lot of savvy buyers have figured out that a Renault is pretty much the same truck as a Volvo, with a lower price...

[kscarbel2]

I suspect a lot of savvy buyers have figured out that a Renault is pretty much the same truck as a Volvo, with a lower price...

The Premium was designed and priced as a fleet truck, and the legendary Magnum was a hit with independent operators across Europe (including Sweden).

Today, the new "T Range", though with Volvo DNA, feels to me very much like a "Renault". The "K Range" continues the tradition of the exemplary "Kerax". And Renault Trucks still feels like the highly capable RVI.

Make a point to experience at least one of these trucks the next time you cross the pond. Renault is "much" more still Renault than Mack is Mack.

[PANELIZER]

Can you please shed any light on the back room deal that gave Renault autonomy?

[kscarbel2]

Can you please shed any light on the back room deal that gave Renault autonomy?

French politics. Remember, Renault had long been a state-owned enterprise (company). Even today, France owns 20 percent of Renault (the car unit partnered with Nissan), and enjoys roping in CEO Carlos Ghosn to remind him that France's interests matter.

In order for the French government to approve the truck deal, Renault had to keep some of its autonomy. In America however, the government handed over America's most iconic truckmaker to a foreign aggressor with only one concern......refuse trucks (and I imagine you know why).