Lundstedt: A decent quarter

[kscarbel2]

Sydsvenskan  /  April 22, 2016

Profit and orders fell for truckmaker Volvo, but not as much as analysts had expected

“We had a decent quarter,” says CEO Martin Lundstedt.

Truck and construction machinery manufacturer AB Volvo reported a pretax profit of 5.299 billion kronor for the first quarter of 2016. That compares with profit of 5.697 billion crowns same period the year before.

Analysts had on average expected a profit of 4.356 billion kronors.

“It's still about making sure that our cost savings bite, and they do. We are strengthening the underlying profitability of the truck business, going from 7.3 to 7.8 percent,” said Martin Lundstedt about the past quarter.

Lundstedt thinks that the company has a good compliance and manages to adapt to market fluctuations, above all in North America, where order intake was halved from high levels, and deliveries declined by over 30 percent. About 1,200 people, almost every tenth employee, Volvo has been laid off there. At the same time, business is good in Europe where order bookings rose 23 percent during the quarter.

 

Question: Sales have been stagnant for several quarters, and now falling slightly. When will it turn around?

Lundstedt: The main reason for that is how the market conditions looks, not our relative market position. We also see that we are taking market share in a number of key areas, including in Europe.

 

Turnover amounted to 71.707 billion kronor, compared to 74.788 billion kronor a year earlier.

Order intake, net, falling markedly. During the first quarter amounted to 50,046 vehicles against 56,770 a year earlier.

Analysts had on average expected, however, an even larger decline, to 48,871 trucks.

Deliveries in the first quarter also fell to 46,110 trucks, down from 48,326 trucks in the first quarter of 2015.

Martin Lundstedt noted however that the operating margin in the truck segment ended up at 7.8 percent in the first quarter.

"Volumes in South America decreased due to the already weak demand in Brazil. It will be some time before demand improves. The trend in Asia is stable. The European market is developing strongly and we note an increase in orders of 23 percent," said Lundstedt.

Currency movements during the quarter have reduced earnings by 417 million.

It occurred particularly in the bus segment, which experienced good sales after a strong showing of orders at the end of 2015.

"Shipments in the quarter were high, but profitability was negatively affected by currency effects," said Lundstedt.

After reporting 660 million kronor of credit losses in China for the 2015 fourth quarter, AB Volvo's construction machinery unit Volvo CE reported sales of 149 million kronor in China for the first quarter while continuing to lead the company’s credit losses.