Volvo earnings rise, truck orders tumble

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MarketWatch  /  July 18, 2019

STOCKHOLM--Volvo AB (VOLV-B.SK) on Thursday reported bumper earnings in its second quarter as sales of vehicles and services drove higher, but a sharp drop in orders for new trucks will lead to production cuts during the second half of the year.

The Swedish truck maker said net profit for the period ended June 30 was 11.13 billion Swedish kronor ($1.19 billion) compared with SEK9.22 billion a year earlier, beating analysts' forecasts of SEK9.5 billion.

Sales rose 16% to SEK120.69 billion, beating analysts' forecasts of SEK111.73 billion, while the group's adjusted operating margin grew to 12.5% from 11.1%.

Truck volumes grew by 10% in the quarter, but order intake fell 21%, Volvo said.

In Europe, even though transport activity has remained solid, customers have become more cautious to invest in new trucks, while in North America, the decline is related to the exceptionally strong order activity in 2018 and the fact that customers have ordered what they need for 2019.

Customers are awaiting more visibility on the economic development in 2020 before placing new orders, Volvo said.

Volvo had previously guided for North American retail sales of 310,000 heavy-duty trucks in 2019 and 300,000 in Europe while Chinese demand for heavy- and medium-duty trucks in 2019 was projected at 1.15 million vehicles. However, the company didn't include any guidance on this in its report Thursday.

In a separate announcement, Volvo said it has entered a strategic alliance with Samsung SDI to develop battery packs for Volvo's electric trucks.

The alliance will cover joint development of battery packs specifically developed for Volvo Group's truck applications.