Volvo’s truck division reports a surprising profit decline in the third quarter

Main restaurants

• Volvo‘s truck division’s adjusted profit for the third quarter fell more than expected due to reduced activity in the freight and construction divisions.
• The company expects a stable market next year with a European heavy truck market of 290,000 vehicles and a North American market of 300,000 vehicles.
• Volvo reported a 7 percent drop in heavy truck orders compared to last year.

AB Volvo reported a decline in adjusted earnings for the third quarter which exceeded analysts’ expectations. The company attributed this to reduced activity in the freight and construction sectors, which affected vehicle sales. Volvo expects a stable market next year, with heavy truck markets in Europe and North America expected to remain at around 290,000 and 300,000 vehicles respectively.

Results

This is the first time this year that Volvo’s quarterly results have fallen short of forecasts. After the announcement, shares fell 0.9 percent in early trading. Adjusted operating profit came to 14.1 billion Swedish kroner, compared to 19.3 billion kroner in the previous year. Analysts had expected an average profit of 15.6 billion Swedish crowns.

Volvo is the first of the European truck manufacturers which will announce its earnings in the third quarter. Traton will follow up later in October and Daimler’s report is expected in early November. The company, which makes vehicles under brands including Mack Trucks, Renault and Volvo, reported a 7 percent decline in heavy-duty truck orders compared to last year.

Answer

CEO Martin Lundstedt cited macroeconomic uncertainty as a contributing factor to the relatively flat market forecast for next year. He noted that production cuts at Volvo’s European plants in the first half of the year led to a realignment of production with demand in that region. Meanwhile, in North America, additional resources are available to make a new truck range.

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