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VOLVO

Volvo bounces back from first-quarter gloom

Sweden-based truck makers Volvo posted a second quarter profit of 72.8 billion kronor ($11.3 billion), a 25-percent increase compared to the "weak start" to 2013.

Volvo bounces back from first-quarter gloom

“Despite having to increase our warranty reserves by 900 million for legacy truck quality issues, operating income totaled 3.3 billion, corresponding to an operating margin of 4.5 percent compared with 0.8 percent in the first quarter,” the company said in a statement on Wednesday.

While profits were down 12 percent compared to the same period last year, the profits represented a 25 percent increase from the first quarter of this year.

“Compared with the second quarter of 2012, changes in currency exchange rates had a negative impact of 1,210 million kronor,” the company wrote, adding that it was in a phase of reinvention.

“During the quarter, Renault Trucks launched a completely new range of trucks for distribution, construction and long-haulage. Volvo Trucks launched four new truck models. Altogether this is the biggest product renewal in the group’s history.”

The company credited that renewal for helping it bounce back from a “weak start” to the year.

“Thus far, the trucks have been well received by customers and dealers, which is of utmost importance since these new trucks will be highly significant to the Group’s sales and profitability in the coming years,” said Olof Persson, President and CEO.

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VOLVO

Sweden’s Volvo regains strength after pandemic puts brakes on earnings

Swedish truck maker Volvo Group was hit by a sharp drop in earnings due to the coronavirus pandemic, but business rebounded at the end of the year.

Sweden's Volvo regains strength after pandemic puts brakes on earnings
Volvo Group CEO Martin Lundstedt. Photo: Adam Ihse/TT

In 2020, the group saw “dramatic fluctuations in demand” due to the Covid-19 pandemic, chief executive Martin Lundstedt said in a statement.

For 2021, Volvo raised its sales forecasts in its trucks division – its core business – in Europe, North America and Brazil.

However, it said it also expected “production disturbances and increased costs” due to a “strained” supply chain, noting a global shortage of semiconductors across industries.

The truck making sector is particularly sensitive to the global economic situation and is usually hard hit during crises.

In March, as the pandemic took hold around the world, Volvo suspended operations at most of its sites in 18 countries and halted production at Renault Trucks, which it owns, in Belgium and France.

Operations gradually resumed mid-year, but not enough to compensate for the drop in earnings.

With annual sales down 22 percent to 338 billion kronor (33.4 billion euros, $40 billion), the group posted a 46 percent plunge in net profit to 19.3 billion kronor (1.9 billion euros).

Operating margin fell from 11.5 to 8.1 percent.

However, the group did manage to cut costs by 20 percent.

“We have significantly improved our volume and cost flexibility, which were crucial factors behind our earnings resilience in 2020,” the group said.

Volvo's business regained strength in the second half of the year.

“Customer usage of trucks and machines increased when the Covid-19 restrictions were eased during the summer and this development continued during both the third and fourth quarters,” it said.

“Both the transport activity and the construction business are back at levels on par with the prior year in most markets.”

For the fourth quarter alone, the company reported a 38-percent rise in net profit from a year earlier.

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