Volvo profits plummet on rising material costs

Swedish automaker Volvo Cars said on Thursday that rising raw material costs and inflation had driven down profits in the third quarter.

Volvo profits plummet on rising material costs
Volvo cars are seen on the forecourt of a Volvo dealership in Reading, west of London. Photo: Ben Stansall/AFP

The group posted a net profit of 665 million kronor ($61 million) in the July-September period, a drop of 71 percent compared to 2.3 billion kronor during the same quarter a year ago.

The figure was far below analysts’ forecasts of between 2.15 and 2.19 billion kronor, according to Bloomberg and Factset.

The company’s share price was down by around seven percent in midday trading on the Stockholm stock exchange.

Chief executive Jim Rowan said the company was hit hard by rising raw material prices, record inflation, higher interest rates and the war in Ukraine.

“The macroeconomic uncertainties around the world weighed on our third quarter performance”, he said in a statement.

Revenue meanwhile rolled in slightly higher than analysts’ expectations, rising by 30 percent to 79.3 billion kronor, boosted by “robust” demand for the company’s SUVs.

Analysts had predicted third quarter sales of between 78.1 and 78.7 billion kronor.

Retail sales declined however in some markets, including its main markets Europe and the United States, where the number of vehicles sold fell by 14 and 32 percent respectively.

The carmaker insisted however that its order book remained solid.

Volvo Cars, which aims to have an all-electric fleet by 2030, also reported “sharp pick-up” for its fully-electric vehicles at the end of the quarter, especially in September.

It said sales of fully-electric cars soared by 87 percent in the third quarter, accounting for seven percent of its total sales during the period.

The company, a subsidiary of Chinese group Geely, said manufacturing output continued to improve in the third quarter, but “unforeseen factors” such as power outages and Covid-19 related lockdowns in China “slowed down the pace of normalisation”.

It expected production, wholesale and retail growth in the second half of the year.

“For the full year 2022, we expect slightly lower wholesale volumes than 2021, assuming no further major supply chain disturbances. Wholesale and retail volumes will be on similar levels”, it said.

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Swedish grocery giants to cut prices on hundreds of items

Swedish supermarket chains Ica and Coop vowed to lower prices on a range of items, following a similar move by Lidl last week.

Swedish grocery giants to cut prices on hundreds of items

Ica on Monday morning said that it would cut prices on more than 300 items by between 5 and 25 percent, starting April 11th and lasting at least two months.

It said bread, poultry, cheese, cured meats, sauces, dry goods, baby food and hygiene products would be affected by the price cuts.

Ica is the largest supermarket chain in Sweden with around 36 percent of the market share. Ica franchisees are allowed to independently set their own prices, so the number of items affected and their actual cost will vary from store to store.

The price cuts come after Finance Minister Elisabeth Svantesson urged Swedish supermarkets to follow Lidl’s example, after the chain (which owns about 5-6 percent of the market) last week announced it would lower and freeze prices on more than a hundred items from March 27th.

Coop also announced on Monday that it would lower prices on all fresh fruit and vegetables by 12 percent for its members. Coop’s price cuts will start on March 30th and apply throughout April.

Household grocery bills are soaring in Sweden, as The Local has previously reported. Prices of food and non-alcoholic beverages last month rose 21 percent year-on-year, the biggest increase since the 1950s, eclipsing even the high-inflation years of the 70s.