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The Volvo Group reported lower first-quarter net profit and higher revenue amid what the company said was good economic activity, high transport volumes and solid construction activity, while order books are long and delivery times long.
Truck deliveries set a record for a first quarter, rising to 55,588 from 52,444 a year earlier.
“With haulage activity in most regions at good levels, demand for trucks is high. We have large order books and long lead times, which has made us restrictive in the order window, which had a negative impact on order intake. We are working hard to reduce long lead times to our customers. The supply chain continued to be strained, causing disruptions and shutdowns production also in the first quarter,” CEO Martin Lundstedt said in a statement.
Volvo, which reports in Swedish krona, reported equivalent net profit of $732 million, or 34.2 cents per diluted share, compared with $942 million, 45.5 cents, for the 2021 period.
Revenue soared to $11 billion from $9.83 billion a year earlier.
Of that revenue, $7.2 billion came from truck sales, up from $6.1 billion a year earlier.
North American truck sales rose to $3.1 billion from $2.5 billion a year earlier.
Volvo Group North America brands include Mack Trucks and Volvo Trucks North America.
“Strong commercial activity combined with our growing portfolio of service contracts has resulted in continued good service growth, which increased by 19%. We achieved an adjusted operating margin of 12% versus 12.6% a year earlier despite a challenging supply chain situation,” Lundstedt said.
Volvo recorded additional costs due to supply chain disruptions as well as higher costs for materials, and worked proactively with “pricing management to mitigate these”, he said. “We expect inflationary pressure to continue.”
In Europe, Volvo’s biggest market, sales rose 25% to $4.8 billion, from $3.9 billion in the 2021 period.
Overall vehicle sales increased to $8.4 billion from $7 billion a year earlier.
Meanwhile, net truck orders fell to 45,594 from 85,461 a year earlier.
Order intake in North America decreased by 73% to 6,017 trucks while deliveries increased by 7% to 13,908 vehicles.
VTNA’s heavy truck market share increased from 10.3% to 9.8% and Mack Trucks’ market share increased from 6.6% to 5.3% during the 2021 period.
Volvo noted that demand for electric trucks is gradually gaining ground in urban distribution and regional transport.
In March, Volvo Trucks North America received an order for 110 Volvo VNR electric trucks from global logistics company Maersk. The agreement adds to a previous order for 16 trucks of the same model and marks the largest commercial order to date for Volvo’s electric trucks.
Clearly, he said, his customers and their customers are really starting to push for a transition to electric vehicles and machines to decarbonize their value chains.
“It’s a development that will only accelerate,” Lundstedt said. “And we continue to accelerate our investments to deploy even more electrical products and solutions in the near future.”
Regarding the war in Ukraine, Lundstedt said that since the start of the war with Russia and the imposition of sanctions, all sales, services and production in Russia have been suspended.
“We have total assets of approximately $940 million related to Russia, of which $429 million was provisioned in the first quarter, negatively impacting operating income,” he said.
Of that $940 million, some $628 million is “cash primarily related to the financial services business where we funded customer truck and machinery purchases. The other three would be real estate, spare parts inventory, etc. wrote Claes Eliasson, Volvo Group’s senior vice president of media relations, in an email to Transport Topics.
“Cash items are primarily loans we have taken out and bonds we have issued to fund our credit portfolio,” he wrote. “As these loans and bonds mature over the next few years, we have to repay the money, even if our customers are unable to pay us their rents. The maturities of financing and loans in the credit portfolio match.