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AB Volvo profit shines, supply chain woes hit truck orders

By Niklas Pollard

STOCKHOLM (Reuters) – Swedish truck maker AB Volvo reported a surprise rise in first-quarter core earnings on Friday, as it juggled strong market demand with a strained supply chain that put a cap on its ability to fill up order books.

The rival of Germany’s Daimler (OTC:DDAIF) Truck and Traton also said it expected supplies of components to stay unstable with more disruptions and stoppages of production expected to hamper its business.

Adjusted operating profit at the maker of trucks, construction equipment, buses and engines rose to 12.68 billion Swedish crowns ($1.33 billion) from 11.82 billion a year ago, well ahead of the 10.55 billion seen by analysts in a Refinitiv poll.

The results excluded a previously announced provision related to the war in Ukraine.

Heavy-duty truck makers have been grappling with global shortages of components, such as semiconductors, and a lack of freight capacity since market demand began to recover from the initial pandemic shock.

Russia’s invasion of Ukraine, which Moscow calls a special military operation, has since further clouded the outlook for supply chains and diesel fuels, and seen Western manufacturers such as Volvo cut production and sales in Russia.

“We have had extra costs due to the supply chain disruptions as well as higher costs for material and have worked proactively with price management to mitigate them,” Volvo Chief Executive Martin Lundstedt said in a statement.

“We expect that the inflationary pressure will continue.”

Adding to frustrations over the supply chain problems, which forced vehicle makers to limit output in the quarter, demand for trucks has been strong across most major markets, leaving the pain one of both higher costs and missed sales.

“We have large order books and delivery times are long, and this has made us restrictive with order slotting, which affected order intake negatively,” Lundstedt said.

“We are doing everything we can to reduce the long lead times to our customers.”

Hobbled by the supply constraints, Volvo said order bookings of its trucks, sold under brands such as Mack and Renault (EPA:RENA) as well as its own name, tumbled 47% year-on-year in the first quarter, while it kept unchanged forecasts for the European and North American truck markets.

($1=9.4982 Swedish crowns)

Source : Reuters

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