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February 1, 2018 10:15 AM, EST

AB Volvo Ends 2017 With Record Revenue

Volvo Truck John Sommers II for Transport Topics

Diversified truck manufacturer AB Volvo reported a surge in net income as well as record revenue for 2017 as truck demand remains high in Europe and is increasing in North America and Brazil.

Quarterly gains were less dramatic.

Net income for the quarter, ended Dec. 31, rose to the equivalent of $628 million, or 30 cents a share, on sales of $11.6 billion. In the same year-ago quarter, net income was $613 million, or 30 cents, on sales of $10.5 billion.

For the full year, net income surged 59% to $2.7 billion, or $1.31, on record sales of $42.5 billion. That compares with net income of $1.7 billion, or 82 cents, on sales of $38.3 billion in the 2016 period.

“2017 was a very strong and solid year for Volvo Group. It was the best year ever both when it comes to sales and in operating income. We have had strong markets on the truck side obviously and good progress for all our truck makes. We have also had a strong market for Volvo construction equipment,” CEO Martin Lundstedt said.

Lundstedt

Volvo’s trucks, construction equipment, Penta and financial services segments all recorded their highest operating income for a full year, according to the Gothenburg, Sweden-based company, which reports results in Swedish krona.

Its Volvo Trucks unit — the second-largest heavy-duty truck brand in the world and the company’s largest segment — delivered 59,814 trucks in the fourth quarter, 18% more than in the preceding year, despite Volvo’s supply chain constraints.

Truck orders in the quarter increased by 29% to 69,597 trucks. Of those, 18,543 were in North America, an 84% increase compared with 10,098 orders in 2016’s fourth quarter. The 84% increase was driven by Volvo Trucks North America and Mack Trucks brands, reflecting high activity in construction and highway segments.

For the year, North American truck orders were 51,693, a 56% increase over the 33,221 ordered in 2016.

Industrywide, total truck orders jumped 23% to 232,439 in 2017, compared with 188,898 in 2016.

Volvo forecast the North American Class 8 retail sales market in 2018 will hit 280,000.

It forecast European demand for heavy-duty trucks this year to reach 310,000, compared with 307,000 in 2017.

Also, the company noted in the earnings report what it called “important events.” These included the unveiling of a self-driving truck that drove autonomously from one hub to another in China. The truck is part of a development project exploring how automation can contribute to increased productivity, enhanced safety and lower environmental impact.

Plus, Volvo Trucks will start selling electric medium-duty trucks for city distribution in Europe in 2019.

Volvo’s shares have risen 48% in the past 12 months, valuing the company at $45 billion, Bloomberg News reported in January.

“There will be a very good cash flow in 2018,” John Hernander, chief investment officer at Nordea Asset Management, told Bloomberg earlier in January. Hernander manages Nordea Swedish Stars, whose biggest holding is Volvo AB.

“It’s easy to see Volvo with 30% to 35% upside from here. There are few other industrials with the same potential,” he said.

Hernander said the fear that “something irrational” will happen because of the Chinese firm Zhejiang Geely Holding Group Co. becoming a large owner of Volvo shares is exaggerated. Instead, Geely could open doors in China, he said.

Geely also owns Volvo Cars, the truck maker’s former auto business.