Volvo Group Reports Q1 Net Income, Revenue Setbacks
[Stay on top of transportation news: Get TTNews in your inbox.]
Volvo Group reported first-quarter net income and revenue fell amid lower truck orders and deliveries as the coronavirus pandemic intensified.
For the period ended March 31, Volvo (reporting in Swedish krona) had net income the approximate equivalent of $470 million, or 23 cents per diluted share. That compared with $1.1 billion, or 52 cents, in the year-ago period.
Revenue fell to $9 billion from $10.6 billion a year earlier.
"We have been able to maintain service to our customers, who are running society critical activities. I would like to thank the whole team and our business partners for doing a fantastic job during a difficult period." Martin Lundstedt comments on the first quarter 2020. pic.twitter.com/nvmUn4QLCJ — Volvo Group (@VolvoGroup) April 23, 2020
In North America, revenue dropped 25% to $2.5 billion compared with $3.4 billion.
Global truck revenue was $5.7 billion. A year earlier truck sales were $6.7 billion.
The company is in a tough period, said CEO Martin Lundstedt.
“The first quarter of 2020 was impacted by the measures in society to stop the spread of the COVID-19 pandemic. These began affecting our operations in China in February and had a severe impact on the Group as of mid-March, when our global supply chain was disrupted and production halted in most parts of our operations,” Lundstedt said. He added: “We maintain a strong financial position with net cash of $5.75 billion in the industrial operations, with pension and lease liabilities excluded.”
The Gothenburg, Sweden-based company is the world’s second-largest commercial vehicle manufacturer.
The number of employees in the quarter fell by 7,244 from a year earlier to 99,036. Blue-collar employees dropped by 4,910, relative to the reduction in production levels. White-collar employees decreased by 2,334, relative to a reduction of hired consultants, according to the company.
Lundstedt
Volvo’s operating margin slid to 8.1% compared with 13.2% in the 2019 period.
Net truck orders fell to 38,399 compared with 45,884 a year earlier, falling 75% in March alone compared with February, the company said. Since the end of March, the net order intake has been negative as a consequence of increasingly cautious customers and dealers canceling already placed orders.
Citing the “very turbulent and unstable situation with low visibility,” Volvo reported it was not meaningful to provide any forecasts for the total market demand for 2020.
In the quarter, North American truck orders were off by 13% to 4,732 trucks.
Net truck deliveries also dropped, hitting 44,765 compared with 58,594 a year earlier.
READ MORE: Daimler Truck AG, Volvo Group Plan Joint Venture on Hydrogen Fuel Systems
North American deliveries decreased by 38% to 10,660 trucks compared with 17,205 in the 2019 period.
Volvo’s two North American brands are Volvo Trucks North America and Mack Trucks. In the quarter, Mack’s market share rose to 6.9% compared with 5.5% a year earlier even as deliveries fell to 5,501 compared with 7,621 a year earlier.
VTNA’s market share held steady at 9.1% with 5,501 deliveries compared with 9,584 a year earlier.
Volvo’s service segment sales dipped 1% lower to $2.1 billion compared with a year earlier.
“The absolute majority of our own service workshops as well as those operated by our dealers are open and our colleagues in the group’s warehouses are working to secure the supply of spare parts,” Lundstedt said. “This means that we are able to support our customers transporting supplies to hospitals, food to tables, people to work, collecting refuse in cities, etc. We do, however, expect service sales to be impacted in the near-term by lower fleet utilization and vehicles standing still as a consequence of the lower business activity.”
Its financial services segment increased quarterly revenue 9% to $380 million compared with $350 million a year earlier.
Pressure increased in the quarter from customers looking to adjust contracts, Lundstedt said.
“As customers in certain segments and countries experience lower business activity, delinquencies are increasing, as expected,” he said. “Requests from customers for modifications of their leasing contracts related to payment terms have accelerated. We are working closely together with our customers to support them through these difficult times.”
Want more news? Listen to today's daily briefing:
