Volvo Income, Revenue Rise Despite Supply Chain Disruptions

Volvo VNL
Volvo VNL 760 (Volvo Trucks)

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Volvo Group reported strong third-quarter earnings and revenue gains in the face of chip shortages and other issues caused by global supply chain disruptions.

For the period ended Sept. 30, Volvo, which reports in Swedish krona, said net income rose 20.4%. That was the approximate equivalent of $828 million compared with $687 million in the same period a year earlier, the company said in an Oct. 22 report to shareholders.

Earnings per share rose to the equivalent of 40 cents per share from 33 cents in the same period a year earlier.

Revenue rose 11% to the equivalent of $9.93 billion from $8.95 billion in the 2020 period. Sales in Volvo’s truck business, its largest operating segment, rose 25.8% to $6.22 billion, from $4.94 billion, after adjusting for the sale of UD Trucks, a company Volvo divested in April.

Volvo’s global truck deliveries sales rose 16.6% to 43,984 units from 37,709 a year earlier. Excluding sales of UD Trucks made a year earlier, truck deliveries rose nearly 30%.

Demand for trucks and equipment is strong, but global supply chain disruptions have hampered the company’s operations, Volvo CEO Martin Lundstedt said in the earnings release.

“The quarter was affected by shortages of semiconductors, other components and freight capacity resulting in production disturbances and increased costs,” he said. That has caused the company to stop or slow down production periodically.

Truck customers are looking to replace existing trucks and expand their fleets, but Volvo has limited new orders “due to our already large order books and long delivery times.”

However, the company is continuing to launch the transition to electric trucking.

“Electrification of commercial vehicles will play an important role in the journey toward a carbon-neutral society,” Lundstedt said.

Volvo delivered 103 electric trucks and received orders for another 214 during the quarter. Earlier this month, it booked an order for 100 heavy-duty truck Volvo FM Electric trucks from DFDS, northern Europe’s largest shipping and logistics company. It is the largest order for Volvo’s electric trucks to date and one of the largest in the world, Lundstedt said.

North America continues to be one of Volvo’s strongest markets. Truck deliveries rose 67% to 10,222 units during the quarter.

Orders for Volvo and sibling brand Mack Trucks rose 75% to 21,750 vehicles during the quarter.

However, Volvo’s heavy-duty truck North American market share dipped to 8.5% from 9.5% in the same quarter a year earlier. Mack Trucks’ market share rose to 7.4% from 7.0%.

Volvo also reached a milestone in its North American development of self-driving trucks during the quarter. It unveiled a prototype of its flagship longhaul VNL integrated with the Aurora Driver autonomous technology. Volvo and Aurora are now identifying specific regions and routes to serve as the initial hubs for self-driving technology on-road highway testing.

The market for Volvo’s construction equipment is mixed. Demand has fallen in China but increased in Europe and North America, Lundstedt said. Volvo’s bus sales remain weak as that market is dependent on the tourist business, which has sagged during the COVID-19 pandemic.

Deliveries of Volvo’s construction equipment slid 8.5% to 18,085 from 19,774 in the same period a year earlier. But sales still increased 11% to $2.29 billion thanks to a more favorable product mix and foreign currency exchange rates.

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