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April 24, 2018 11:00 AM, EDT

Volvo Reports Higher Quarterly Net Income, Revenue as North American Orders Soar

Volvo trucks at a customer service center Volvo trucks at a Virginia customer service center. (Joe Howard/Transport Topics)

AB Volvo reported first-quarter net income and revenue increased despite supply chain constraints in North America’s surging truck market.

Net income for the period ended March 31 rose 24% to the equivalent of $682.2 million, or 33 cents a share, on sales of $10.5 billion — up 15%. In the year-ago quarter, net income was $549.2 million, or 26 cents, on sales of $9.1 billion.

The Gothenburg, Sweden-based company reports results in Swedish krona.

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In North America, the hunger for new trucks reflected an improving economy, high demand for freight and a shortage of transport capacity, which combined to lift freight rates, according to the company — the second-largest heavy-duty truck brand in the world.

North American Class 8 orders for the quarter soared 107% to 23,405 compared with 11,334 in the 2017 period. Its Mack Trucks brand accounted for 9,952, up 59% from 6,243 a year earlier.

Volvo Trucks North America, the company’s other North American brand, accounted for the balance of the orders.

Lundstedt

Lundstedt

“We have had strong markets on the truck side, obviously, and we have seen good progress for all our truck makes,” CEO Martin Lundstedt said.

But profitability was hampered by the transition to new trucks in North America, he said, and “a continued strained situation in parts of the supply chain. What is encouraging is the great reception of these new trucks.”

Mack and VTNA recently launched new models.

Volvo reported the operating margin at its truck division slipped to 8.8% compared with 9.6% in the first quarter of 2017.

Lundstedt said service repairs remained a key driver of revenue, including sale of spare parts, maintenance services and other aftermarket products — which increased 6% in the period.

“Providing good service is a differentiating factor in the marketplace, and it deepens the relationship with our customers,” he said. “One good example is our Mack Connect suite of services, which integrates intelligent software, predictive analytics and driver assist technologies to help customers boost productivity. The suite has helped us to cut diagnostic times by more than 70% and repair times by more than 20%, increasing customer uptime and strengthening their profitability.”

Despite the constraints in the supply chain, which the earnings report did not elaborate on, “hard work by many of our colleagues and our suppliers” led to an increase in production output, with truck deliveries rising 17% compared with a year earlier, he added.

The company expects supply chain constraints and associated higher costs will remain in the near term.

“There is more to do to improve efficiency along the entire value chain. This will remain our focus for the coming quarters,” Lundstedt said.

Meanwhile, Volvo increased its forecast for North American Class 8 retail sales in 2018 to 300,000, up from its estimate of 280,000 issued in its fourth-quarter report.

Globally, Volvo sold 55,989 trucks in the quarter, a 14% increase, compared with 41,101 a year earlier.

Volvo also is the parent company of truck brands Renault and UD.