Volvo Says Quarterly Earnings Rose 143% on Growing Demand for Trucks Worldwide
This story appears in the May 2 print edition of Transport Topics.
Benefiting from increased global demand for its trucks, Volvo AB reported a 143% jump in first-quarter earnings from a year earlier, driven by a 22% increase in revenue, the company said April 27.
Converted from Swedish kronor, Volvo said it earned the equivalent of $581.5 million, or 28 cents a share, on quarterly revenue of $9.96 billion. In 2010, the Gothenburg, Sweden, company made $265.5 million, or 13 cents a share, on revenue of $9.05 billion.
“Demand for trucks continued to improve across the board. In total, the order intake rose 40% compared with the first quarter of 2010,” CEO Leif Johansson said in the quarterly report.
“The North American truck market is driven primarily by the need to replace the increasingly older truck fleet with more modern and fuel-efficient trucks and by a positive trend in the U.S. economy and corresponding higher freight volumes,” he added.
The company makes trucks in the United States through its Volvo Trucks North America and Mack Trucks units based in Greensboro, N.C.
Volvo AB has five manufacturing divisions and a finance company, and the global truck unit generates majorities of revenue and profits.
Volvo’s statement also said the company is increasing its estimate of its heavy-duty North American truck sales market for this year to 230,000 to 240,000 units, up from 220,000. Volvo’s three rivals in North American heavy truck making — Daimler Trucks, Navistar International and Paccar Inc. — have all made similar increases in their forecasts.
The company’s worldwide truck group earned operating income equivalent to $596.1 million on quarterly revenue of $6.35 billion. A year earlier, it made $222.9 million on revenue of $5.63 billion. Operating income as a percentage of revenue increased to 9.4% from 4% in the first quarter last year.
Volvo’s other manufacturing divisions make construction equipment, buses, marine engines and aerospace engines and systems.
“Volvo delivered a strong set of numbers,” Danish securities analyst Morten Imsgard told Bloomberg News. “Volvo has a strong discipline keeping the costs down while sales go up.”
Bloomberg said that Volvo cut more than $1 billion in spending during the downturn that started in 2008 by slashing jobs and other costs. At least half those reductions should be permanent, Volvo has said.
In assessing the improvement in truck orders and sales, the report said, “While highway truck customers and bigger fleets, in particular, have largely driven the recovery in the market, smaller fleets, with increasing access to credit, have started to become more active.”
Sales of vocational trucks, a staple for Mack, are still lagging, but the company said customers in crude oil and natural gas production are doing better. However, there was no prediction for improvement in housing and construction.
Global truck sales for Volvo increased 25% during the quarter, while orders for new trucks jumped 40%. North America was busier than average, providing the corporation with a 33% sales increase and a 244% order increase.
Quarterly North American truck deliveries rose 68% for Volvo to 8,821 units, whereas the company’s global average was a 49% improvement.
The corporation’s success with heavy-duty trucks in North America did not extend to medium-duty vehicles. Volvo’s UD Trucks subsidiary, formerly Nissan Diesel, delivered just 262 Class 4-7 vehicles in the first quarter, a 7% decline from the year-ago level. UD’s biggest market is Asia, where it also experienced a decline, as well as on a global basis.
Volvo’s other major truck brands are wholly owned Renault and Eicher, which is a joint venture in India.
