Volvo Takes $423 Million Hit as Russia Business Halted

Volvo VNL
Volvo VNL 760 (Volvo Trucks)

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Volvo AB said Russia’s war in Ukraine has forced it to make provisions in the first quarter totaling 4 billion kronor ($423 million) that will have a negative impact on operating income.

The Swedish truck maker’s sales, service and production in Russia have been suspended since the war started and sanctions were imposed, the company said April 8. Last year, about 3% of Volvo’s net sales stemmed from Russia with the provision related to expected credit losses among customers there.

Volvo has total assets worth about 9 billion kronor related to Russia, of which 6 billion kronor are classified as cash items, the company said, which are related to its leasing business that is financed through the bond market.


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“As we believe that customers’ credit losses will increase, we will of course receive lower income from clients but still pay on the bonds as they mature,” spokesman Claes Eliasson said.

The shares fell as much as 2.2% in Stockholm trading and were 0.9% lower at 9:46 a.m.

Volvo is taking a hit as vehicle manufacturers broadly retreat from Russia after its invasion of Ukraine. Volkswagen AG, Ford Motor Co. and Renault SA have suspended operations, while Renault said it will book a 2.2 billion-euro writedown on its assets in Russia.

Volvo is among the biggest issuers of corporate bonds in Sweden and currently has about 107.6 billion kronor of notes outstanding, according to data compiled by Bloomberg. It is rated A2 by Moody’s and A- by Standard & Poor’s, putting it comfortably in investment grade.

Analysts at Danske Bank said in a note that the impairment is slightly credit negative. However, “it could, together with mounting supply chain pressures from the war, postpone a potential upgrade of the S&P rating to A from A-.”

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