Volvo Earnings Drop on Waning Freight, Construction Demand
Volvo shares declined as much as 3% in Stockholm
Volvo AB’s earnings declined in the third quarter as the truckmaker struggled with slowing demand for heavy-duty rigs in most markets.
Adjusted operating profit slipped to 14.1 billion kronor ($1.3 billion) due to lower freight and construction activity, the company said Friday. Analysts had projected 15.05 billion kronor.
European manufacturers led by Volvo, Daimler Truck Holding AG and Traton SE are under pressure to cut costs as demand for big rigs slows in markets including Europe and China. They’re also contending with investments needed to shift to cleaner forms of transport. Electric-truck sales remain minimal due to their higher price tag and the slow build-out of charging infrastructure.
Volvo reported net truck order intake of 43,234 units in the third quarter, missing analyst expectations, with deliveries in the period also declining. Some clients are holding back orders because they’re cautious about how the economy will develop going into next year, Chief Executive Officer Martin Lundstedt said.
Volvo shares declined as much as 3% in Stockholm. The stock is still up around 3% this year.
In North America, truck deliveries slumped by a fifth after its Mack brand got hit by cab supply problems. The company also adjusted production for Volvo trucks in the region to reduce inventories.
Volvo reported rising deliveries and order intake in South America, driven by robust demand in Brazil. Buses also were a bright spot, with sales and orders rising.
The manufacturer sees heavy-truck registrations declining slightly in Europe next year, to 290,000 units, and a minor increase in North America to 300,000 units.
Jefferies analyst Michael Aspinall said the 2025 industry outlook was better than expected, especially for North America, implying that “we are in the first year of a positive cycle.”
That’s not the case for fully electric trucks, with order intake for battery-powered rigs slumping 20% in the third quarter. Volvo said broader adoption will depend on better availability of charging infrastructure and incentives to bring down cost of ownership.
Volvo has several electric trucks for sale and will introduce a long-range variant of its FH Electric model next year. At the same time, the company is postponing a planned battery factory in Mariestad, Sweden by 12 to 24 months because of the slower adoption of electric trucks.
“All in all, a disappointing result from Volvo,” said Mads Rosendal, a Danske Bank analyst. “But with the slowdown already flagged and the balance sheet being as solid as ever we doubt that this would cause any meaningful impact on Volvo bond spreads.”
— By Rafaela Lindeberg (Bloomberg)
