Volvo says price rises help returns as truck demand softens

Volvo AB’s second-quarter earnings surpassed expectations and reassured after pessimistic updates from rivals as the truckmaker managed to defend its margins even as as key markets slowed.

Adjusted operating profit dropped to 19.4 billion kronor ($1.68 billion) in the period, ahead of analyst projections of 18.5 billion kronor, Volvo said Thursday. Operating return on sales in the three months through June was also better than expected.

“Volvo Group delivered good profitability as demand in many markets continued to normalize,” Chief Executive Officer Martin Lundstedt said in a statement. “Price increases we implemented during last year continued to have a positive effect.”

Volvo slightly raised its forecast for the European heavy-truck market to 300,000 units for this year from 290,000, while it trimmed the outlook for the Chinese market to 750,000 from 800,000. Analysts at Morgan Stanley led by Shaqeal Kirunda described the outlook as “upbeat.”

RBC analyst Nick Housden noted that Volvo’s second-quarter was helped by the firm’s bus and marine divisions. Overall, the report reassured, he said, with “solid” profitability in a moderating market environment.

Volvo shares rose as much as 2.1% in early Thursday trading in Stockholm before trimming some gains.

Truckmakers are adjusting forecasts in line with lower demand levels after working down record order backlogs following the pandemic. Earlier this week, Daimler Truck Holding AG reported weaker than expected second-quarter results led by “persistent” soft demand in China and put its full-year guidance under review. In May, the world’s largest commercial vehicle producer already warned of dwindling demand, especially in Europe.

China’s slowdown is hitting a range of industrial businesses with a protracted real estate crisis weighing on consumer spending. During the second quarter, the economy slowed more than expected with US tariffs adding to the drag.

Volvo’s truck orders during the second quarter declined slightly to 47,760 units.