Volvo profit beats despite persisting supply chain snarls

STOCKHOLM (BLOOMBERG) – Volvo reported second-quarter earnings that came in ahead of analyst estimates as the Swedish truck maker raised prices to pass on higher production costs. Adjusted operating profit for the three months through June came in at 13.75 billion kronor (S$1.85 billion) the Swedish manufacturer said on Tuesday (July 19), beating the average analyst estimate of 12.5 billion kronor.

Net sales climbed 31 per cent to 118.9 billion kronor amid good momentum in vehicle sales and in the service business, the company said, adding that it continues to expect production issues due to problems in the supply chain.

“We have had extra costs related to supply chain disruptions as well as higher costs for material and have continued to work proactively and successfully with price management to mitigate these effects,” chief executive Martin Lundstedt said in a statement.

After several months of severe supply chain disruptions, Volvo said it is still working to catch up on filling pent-up demand and has reduced taking on new orders to cut wait times and in response to cost inflation.

The world’s second-biggest truck maker also said it is on high alert for changes in demand as the economic outlook becomes more uncertain.

While demand for Volvo’s trucks remained high, order intake fell 8 per cent, with strong new business in the United States unable to offset “restrictive order slotting” in Europe.

Volvo kept its 2022 outlook for most major markets even as it warned of low visibility because of the supply chain issues, the ongoing coronavirus pandemic and the war in Ukraine.

The manufacturer still sees the European and North American heavy-duty truck markets at 300,000 units each, and the Brazilian market at 100,000 vehicles.

It cut its expectation for the Chinese heavy-duty truck market to 700,000 units from 880,000 units.