Volvo profit tops forecast in Q1

Truckmaker AB Volvo beat first-quarter profit forecasts on Wednesday as it sold more higher priced vehicles and margins benefited from an easing of supply chain bottlenecks for components such as engines and gear boxes.

The Swedish company, which sells trucks under brands Volvo, Mack, Renault and UD Trucks, was also upbeat about demand trends in North America, sending its shares as much as 4.6 per cent higher, although it kept its overall 2019 forecasts unchanged. Volvo has enjoyed buoyant trade in recent years as truck buyers renewed fleets starved of investment during the last downturn, but its forecast for lower demand in China and Europe this year had fuelled concerns the cycle may have peaked.

“We’re leaving our forecast unchanged but if anything we see somewhat of an upward pressure when it comes to North America,” Chief Executive Martin Lundstedt told analysts.

“The message here is that North American customers are taking their deliveries... and we have an order book that is full up to end of 2019 and, in a very restricted (way), open for 2020.”

The demand has left Volvo battling supply chain bottlenecks for four quarters, but margins improved during the first quarter of 2019, helped by better pricing and mix of goods sold, improved efficiencies and easing supply problems.

Lundstedt told Reuters that Volvo had more or less worked through supply challenges for powertrain components, where it relies on global sourcing, and was now focused on solving remaining issues with suppliers specific for North America.

“We’re working through that... and we saw improvement by the end of the quarter, so let’s hope that will continue,” he said.

Reuters