AB Volvo profits soar, while supply chain woes wreak havoc on truck orders

AB Volvo, a Swedish truck manufacturer, announced an unexpected increase in first-quarter core earnings on Friday, despite a stressed supply chain that limited its ability to fulfil order books. Daimler Truck and Traton’s rival said it expects component supplies to remain unpredictable, with future delays and production stoppages expected to hurt its company.

The builder of trucks, construction equipment, buses, and engines increased adjusted operating profit to 12.68 billion Swedish crowns ($1.33 billion) from 11.82 billion a year ago, well ahead of the 10.55 billion expected by analysts in a Refinitiv poll. A previously announced provision connected to the Ukraine war was left out of the outcomes.

Since market demand began to recover from the first pandemic shock, heavy-duty truck manufacturers have been dealing with global shortages of components, such as semiconductors, and a lack of freight capacity. Russia’s invasion of Ukraine, which Moscow describes as a “special military operation,” has clouded the future for supply chains and diesel fuels, prompting Western firms like as Volvo to reduce production and sales in the country.

“We’ve had additional costs as a result of supply chain disruptions, as well as higher material costs, and we’ve worked proactively with pricing management to offset them,” Volvo CEO Martin Lundstedt said in a statement. “We anticipate that inflationary pressures will persist.”

Demand for trucks has been robust across most key markets, adding to the frustrations over supply chain challenges, which caused vehicle makers to reduce output in the quarter, leaving the sting of both increased prices and missed sales. “Because we have enormous order books and extended delivery times, we’ve had to be more stringent with order slotting, which has had a detrimental impact on order intake,” Lundstedt explained. “We’re doing everything we can to cut down on our customers’ extended lead times.”

Volvo said order bookings for its trucks, which are offered under brands such as Mack and Renault as well as its own name, fell 47 percent year over year in the first quarter, although keeping its expectations for the European and North American truck markets constant.