- Third quarter sales rose 9%, ignoring the effect of exchange rates
- Underlying operating income was SEK19.1bn, up from SEK11.9bn
- Order intake of new trucks fell 27% and truck markets forecast to be lower next year
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown:
“Truck giant Volvo has steered headfirst into the ill effects of falling orders. The double-digit slowdown in order intakes is partly because of the group’s decision to slowdown on taking new orders while inflation was sharply rising. It also reflects the decision by smaller fleets to rein in their spending on new transport because of falling volumes. The uneven economic landscape was always going to impact the transport giant, but there are some areas of optimism. This includes good growth in India, where consumer spending and general economic activity seems to be resulting in more Volvo trucks hitting the highways.
Of course, it’s not just trucks that Volvo’s responsible for – it also has a sizeable construction equipment business. The European market has softened here because of the weaker economic outlook triggered by rising interest rates. There’s been a substantial drop-off in the Chinese market because of lower real estate investments, following the well-publicised creaking of the foundations in that area for the region. As a cyclical business, Volvo will be prepared for the turning of this wheel, but sharper-than-expected contractions have the ability to dent investor sentiment.
Despite further supply constraints and the extra costs these entail, operating margins rose to 14.4% in the quarter, which is a marked improvement. There have also been continued strides in the group’s electric vehicle charge, which is an important growth driver. For now though, the stock’s trajectory will be squarely based on how economic recoveries shape up across the world.”
