By Dominic Chopping
STOCKHOLM–Volvo posted forecast-beating third-quarter earnings but said demand is beginning to normalize, with truck markets seen weakening next year.
The Swedish truck maker said Wednesday that truck deliveries rose 4% in the third quarter, but that order intake fell 27%, reflecting a gradual normalization of demand and the company’s continued gradual opening of order books.
Supply disturbances affected productivity and costs in the quarter, but had limited effect on deliveries, it said.
Nearly 4,000 members of the United Auto Workers went on strike at Volvo’s Mack Trucks unit last week after rejecting a five-year contract proposal. The strike covers plants in Pennsylvania, Maryland and Florida, including a powertrain plant that supports production of both Mack Trucks and Volvo Trucks, as well as Mack Trucksʼ assembly plant.
“If the strike continues for an extended period of time, it may result in negative financial consequences for the Volvo Group,” the company said Wednesday without elaborating further.
Volvo reported a net profit of 14.09 billion Swedish kronor ($1.29 billion) in the third quarter compared with SEK8.63 billion a year earlier as sales rose 15% on year to SEK132.41 billion.
Analysts polled by FactSet had seen a net profit of SEK12.05 billion on sales of SEK127.05 billion.
The adjusted operating margin rose to 14.4% from 10.3% as price increases helped offset higher production costs as well as increased selling and research and development expenses.
“We have successfully mitigated cost inflation with price management and continued to handle disturbances in the supply chain,” Chief Executive Martin Lundstedt said.
“We expect our major truck markets to continue to be strong throughout this year as we continue to deliver from our large order books to customers, but forecast lower market levels for next year.
Volvo raised its 2023 truck market forecasts for Europe and China, and maintained guidance in other regions.
Looking ahead to next year, Volvo sees the European truck market falling to 290,000 vehicles from 340,000 in 2023, with the North American market falling to 290,000 from 330,000 in 2023. The Braziilan market is seen steady at 80,000 while China is seen at 700,000 vehicles and India at 440,000.
Volvo is the first major truck manufacturer to provide an outlook for next year and the drop in key European and North American markets appears well reflected in current consensus estimates, analysts at Stifel wrote.
The guided volume drop of around 14.7% in Europe and 12% in North America on the year in 2024 compares to current Visible Alpha consensus that sees a drop in deliveries of 12.4% and 17.1% in Europe and North America, respectively, the U.S. investment bank said.
At 0905 GMT shares traded 2.9% higher at SEK232.60 in Stockholm.
Write to Dominic Chopping at dominic.chopping@wsj.com
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