Volvo Group Cruises To Sales And Earnings Record Amid Slowing Truck Orders

Volvo Group VOLV reported the highest sales and adjusted operating income for any quarter in its history for the April-June period despite a continuing falloff in new truck orders that likely will lead to production cuts in North America and Europe later this year.

Net sales increased 16 percent to SEK 120.7 billion ($12.9 billion). Adjusted for currency movements, net sales at the Swedish truck maker rose 11 percent. Higher volumes of trucks, construction equipment and buses led to a 13 percent increase in vehicle sales.

Second quarter adjusted operating income was 15.1 billion ($118.1 million), for a 12.5 percent operating margin. 

"The Group's progress is visible both in our current financial performance and in the products we are developing for the sustainable transport solutions of the future," Volvo Group CEO Martin Lundstedt said in a statement.

Second-half production adjustment

Net second quarter truck orders fell 21 percent year over year to 47,821. Truck deliveries rose 10 percent to 65,237. In North America, orders fell 53 percent to 7,428 trucks compared to the second quarter of 2018, when fleets placed record orders to keep up with a blistering U.S.  freight market. Orders were down 9 percent in Europe.

Strong first-half production reduced the backlog of orders placed in 2018. North American deliveries in the April-June period rose 35 percent to 19,010.

With orders slowing, Lundstedt said Volvo expects to "adapt our production" in the second half of the year due to "the fact that customers have ordered what they need for 2019." 

On a call with analysts, he declined several times to provide specific targets.

Share losses

Volvo Trucks' global heavy-duty market share through May decreased to 15.4 percent compared with 16.7 percent in the same period last year. Its North America share decreased to 9.4 percent from 10.9 percent. The Mack Trucks division's' heavy-duty market share declined to 6.4 percent from 6.9 percent.

Battery alliance

Volvo also announced Thursday (July 18) an alliance with Samsung SDI to jointly develop battery packs for its trucks.

During the second quarter, Renault Trucks handed over the first fully electric refuse truck to Lyon (France) Metropole. In the U.S., the Mack LR battery-electric refuse truck will be tested by the New York City Department of Sanitation in 2020.

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