Volvo Stock Falls as North America Deliveries Extend DropBy
Truck division’s profitability narrows in second quarter
Unit’s margin shrinks even as groupwide earnings jump 39%
Volvo AB shares fell the most in more than a year as the truck division’s profitability shrank in the second quarter amid a continuing decline in North American deliveries.
Volvo dropped as much as 7.8 percent, the steepest intraday plunge since June 27, 2016, and was trading down 5.8 percent at 137.1 kronor as of 12:37 p.m. in Stockholm, valuing the Gothenburg, Sweden-based manufacturer at 292 billion kronor ($35 billion).
Adjusted earnings before interest and taxes at the truck unit narrowed to 9.6 percent of revenue in the quarter from 10 percent a year earlier, even as the division’s profit rose, according to a statement Volvo released Wednesday. Group earnings excluding one-time items jumped 39 percent to 8.54 billion kronor, matching analyst estimates. While North American truck deliveries fell 11 percent in the period and 22 percent in the first half, Chief Executive Officer Martin Lundstedt said the regional market has bottomed out.
“When it came to the truck division, the margin was down a little bit lower on the back of some supply restrictions toward the end of the quarter,” Chief Executive Officer Martin Lundstedt said in an interview on Bloomberg Television’s Surveillance program with Francine Lacqua. “The quality in the business is still solid.”
Net income tripled to 5.92 billion kronor, helped by revenue growth of 12 percent, currency gains and a year-earlier credit provision that wasn’t repeated. Adjusted Ebit at the truck business rose 3.7 percent while surging threefold at the unit that makes equipment such as excavators and loaders for the building and mining industries.
The second-quarter figures “underscore the picture from the first quarter: the truck division is increasingly replaced by construction equipment as the motor behind Volvo’s year-on-year earnings growth,” Michael Raab, a Frankfurt-based analyst at Kepler Cheuvreux, wrote in a report to clients. The period “marks the first time in many quarters that the truck division’s profitability has not advanced.”