AB Volvo posts forecast-beating profit despite pandemic

Credit: REUTERS/FABIAN BIMMER

Swedish truck maker AB Volvo eked out a better-than-expected core profit in the second quarter as it weathered the coronavirus pandemic, which has disrupted production and sent order bookings tumbling in markets across the globe.

Q2 core profit SEK 3.27 bln vs forecast 17 mln

Order bookings fall 45% yr/yr

Order intake recovers in May and June

Adds quote, detail, background

STOCKHOLM, July 17 (Reuters) - Swedish truck maker AB Volvo VOLVb.ST eked out a better-than-expected core profit in the second quarter as it weathered the coronavirus pandemic, which has disrupted production and sent order bookings tumbling in markets across the globe.

The rival of Germany's Daimler DAIGn.DE and Volkswagen's Traton 8TRA.DE said its plants were back in production after having been idled amid widespread lockdowns, but cautioned the pandemic would weigh on demand in the near and medium term.

"When countries started to open up again, both fleet utilization and order intake began to recover," CEO Martin Lundstedt said in a statement.

"However, there is still significant uncertainty about the future economic development and demand for our products."

Adjusted operating profit at the maker of trucks, construction equipment, buses and engines fell to 3.27 billion Swedish crowns ($360 million) from 15.1 billion a year ago. But it came in far above analysts' mean forecast for a profit of only 17 million crowns, according to Refinitiv estimates.

The pandemic has created a toxic mix of plunging demand and disrupted production that has left the global truck industry, always prone to sharp cyclical swings, facing its greatest uncertainty since at least the 2008 financial crisis.

State-sponsored aid such as furlough schemes has supported the industry in production hubs such as Sweden, but Volvo has announced plans to cut thousands of white-collar staff and shelved its dividend.

Order intake of its trucks under brands such as Mack and Renault, as well as its own name, fell 45% year-on-year in the second quarter but Volvo said bookings had improved toward the end of the period.

Bookings fell 5% year-on-year in June, compared with a 90% plunge in April.

($1 = 9.0799 Swedish crowns)

(Reporting by Niklas Pollard; Editing by Johannes Hellstrom and Ana Nicolaci da Costa)

((Niklas.Pollard@thomsonreuters.com;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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