Volvo earnings beat estimates on pent-up truck demand, managing costs

VOLVO’S fourth-quarter report beat estimates on the back of pent-up demand and managing cost inflation, as well as supply-chain disruptions. 

Truck demand continued to normalise in Europe and North America during the quarter from high levels, the world’s second-biggest truckmaker said on Friday (Jan 26). Adjusted fourth-quarter operating profit rose to 18.4 billion kronor (S$2.36 billion), compared with an analyst forecast of 17.5 billion kronor. 

“The pent-up demand situation which characterised 2022 and 2023 has largely been absorbed by the transport industry and lead times, particularly in Europe, are back to more normal levels,” the company said in a statement. 

Volvo expects heavy duty truck registrations to contract from last year’s record highs to 280,000 in Europe, while leaving unchanged its forecast for North America. The company is reportedly reducing output at one of its plants in Sweden due to lower demand. 

Truckmakers have been buoyed by pent-up demand and high prices after years of supply-chain disruption. This year, markets are expected to return to more average demand levels, Volvo has said. The company alongside main competitor Daimler Truck Holding has a strong presence in North America and Europe, two markets facing recession risks over the next 12 months.

The company proposed a dividend of 7.50 kronor, and an extra dividend of 10.50 kronor a share. BLOOMBERG