Volvo Group posts strong earnings despite ongoing chip shortage

Good demand for transport and high activities in the construction sector buoy group

Photograph: iStock

Photograph: iStock

 

Volvo Group posted better-than-expected earnings even as it warned that the global semiconductor shortage will continue to weigh on the production of trucks.

Adjusted operating profit came in at 9.4 billion Swedish kronor (€938.2 million) in the third quarter, Volvo said Thursday, beating the average analyst estimate of 8.7 billion kronor. It cited good demand for transport and high activities in the construction sector.

“Demand for the Volvo Group’s products and services was good in most markets around the world,” chief executive Martin Lundstedt said. “However, the quarter was affected by shortages of semiconductors, other components and freight capacity resulting in production disturbances and increased costs.”

Disruptions and stoppages both in the production of trucks and in other parts of the group will continue in the fourth quarter and possibly beyond that, the company said. And after several years of high demand for construction equipment in China, the market there is now “declining sharply”.

Volkswagen’s Traton warned last month that the components shortage will depress third-quarter sales and affect business also next year. Volvo, on the other hand, had said that commodities and chip constraints improved in the three months through September.

While the supply-chain issues meant Volvo had to stop or slow production “from time to time,” the company grew third-quarter sales compared to the same period last year, thanks largely to robust demand in Europe and North America. Still, Volvo delivered slightly fewer trucks than in the three months through June.

The manufacturer also cut its forecast for the truck market in Europe and North America this year by 30,000 units. It expects the markets to grow again in 2022. – Bloomberg