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The result was far above analysts’ expectations and came even after the Swedish company said as recently as January it expected “disturbances, stoppages and extra costs” to persist, with soaring inflation and the energy crisis adding to the pain.
The group’s adjusted January-March operating profit rose 45% year-on-year to 18.4 billion Swedish crowns ($1.76 billion), exceeding the mean expectation of 12.9 billion crowns in a Refinitiv poll of analysts.
Volvo did not elaborate on what had spurred its turnaround and did not provide a profit outlook in Tuesday’s statement. The company will report full first-quarter 2023 earnings on April 20.
“We believe this quarter was influenced by price increases and (a) much better supply chain situation leading to less stop and go on the production line allowing the firm to deliver very strong results,” analysts at JPMorgan (NYSE:JPM) said in a research note.
Volvo and rivals such as Germany’s Daimler (OTC:MBGAF) Truck and Traton have struggled with semiconductor shortages and broader supply chain issues and strained freight capacity stemming from the COVID-19 pandemic and the war in Ukraine.
Preliminary net sales for the quarter stood at 131.4 billion crowns, up from 105.3 billion a year ago, while analysts on average predicted 118.6 billion according to the poll.
The company’s adjusted operating margin rose to 14.0% from 12.0% a year ago, and earnings at the group’s two major divisions, truck making and construction equipment, both showed progress compared to the same quarter of 2022.
Daimler Truck last month said its outlook had improved and that its profit will grow this year, but the company’s share price still fell amid concern inflation would weigh on margins.
Volvo’s share price is up 3.1% year-to-date, lagging a rise of 8.2% in the Stockholm benchmark share index.
($1 = 10.4303 Swedish crowns)
