AB Volvo truck orders tumble as markets hit brakes in third-quarter
Fri Oct 18 2019
Lucy Harlow (3259 articles)

AB Volvo truck orders tumble as markets hit brakes in third-quarter

 Sweden’s AB Volvo  on Friday reported a sharp fall in order intake of its trucks in the third quarter and forecast slumping market demand on both sides of the North Atlantic next year, taking the shine off forecast-beating earnings.

After years of strong demand, signs of a slowdown in commercial vehicles markets that have always been prone to violent cyclical swings have multiplied in recent months, amid worries over global trade wars and slumping economies.

The world’s second largest truckmaker behind Daimler (DAIGn.DE) said order intake of its trucks, which include brands such as Mack and Renault, fell 45% in the third quarter. Several analysts were forecasting declines of just over 30% in research notes ahead of the report.

“EBIT and sales are good, but what one will focus on here is the order intake,” Handelsbanken analyst Hampus Engellau said.

“I would guess that the stock will come down 4% to 5% on this, in any case.”

Volvo forecast the heavy truck market falling about 14 percent in Europe and 29 percent in North America next year, and said that with freight volumes having leveled off, economic uncertainty was prompting customers to hold back investment.

“During Q3, we continued to reduce our production volumes and further adjustments will be implemented in coming quarters,” Chief Executive Martin Lundstedt said in a statement.

Ahead of the results, analysts at Citi predicted Volvo would forecast a truck market decline of just over 11 percent for Europe and about 25 percent for North America, the two markets that still generate most of the group’s profits.

Shares in Volvo, which also counts Volkswagen’s (VOWG_p.DE) recently listed truck manufacturer Traton (8TRA.DE) as a rival, have eased 7 percent over the past six months as investors have increasingly priced in a market downturn.

With deliveries yet to follow order intake down, operating profit at Volvo rose to 10.9 billion Swedish crowns ($ 1.12 billion) from 10.2 billion a year ago, topping analysts’ mean forecast of 10.0 billion, Refinitiv data showed.

The slowing markets will present a test for former Scania boss Lundstedt and his moves to make Volvo a nimbler organization better able to sustain profitability over the course of a business cycle.

“For 2020, we expect markets to come down to more normal replacement levels in both Europe and North America, which we have prepared ourselves for,” Lundstedt said.

Lucy Harlow

Lucy Harlow

Lucy Harlow is a senior Correspondent who has been reporting about Commodities, Currencies, Bonds etc across the globe for last 10 years. She reports from New York and tracks daily movement of various indices across the Globe