Volvo Q2 Profits Jump on Price, Margin Increases
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Volvo Group profits jumped year-on-year in the second quarter of 2024 on the back of truck price increases and improved margins for construction equipment plus marine and industrial engines, the original equipment manufacturer said July 18.
“During Q2 2024, the Volvo Group delivered good profitability as demand in many markets continued to normalize compared with the high levels of 2023,” CEO Martin Lundstedt said in a presentation accompanying the release of the results.
“Lower volumes and our increased investments in R&D affected margins negatively, while carryover from the price increases we implemented last year continued to have a positive effect,” the company’s top executive said.
The parent company of Volvo Trucks North America posted a profit of $1.474 billion in Q2, up 44% compared with $1.023 billion a year earlier. Volvo Group reports in Swedish krona and all conversions are correct as of July 18.
Volvo Group CEO Martin Lundstedt says, "Carryover from the price increases we implemented last year continued to have a positive effect.” (Volvo Group)
Gothenburg, Sweden-based Volvo Group reported Q2 sales of $13.26 billion, down 0.28% compared with $13.3 billion in the year-ago period. Of that total, trucks accounted for $9 billion, up 1% compared with $8.87 billion a year earlier.
Volvo Group’s operating margin in the most recent three-month period rose to 14.5% from 10.3% a year earlier, although the truck division’s operating margin fell to 13.9% from 15.9%.
Truck orders in Q2 totaled 47,760, down 1.1% compared with 48,308 in the year-ago period. Lundstedt said orders increased for heavy-duty trucks and decreased for medium-duty and light-duty trucks, especially at its Renault operations.
Volvo Trucks delivered 58,935 vehicles in the most recent quarter, down 8% from 63,842 a year earlier, although Lundstedt said heavy-duty truck deliveries matched those of the year-ago period.
VTNA, meanwhile, saw its order intake across the continent increase 12% to 9,756 trucks from 8,708 vehicles and deliveries increase by 2% to 16,234 vehicles from 15,960.
Increased orders at Mack Trucks underpinned the overall growth, with North American orders for the unit rising 36% to 6,556 from 4,837 a year earlier.
Demand in the heavy-duty sector was even greater, with Mack Trucks heavy-duty orders jumping 54% year-over-year to 5,798 vehicles from 3,775 a year earlier.
Q2 2024: Strong performance on normalizing volumes https://t.co/iApeyVrRuj#VolvoGroupReport #fintwit #financialreport #quarterlyreport #Q2 #volvo pic.twitter.com/EdhFsRXySq — Volvo Group (@VolvoGroup) July 18, 2024
But Volvo-branded trucks’ share of the order intake in North America totaled 3,193 vehicles, down 17% from 3,858 a year earlier.
However, Volvo-branded truck deliveries in North America rose 5% year-over-year to 8,779 from 8,337, while Mack Trucks’ deliveries in the region fell 1% to 7,475 from 7,555. That said, Mack Trucks’ heavy-duty deliveries in the region rose 4% year-on-year to 6,393 from 6,122 trucks.
Volvo’s North American heavy-duty truck market share increased to 10.8% from 10.1% in Q2 2023 and Mack Trucks’ market share increased to 6.8% from 6.5%.
“When it comes to U.S., we have, as you have also maybe noticed, seen a good development when it comes to our market shares in Quarter 2,” Lundstedt said during Volvo Group’s quarterly analyst earnings call.
“We have a strong offering, and we have been limited by our own industrial capabilities over ‘23 and into Quarter 1,” he said, adding: “But as we have seen for Europe, we will be very clear on demand and swiftly doing so when it’s required.”
Volvo cut production levels in Europe as a result of the normalization of demand.
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“And that is, of course, the balance with the current demand going forward and how we look into 2025, given also that we know that in ‘27 we have a new legal requirement coming in,” the executive said.
Lundstedt was referring to the introduction of the U.S. Environmental Protection Agency’s nitrogen oxide emission standards, which are 80% more stringent than current levels.
Later on the call, Nordea Markets analyst Agnieszka Vilela asked Lundstedt and Chief Financial Officer Mats Backman when they expect the pre-buy to start ahead of the introduction of the regulations.
“Difficult to say. Obviously, a little bit also related to the sentiment in the general market because the better the sentiment, I think the more forward-leaning customers would be in planning,” said Lundstedt.
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“So, if we will see a little bit of development now on interest rates, etc., [the pre-buy] might be a little bit earlier in that case because then the market tends to be more forward-leaning and wants to plan a little bit ahead,” he added.
Volvo said in its earnings statement that demand for vocational trucks continues to aid VTNA sales and orders, especially for Mack Trucks. Lundstedt added that the launch of Volvo Trucks’ redesigned VNL Class 8 on-highway flagship was also helping.
VTNA launched the redesigned VNL in January. The order book opened in April. Deliveries will start in the fourth quarter. Operations of Plant 2 at the New River Valley manufacturing facility that will support production of the VNL began in its entirety for the first time June 21.
