Volvo Reports Q2 Net Loss, Lower Revenue Amid Pandemic
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Volvo Group reported a net loss in the second quarter and lower revenue in a period scarred by the novel coronavirus pandemic.
For the quarter ended June 30, Volvo — which reports in Swedish krona — posted a net loss that was the approximate equivalent of $31.2 million, or a loss of 1.6 cents per diluted share, compared with net income of $1.25 billion, or 61 cents, a year earlier.
At the same time, the Gothenburg, Sweden-based company reported a gain in the quarter of $36.1 million from investments where it does not have a controlling interest.
Revenue fell to $8.1 billion compared with $13.6 billion a year earlier, which was a record for sales.
Its operating margin sank to 0.5% compared with 12.5% in the 2019 period.
“Since the record levels in Q2 of last year, demand has declined as part of a normal cyclical slowdown, something that was significantly accelerated by the pandemic. Measures adopted by countries to control the spread had a significant impact on our production and supply chain as well as on demand for our products and services,” CEO Martin Lundstedt said in the report. “After having been standing still in April, production was gradually restarted in May and is currently running well thanks to great efforts by our colleagues and suppliers,” he said.
Lundstedt
“We expect demand to continue to be negatively affected in the short and medium term because of the lower economic activity in many markets and the fact that the truck and machine populations are relatively young,” he added.
North American sales fell 61% to $1.65 billion. North American orders were down by 44% to 4,179 trucks while deliveries decreased by 79% to 3,925 trucks. Volvo Trucks’ heavy-duty truck market share through June remained steady at 9.3%, compared with 9.4% a year earlier, while Mack Trucks’ market share increased to 7.6% from 6.4% in the 2019 period.
Overall, in its truck operations, deliveries in the quarter decreased by 57% with reductions in all regions. Net sales declined by 46% to $4.5 billion. Truck order intake decreased by 45%.
In the quarter, the company reduced its white collar workforce by 4,100.
Also, cash flow was negative, but the company noted it continues to have a strong financial position with net cash of $5.6 billion in hand, excluding liabilities such as pension and leases. “This allows us to act from a position of strength and to drive the transformational technologies that are moving our industry to more sustainable solutions. We continue to invest in electrification, automation and connectivity,” Lundstedt said.
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In April, Volvo announced it had reached a preliminary agreement to form a joint venture with Daimler Trucks, a unit of Daimler Group, to develop, produce and commercialize fuel cell systems in heavy-duty vehicles by the second half of the decade.
READ MORE: Daimler Truck AG, Volvo Group Plan Joint Venture on Hydrogen Fuel Systems
In the context of the current economic downturn, cooperation has become even more necessary to meet the Green Deal objectives in Europe within a feasible time frame, the companies noted at the time.
In the quarterly earnings call, Lundstedt said, “We’re given the sign that some of the major players really want to move this way. When it comes to infrastructure and green generation of hydrogen, we’ll invest there as well, because this is really an ecosystem. But from a truck maturity level, we are not that many years away.”
For the six-month period, the company reported net income of $48 million, or 24 cents, compared with $2.45 billion, or $1.19, a year earlier. Revenue fell to $18.27 billion compared with $24.3 billion in the 2019 period.
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