Volvo Results Improve for Quarter, Dip for Year
Original equipment manufacturer Volvo AB reported a fourth quarter of improving revenue and net income to cap off a 2016 characterized by modest declines due to soft business conditions.
Europe and Asia were the truck markets that provided the Gothenburg, Sweden-based OEM the most growth as North American activity continued to decline “but with some signs of stabilization.” However, whatever U.S. dollars Volvo could generate were more valuable as the Swedish krona fell in value against the dollar by 6% during the fourth quarter, year-over-year, and by 1.5% in 2016 relative to 2015.
As a whole, the corporation earned the equivalent of $534.5 million, or 26.2 cents a share. In the 2015 fourth quarter, the company had net income of $305.5 million, or 14.9 cents. Quarterly revenue rose in kronor but declined in dollars because of the exchange rate shift to $9.13 billion from $9.37 billion.
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Global truck making — including Volvo and Mack Trucks in North America — produces a majority of the company’s revenue and a strong majority of its operating profits. Volvo’s other major divisions are construction equipment, marine engines, buses and financial services.
CEO Martin Lundstedt, for whom 2016 was his first full year on the job, noted the importance of improved profit margins even if sales volumes did not boom. The truck division’s operating margin rose to 8.8% from 7.8% in the 2015 fourth quarter.
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For the global truck division, quarterly operating income rose to the equivalent of $533.7 million from $507.1 million for the final three months of 2015, even as revenue declined over the same time to $6.03 billion from $6.48 billion.
“The truck market in Europe continued to develop favorably in the fourth quarter,” Volvo said in its report before shifting west across the Atlantic Ocean.
“The North American heavy-duty truck industry continued in a correction mode in Q4, with low production in response to reduced demand and elevated inventories of new and used trucks. While decent economic conditions prevailed, retail deliveries were down 19% in 2016 compared to the exceptionally strong market in 2015,” the report said.
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“Virtually the entire decline was registered in the highway tractor segments,” Volvo said, adding that new truck inventories had come down to “much healthier levels,” even though a “used-truck overhang” is expected to continue to dampen demand for new heavy-duty trucks and in 2017.
Volvo is maintaining its North American, heavy-duty, new registration forecast for this year at 215,000 vehicles, down from 243,229 in 2016 and 301,740 in 2015.
