Sweden’s Volvo posted a much bigger than expected rise in first-quarter core earnings on Tuesday as robust demand and years of cost trimming bolstered turnover and profitability at the truck maker.
Gothenburg-based Volvo also raised its forecast for long-depressed demand for construction equipment in China, but left unchanged its outlook for truck markets on both sides of the North Atlantic.
Volvo, a rival of Germany’s Daimler and Volkswagen’s truck brands, has begun reaping the dividends of a now completed cost cutting drive to boost margins and improve flexibility across the sprawling group.
Adjusted operating profit rose to 7.03 billion Swedish crowns ($793 million) in the first quarter from 4.46 billion a year earlier, beating the mean forecast of 5.32 billion in a poll of analysts.
Shares in Sweden’s biggest company by revenues have risen 26% this year, outpacing a 6% rise for Swedish blue chips, on expectations that with major cost cuts in the rear view mirror margins stand to climb in coming years.
Stronger profitability at the maker of trucks, construction vehicles, buses and engines saw its adjusted operating margin rise to 9.1%versus 6.2% a year earlier and the 7.0% seen by analysts, with profit increases coming through in all its business areas.
Volvo, whose stable of brands includes Mack, Renault and UD Trucks as well as its namesake vehicles, said order intake of its trucks rose 11% year-on-year in the first quarter, topping the 7% rise seen by analysts.
After reaching their highest since the global financial crisis last year, European truck sales have held up through the early months of 2017, while soft demand in North America has shown signs of improvement.
“After the downwards correction in the long haulage segment in 2016, the North American market seems to be bottoming out. We see positive signs of increased order activity,” chief executive Martin Lundstedt said in a statement.
($1 = 8.8688 Swedish crowns)