Geely controlled Volvo Cars has reported an 8% year on year increase in first quarter 2024 core operating profit to SEK6.8bn. Q1 2023 operating income was SEK6.3bn.
Q1 2024 revenue slipped to SEK93.9 bn from SEK95.7bn in Q1 2023, Q1 EBIT margin was 7.2% versus 6.6% a year previously but earnings per share fell to SEK1.12 from SEK1.21.
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Retail sales rose 12% to 182,687 cars, with a new record set for a single month in March. A strong performance in Europe and the US contributed to the company’s sales growth, it said, and it recorded new sales records for the first quarter in 11 markets, including Germany, France, the Netherlands, Canada and Turkey.
Q1 2024 revenue fell due mainly to lower receipts from contract manufacturing. Some foreign exchange effects as well as sales mix also affected revenue, although the company said it “maintained a healthy price discipline”.
Fort-one percent of global volume during the quarter consisted of plug-in hybrid (PHEV) and fully electric (EV) cars while EV share of sales rose to 21% from 18% a year earlier.
“This demonstrates that the company is on track towards its annual sales target of at least 15% growth in 2024, with a balanced premium product strategy that offers competitive EVs alongside attractive plug-in and mild hybrids,” the automaker said ina results statement.
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By GlobalDataIn Europe, it claimed to be the third largest brand in EV sales with the XC60 the best-selling plug-in hybrid in the first quarter.
Q1 gross margins on EVs improved to 16% from 7%, claimed to be “among the best in the industry”. This reflected strong demand for the EX30 SUV which was set to bring in gross margins of 15%-20%, as well as improved margins on the EX40 and EC40 models.
“We have had a strong start to the year, with our first quarter results laying a solid foundation for the year ahead,” said CEO Jim Rowan.
“We secured shareholder support to distribute a majority of our shareholding in Polestar, allowing us to fully focus on our core operations,” added Rowan.
“We remain focused on costs and capital allocation to ensure cash and liquidity are at a healthy level. I am confident these actions will make 2024 another milestone year in our ongoing transformation.”
Free cash flow in the quarter came in as planned at SEK12 bn due to increased production and build-up of EX30 inventory, in addition to usually seasonally lower cash flow in Q1.
The company expects free cash flow generation to be neutral in 2024 and 2025. From 2026 onwards, it expects to deliver strong cash flows as the scale of investment declines and it starts reaping the long term benefits of its strategy with higher revenue and profitability.
Volvo Cars expects demand for its cars to remain robust in coming quarters and in line with its guidance of full year sales growth of at least 15 per cent. The company also expects cash flow to improve in coming quarters which should enable it to be cash neutral for the full year.
It remains focused on achieving profitable growth and expects 2024 to be another solid year after the record 2023.
