After a first half of record sales and income, sales growth at truck maker Volvo decelerated during the third quarter, with the company blaming the downturn in the economy for the weaker results.
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Net sales increased by 2% to SEK69.6bn (68.4) in the third quarter, whilst operating income declined by 37% to SEK3,177m. Earnings per share declined 36% to SEK0.98.
The company said it had seen a “significant impact” from increased costs for raw materials and components as well as a slowdown in demand and restructuring costs
“The important European market has declined significantly, while North America and Japan continue to show weak demand,” president and CEO Leif Johansson said.
“In addition, we are seeing indications that the economic climate is also weakening in other parts of the world. Because of the deceleration being so rapid, we haven’t been able to reduce our costs at the same pace, but currently hard work is being performed around the goup in order to adjust operations to the present market situation and to counter the effects of increases in the cost of materials.”
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By GlobalDataJohansson said that in Europe, customers were adopting a wait-and-see attitude to the ordering of new vehicles and equipment. Moreover, they have increasingly opted to cancel previously placed orders.
In North America, Volvo said demand for trucks remains weak, at the same time as the markets for construction equipment and boat engines have declined.
The company said that to enhance the efficiency of its North American truck operations, it was planning to relocate Mack’s head office, including such functions as product planning, product development and purchasing, to Greensboro, North Carolina, where most of the group’s truck operations in North America are already located.
“We are in a situation in which demand is declining in an increasing number of our markets. In times of recession, we face increasingly tougher demands. To ensure that the group will emerge from the imminent recession with a stronger market position, we will have to quickly adapt our production even though it’s painful and affects many workers. We must lower our overhead costs, increase our cash flow and, not least, continue to work hard and in a determined manner,” Johansson said.
