Demand is up but profits are down for Swedish truck brand Volvo, with the Swedish brand saying in a statement last week that a stretched supply chain and extra costs denting into margins in the second quarter.
Volvo shares are up nearly 40 per cent this year thanks to the increased demand but the operating margin in its main business, which accounts for two-thirds of the group’s sales, are down by 0.4 per cent.
Order intake of trucks under brands such as Volvo, Mack and Renault shot up 22 per cent in the second quarter, beating the 12 per cent increase forecast by analysts.
Chief Executive Martin Lundstedt said the extra costs for overtime and express transport had mostly hit its European truck manufacturing and that supplies of powertrain components has put strain on the brand.
“It will cause a number of challenges also during the third quarter, but I think we should see it as something coming with a good situation in demand and primarily then in the European production system,” Lundstedt said.
A strengthening economy in Europe has resulted in increased investment from fleet operators while in America demand is being driven by falling inventories.
“If you want to point to weaknesses, results in trucks are softer than expected, above all in terms of the margins. The real positive is that order intake is so strong,” said an analyst with Handelsbanken Capital Markets.
