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Volvo Cars reported a sharp drop in second-quarter operating profit, which nevertheless exceeded analysts’ expectations, boosting rising stocks, although the company continues to struggle with fares and falling demand
Sweden-based Volvo Cars is the first European carmaker to publish results in an earnings season that analysts expect to be difficult, as low demand for electric vehicles and increased competition from Chinese manufacturers coincide with trade tensions.
But much of the decline had already been factored into analysts’ and investors’ estimates, as the prospect of lower tariffs and sales was largely expected. Shares were up nearly 8% at 07:12 GMT.
Volvo reports a drop in operating profit, which however exceeds analysts’ expectations
„Demand remains weak and volatile, affected by weakening consumer confidence and the introduction of additional tariffs, which continue to pose challenges for the automotive sector,” the automaker said in its earnings report. In addition to a 27.5% customs duty imposed on European-made Volvo cars entering the US, it was also affected by a 25% customs duty on auto parts, as well as steel and aluminum.
Despite the gloomy environment, the second-quarter figures were better than feared, Bernstein analysts said in a research note.
„Given how weak the stock’s positioning is here, it should be enough for a positive market reaction,” they said.
The company, owned by China’s Geely Holding, posted an adjusted operating profit of $297.89 million, down from 8 billion crowns a year earlier.
Gross margin, a key metric for assessing the impact of tariffs, fell to 13.5% from 18.2% in the first quarter, but adjusted for exceptional items stood at 17.7%.
Volvo Cars on Monday announced a $1.2 billion impairment related to model launch delays and customs tariffs, resulting in an operating loss of 10 billion crowns, compared with a profit of 8 billion crowns in the same quarter last year.
Earlier this year, former CEO Hakan Samuelsson was brought back for two years to help revitalize a record high stock price. Samuelsson quickly launched a cost-cutting program, withdrew earnings forecasts, cut 3,000 jobs and slowed investment.
