Release Date: July 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Volvo AB (VLVLY, Financial) reported strong financial performance with an adjusted operating income of SEK19.4 billion and a margin of 13.9%.
- The company achieved record levels in return on capital employed at 41.3% and earnings per share at SEK7.65.
- Volvo AB (VLVLY) saw a 5% growth in service sales year-over-year, reaching SEK33 billion in the quarter.
- Despite lower volumes, truck sales grew by 2% due to positive price effects and product mix.
- Volvo Buses reported a strong quarter with a 22% growth in vehicle deliveries and structural improvements in profitability.
Negative Points
- Truck deliveries softened by 8% to 58,900 vehicles due to normalized demand.
- Construction equipment deliveries decreased by 10%, with significant declines in Europe and North America.
- The underlying demand for electric vehicles is slowing down, with booked orders down 16% compared to last year.
- Volvo Penta experienced a 7% decrease in sales, particularly in the marine segment.
- The company faces challenges in adapting to the normalized demand, particularly in Europe, where sales were down almost 5% FX adjusted.
Q & A Highlights
Q: Can you discuss the collaboration with Westport and the cost comparison between hydrogen combustion engines and fuel cell trucks? Also, when will you reduce the run rate in North America?
A: The collaboration with Westport involves hydrogen combustion engines, which are part of our multi-technology strategy, including fuel cell and battery electric solutions. The cost and application will vary, but the modular setup allows flexibility across different segments. In North America, we have not made significant changes yet, but we will adjust as needed based on demand and market conditions. - Martin Lundstedt, CEO
Q: Could you provide more details on customer utilization levels and how they are evolving, particularly in Europe?
A: Utilization levels are holding up well, with only a slight drop in certain segments. The overall environment remains stable, and we are closely monitoring any changes in demand. - Martin Lundstedt, CEO
Q: How should we think about lead times and backlogs for trucks and construction equipment going into the second half of the year?
A: We are seeing more normalized order levels and have adjusted our operations accordingly. In Europe, we are balanced, while in Latin America and North America, we have a strong order backlog, particularly for Mack trucks. - Martin Lundstedt, CEO
Q: Is there an increase in discounting for fleet orders, and how might this affect pricing in the second half?
A: We are not seeing discounting but rather a shift in customer mix. Our pricing remains strong, and we continue to focus on value-based pricing strategies. - Martin Lundstedt, CEO
Q: Can you explain the significant drop in Renault's European light-duty orders and the current order run rate for the second half?
A: The drop is due to a model shift with Renault, not market-related. We are maintaining commercial discipline and focusing on value rather than price reductions to drive orders. - Martin Lundstedt, CEO
Q: What are your plans for North America given the high truck inventories and production levels?
A: We will apply the same strategy as in Europe, closely monitoring inventory levels and adjusting production as needed. Mack has a strong order backlog, so adjustments will be more focused on the Volvo brand. - Martin Lundstedt, CEO
Q: How should we think about R&D spending for the second half, particularly for trucks and construction equipment?
A: We expect a year-over-year negative impact of SEK1 billion from lower capitalization. However, we are committed to maintaining our R&D investments to support future growth and innovation. - Mats Backman, CFO
Q: Are the recent bus margin improvements sustainable, and what changes have been made to the business model?
A: The improvements are sustainable due to structural changes and a new business model in Europe, which provides more flexibility and partnerships. We expect continued structural improvements. - Martin Lundstedt, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
