Volvo Cars profit beats forecast despite chip shortage as strong demand persists


An employee of a Volvo car dealership, wearing a protective mask, is seen in a showroom, in Brussels, Belgium, May 28, 2020. REUTERS/Yves Herman

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STOCKHOLM, April 28 (Reuters) – Automaker Volvo Cars (VOLCARb.ST) said on Thursday demand for its products remained strong as chip constraints gradually eased after posting better-than-expected profits.

A global shortage of semiconductors has forced the Gothenburg-based automaker and its global peers to cut vehicle production despite strong demand from potential car buyers.

As with many businesses, the war in Ukraine has driven up raw material, energy and freight costs for Volvo, which is seeking to mitigate the effects by adjusting prices.

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“So far these price increases have materialized and it hasn’t dampened demand at all,” chief financial officer Bjorn Annwall told Reuters.

Volvo said the rising costs had a limited impact in the first quarter, would have a partial impact in the second quarter and would have a full impact in the second half.

In February, the company suspended all sales, services and production in Russia, which last year accounted for around 3% of the group’s net sales. Read more

“Obviously we don’t anticipate any activity in Russia for the foreseeable future,” Annwall said.

Volvo said production was down at the end of the first quarter due to a temporary shortage of a specific semiconductor and warned the supply problem is expected to last into the second quarter.

The automaker’s first-quarter operating profit fell to 6.0 billion Swedish kronor ($607.4 million) from 8.4 billion a year ago. Four analysts polled by Refinitiv had on average forecast earnings of $4.13 billion. Quarterly revenue rose 8% to 74.3 billion crowns, beating the 71.15 billion expected by analysts.

Volvo, majority-owned by China’s Geely Holding (GEELY.UL), maintained its 2022 forecast of marginal year-on-year delivery growth. Read more

It said this month that its car sales fell 20% in the first quarter to 148,295 cars. Read more

Volvo shares are down 16% this year through Wednesday, but up 22% from their IPO price.

($1 = 9.8776 Swedish kronor)

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Reporting by Helena Soderpalm; edited by Niklas Pollard, Robert Birsel

Our standards: The Thomson Reuters Trust Principles.


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