In a preliminary filing, AB Volvo announced a first-quarter profit that broke records despite supply chain obstacles and rising costs, thanks to increased revenue and margins. The truck manufacturer’s impressive performance caused a 9.6% surge in its shares during early trading on Wednesday. The news came out of Oslo, according to Reuters.
AB Volvo’s adjusted operating profit for the January-March quarter increased by 45% to 18.4 billion Swedish crowns ($1.76 billion), exceeding the Refinitiv Eikon analyst poll’s expected 12.9 billion.
As recently as January, AB Volvo had anticipated the persistence of “disturbances, stoppages, and extra costs,” with the energy crisis and rising inflation compounding the difficulties for the Swedish company.
AB Volvo did not offer any details on the factors behind its impressive performance and refrained from providing a profit outlook in its preliminary earnings report, which was released on Tuesday evening. The Swedish company declined to provide additional comments on the matter.
According to a research note from JPMorgan (NYSE:JPM), “price increases and a much-improved supply chain situation” were likely contributors to the strong performance of AB Volvo in the quarter. The note suggests that these factors led to fewer interruptions on the production line and ultimately led to the company’s impressive results.
As of 7:25 am GMT, AB Volvo’s shares were trading at 210 crowns, up 8.0%, while Stockholm’s benchmark share index saw a modest increase of 0.8%.
JPMorgan suggested that AB Volvo’s impressive results may indicate a broader improvement in the industry and could have a positive impact on other truck manufacturers such as Daimler Truck, Traton, and Iveco from Italy, as well as their respective suppliers.
Daimler Truck’s and Traton’s shares rose by 3.5%, while Iveco’s increased by 2.3%. However, in a research note, Jyske Bank expressed concerns that although AB Volvo’s earnings were strong, the company’s order intake might decrease, and its customers could face stagnancy in their activities due to global economic weakness.
AB Volvo’s adjusted operating margin increased from 12.0% to 14.0%, and both of the company’s major divisions – truck manufacturing and construction equipment – demonstrated progress in terms of earnings.
The truck segment of AB Volvo saw an increase in net sales from 69.6 billion crowns to 89.6 billion crowns, exceeding the expected 79.7 billion crowns.
AB Volvo’s truck division experienced a surge in operating profit from 8.7 billion to 12.7 billion, which was higher than the anticipated decline to 8.4 billion, according to analysts.
($1 = 10.4303 Swedish crowns)
