Volvo Group Posts Solid Q2 Results Despite Losing Month Of Production

Volvo Group lost about a month of truck production in Q2 because of the semiconductor shortage. But it still posted solid results as orders and deliveries soared compared with the pandemic-impacted year-ago quarter.

Sweden-based Volvo VLVLY made no mention of a labor dispute at its Volvo Trucks North America unit that sacrificed five weeks of regular production during the quarter. The second strike ended last Friday, erasing two weeks of Q3 production.

The impact showed up in North American truck deliveries for Volvo and its smaller subsidiary, Mack Trucks. Mack delivered 5,257 trucks to 4,549 for Volvo. Both outstripped the pandemic-impacted second quarter of 2020, by 163% and 137%, respectively. Overall truck deliveries increased 85%, Lundstedt told analysts on a conference call.

Overall, net sales amounted to SEK 90.6 billion ($10.4 billion). Adjusted operating income was SEK 9.7 billion ($1.1 billion). Adjusted operating margin was 10.3%.

Semiconductor Impact

"In a quarter when shortages of semiconductors as well as other production materials resulted in substantial production stoppages affecting both volumes and costs negatively, we achieved an adjusted operating margin of 10.7%," Volvo President and CEO Martin Lundsted said in a press release.

Volvo concluded the sale of its UD Trucks affiliate to Isuzu Motors Ltd. on April 1 and gave the 19 billion SEK ($2.18 billion) proceeds to shareholders as a one-time payout this month. Volvo excluded UD Trucks results from most of its financials released Tuesday.

"Overall, freight markets have continued to be strong and our customers' utilization of their trucks high, which were reflected in a strong service business and continued good order intake," Lundstedt said.

That includes nascent growth in electric trucks. Volvo delivered 98 battery-electric trucks in North America and Europe. It took orders for 194 electric trucks. Overall, Volvo delivered 357 electric trucks and equipment in the quarter compared to 26 in the year-ago period.

"It will continue to be the supply side that is dictating how we can continue to ramp up production to meet the high order backlog and demand that we see across markets," Lundstedt said on the analysts' call..

Construction And Buses

Volvo's construction business experienced a slowdown in China, which was the first to emerge from the pandemic in the second half of 2020. Europe and North America saw higher demand across industry segments, backing a 5% increase in deliveries.. Construction equipment posted an overall adjusted operating margin of 13.1%

The bus and coach unit, hit particularly hard by COVID as the tourist bus business practically ground to a halt a year ago, saw signs of life as restrictions eased in many markets. Fleet use improved, allowing Volvo Buses to post a near breakeven in Q2. Orders rose 5% and deliveries 45% in the quarter.

"So, still a long way to go here," Lundstedt said.

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