AB Volvo Warns Chip Woes to Linger After Narrow Profit Miss

By Niklas Pollard

Operating profit at the maker of trucks, construction equipment, buses and engines nearly tripled to 9.73 billion Swedish crowns ($1.12 billion) from 3.27 billion a year ago, but slightly missed the 9.84 billion seen by analysts according to Refinitiv data.

A global shortage of semiconductors just as the market roared back after last year’s pandemic plunge has squeezed makers of heavy-duty trucks as well as smaller vehicles, crimping production, extending lead times and lifting costs.

Volvo, a rival of Germany’s Daimler and Traton, said it struggled with total production stoppages of close to a month in the second quarter.

And while recovering strongly, the group’s reported sales and adjusted earnings remained below cyclically-high levels reached over the same period in 2019, before the pandemic hit.

“There will be further disruptions and stoppages in both truck production and other parts of the group in the second half of the year,” CEO Martin Lundstedt said in a statement.

“Together with our business partners we are continuing to work hard to increase production levels.”

Meanwhile, demand for heavy-duty trucks is strong with a surge in online shopping due to the pandemic driving freight volumes and rates and emboldening fleet operators to move ahead with vehicle orders suspended after the virus first struck.

“This demand situation is broad based across segments, both in Europe and North America and on both new and used vehicles,” the company said.

Volvo said order bookings of its trucks, also sold under brands such as Mack and Renault, soared 143% from a weak year-ago quarter and stood by forecasts for solid market growth in both Europe and North America this year.

The company also raised its 2021 outlook for construction equipment markets in both regions.

($1 = 8.6971 Swedish crowns)

(Reporting by Niklas Pollard, editing by Supantha Mukherjeem Subhranshu Sahu and Tomasz Janowski)