By Ann Graceford V olvo, aSwedishautoandtruckmaker recentlyhauled inabetterthanexpectedpayloadwithitssecond-quarter earnings.Thecompany’sfocusoncuttingoperationcost andrisingEuropeansalesdrovethebestthanexpectedearnings andcarriedtheloadagainstslumpingdemandforcommercial vehicles in the U.S. Volvo, which sells Heavy-duty trucks under brands like Mack, Renault and the UD brands as well as its own name, scaled back its expected outlook for North America market by 4 percent. Weaker markets in the United States and also China, where sales of construction equipment are falling, will test Volvo’s new company focus to boosting profitability in a very competitive market where Volvo is competing with Germany’s Daimler and Volkswagen. CEO Martin Lundstedt, formerly with Scania, which has posted some of the best margins in the Heavy-duty truck industry, recently said, “In the secondquarter wewere able to continue the improvement of our underlying profitabil-
ity despite declining sales, thanks to positive cost devel- opment,” Gothenburg-based Volvo said order intake of its trucks fell 8 percent in the second quarter compared with a 1 percent drop seen by analysts. A 29 percent fall in North American truck orders led the decline. Lundstedt has come on board as Volvo begins reaping the benefits of a $1.17 billion U.S. dollar cost cutting drive intended to make the sprawling group less prone to sharp swings in profitability as cyclical truck markets periodically slump. Volvo reported that adjusted operating earnings rose to 717 million U.S. dollars up from a 699 million U.S. dollar a year ago, beating a forecast for 660 million. Volvo also had an adjusted operating margin of 7.8 percent, up 0.7 percent from a year ago when it was 7.1 percent and beating forecast by industry analysts that Volvo would haul in the 7.0 percent.
It looks like a change in the driver’s seat has Volvo on track to increase its earnings evenwhen demand in the industry is low.
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SPOTLIGHT ON BUSINESS • AUGUST 2016
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