AB Volvo, the renowned Swedish automotive group, reported a significant slump in sales during the third quarter as the global demand for freight and construction vehicles has noticeably slowed down following a surge in the previous year. For the three months ending September 30, Volvo logged net sales totaling 116.98 billion kronor, a decrease from 132.28 billion kronor in the same period last year.
This figure fell short of the analyst consensus, which anticipated 122.60 billion kronor according to Visible Alpha. The decline in sales can be attributed to a reduction in both orders and deliveries, alongside lower volumes reported across Europe, North America, Asia, Africa, and Oceania. In terms of order intake, Volvo experienced an 8% decrease on a global scale, with truck deliveries declining by 16%.
This downturn reflects notable reductions across the categories of heavy, medium, and light-duty trucks, primarily driven by a combination of ongoing supply chain disruptions, a model changeover for light-duty trucks, and a softening demand in the heavy-duty truck sector. Despite facing these formidable challenges, the company's service sales exhibited resilience, rising by 4% year over year. Furthermore, Volvo's profitability has been adversely affected by this sales slump, with income attributable to owners falling to 10.02 billion kronor from 14.09 billion kronor in the prior year, missing the forecast from Visible Alpha which estimated 11.63 billion kronor. Looking towards the future, Volvo remains cautiously optimistic about the global economic outlook, anticipating 'relatively flat markets overall' in 2025.
Nonetheless, the company holds a positive view regarding its long-term growth prospects, especially within the transportation and infrastructure sectors. Despite disappointment reflected in the third-quarter results, analysts at RBC Capital Markets have expressed confidence that Volvo stands to benefit from an anticipated improvement in truck demand during 2024 and 2025.
'Negative overall, given the large misses in the two biggest divisions, supply issues at Mack and demand deterioration for CE in both Europe and North America. However, Volvo sees underlying truck demand robust heading into 2025 which, assuming an eventual unwind of supply issues, bodes well for margins remaining healthy,' RBC highlighted in their commentary. In response to these developments, Volvo shares experienced a 5% uptick during midmorning trade, settling at a price of $272.80, with a change of $+5.0 and a percent change of +1.87%..