Volvo Group Dips After Truckmaker Warns of Cost Pressures, Supply Disruptions

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Volvo Group Dips After Truckmaker Warns of Cost Pressures, Supply Disruptions
Credit: © Reuters.

By Scott Kanowsky -- Volvo, AB ser. B (ST: VOLVb ) warned that it faces ongoing cost pressures due to supply chain constraints and soaring inflation despite the Swedish truckmaker posting a rise in earnings and revenue in the third quarter.

Operating income during the three-month period jumped by more than 26% year-on-year to SEK 11.87B, as an uptick in prices and improved vehicle volumes outweighed higher material and freight expenses.

Meanwhile, strong demand for Volvo's trucks division, driven by its customers' need to replace aging fleets, helped net sales increase by 35% to SEK 114.9B. Volvo also noted "good" sales growth in all regions except China, where strict COVID-19 rules have threatened to weigh on business activity.

But the Gothenburg-based company said it will be "restrictive" in slotting orders for production "too far in the future," citing uncertainty around the trading environment.

President and chief executive officer Martin Lundstedt flagged that the situation in the global supply of key component parts remains particularly unstable, while a surge in energy prices is putting a heavy strain on its supplier base as well.

"We will therefore continue to have disruptions, stoppages and extra costs both in the production of trucks and in other parts of the Group," he said.

Shares in Volvo fell by more than 3% in early European dealmaking on Thursday.

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