(Oct 18): Volvo Group is preparing for more output cuts after forecasting a slump in truck deliveries next year in North America and Europe on weaker demand.
Total deliveries in North America are expected to decline by 29%, and by 14% in Europe, Volvo said Friday. Volvo’s third-quarter truck-order intake fell 45% from a year earlier, more than analysts had expected. This was mainly driven by an 81% decline in North American orders.
After beating its own 10% margin target this year, including for the third quarter, Volvo is facing up to weaker markets as the truck cycle turns. Kepler Cheuvreux cut its 2020 outlook by 17% after U.S. and European orders for heavy trucks deteriorated.
Volvo factories still have significant backlog to clear after struggling to fill a surge in orders over the last couple of years. This will help CEO Martin Lundstedt’s quest to defend profitability even as conditions weaken.
So far, the backlog is keeping returns at strong levels. The world’s second biggest truckmaker saw third-quarter adjusted operating profit rise to 10.9 billion Swedish kronor ($1.1 billion), beating analyst expectations.
Last week, the IMF made a fifth-straight reduction to its 2019 global economic forecast, citing trade tensions for its weakest view since 2009. As a result, Volvo’s customers are holding back on investments, Lundstedt said, foreshadowing “action” to maintain “good” profitability over the business cycle. - Bloomberg