Volvo Cars’ profit exceed expectations as demand persists

After reporting earnings beyond expectations, Volvo Cars (VOLCARb.ST) said on Thursday that demand for its products remained high and that chip restrictions were progressively improving.

Despite strong demand, a global shortage of semiconductors has pushed the Gothenburg-based carmaker and its global partners to reduce vehicle manufacturing.

The war in Ukraine has resulted in greater costs for raw materials, energy, and freight for Volvo, which is attempting to alleviate the effects by altering prices, as it does for many other enterprises.

“Those price hikes have come through so far, and it hasn’t affected demand in the least,” Bjorn Annwall, the company’s chief financial officer, told media.

Volvo shares surged 3.9 percent in early trade, after falling 16 percent this year through Wednesday but up 22 percent from their IPO price.

Volvo reported a strong performance, according to investment bank JPMorgan, but supply chain concerns and raw material cost management will be essential in the second and third quarters.

The increased expenses had a limited impact in the first quarter, would have a partial impact in the second quarter, and would have a full impact in the second half of the year, according to Volvo.

In February, the company halted all sales, service, and production in Russia, which accounted for around 3% of its net group sales last year.

“Obviously, we don’t see any business in Russia in the near future,” Annwall added.

Volvo stated output was down at the end of the first quarter due to a temporary shortage of a certain semiconductor, and that the deficit was projected to last into the second.

Its first-quarter operating profit decreased to 6.0 billion Swedish crowns ($607.4 million) from 8.4 billion the year before, but it outperformed the 4.13 billion projected by four Refinitiv analysts.

Revenue increased by 8% to 74.3 billion crowns, exceeding analysts’ expectations of 71.15 billion crowns.

Volvo, which is majority controlled by China’s Geely Holding, kept its 2022 delivery target unchanged from the previous year.

It reported last month that car sales decreased 20% in the first quarter to 148,295 vehicles.

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