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Investing.com -- Volvo Group (ST:VOLVb) on Wednesday reported a 27% year-on-year decline in operating income for the first quarter of 2025, at SEK 13.3 billion compared to SEK 18.2 billion in the same period last year.
The operating margin dropped to 10.9% from 13.8%, driven by lower volumes, a weaker product mix, and production inefficiencies in the U.S. due to the rollout of a new truck platform. Currency movements further impacted earnings by SEK 207 million.
Total (EPA:TTEF) net sales decreased 7% to SEK 121.8 billion, with both vehicle and service revenues contracting. Adjusted for currency effects, the sales drop remained at 7%.
Earnings per share fell to SEK 4.86 from SEK 6.92. Income for the period was SEK 9.98 billion, down from SEK 14.1 billion, and cash flow from Industrial Operations plummeted to SEK 1.3 billion from SEK 8.9 billion a year earlier. Return on capital employed fell to 31.8% from 37.7%.
According to RBC Capital Markets, the group’s Q1 adjusted EBIT missed consensus by 14%, with the Truck division’s EBIT 20% below expectations.
Construction Equipment missed by 24%, and Buses by 19%, while Volvo Penta was broadly in line.
RBC analysts noted that “the main headwinds stem from lower volumes,” though they added that “book-to-bill ratios above 1x across key divisions” suggest improving trends ahead.
CEO Martin Lundstedt commented, “In times of uncertainty it is more important than ever to work in close cooperation with our customers,” as the Group works to mitigate the impact of tariffs and adjust its regional production and supply chain strategies.
Sales for trucks dropped 9% to SEK 82.2 billion, with a 35% decline in EBIT to SEK 8.5 billion and margin down to 10.3% from 14.5%.
Deliveries fell 12% to 48,833 units, while order intake rose 13% to 55,227, beating expectations.
Volvo Trucks posted a record 20.1% heavy-duty market share in Europe. Book-to-bill in Trucks was 1.14x, with ASPs ~2% ahead of consensus.
Construction Equipment (CE) revenue dropped 8% to SEK 21.1 billion, with operating income at SEK 2.5 billion, down 31%, and a margin of 12% versus 16.1% in Q1 2024.
Order intake rose 24% year-over-year and deliveries increased 7%, resulting in a book-to-bill of 1.11x. Negative mix effects impacted margins, according to RBC.
Buses sales grew 5% to SEK 5.4 billion. Operating income rose 39% to SEK 360 million with a margin of 6.6% (up from 5%).
However, RBC noted that EBIT was still 170 basis points below expectations. Order intake surged 123% year-on-year, with a strong 1.58x book-to-bill ratio.
Revenue for Volvo Penta declined 3% to SEK 5 billion, with EBIT down 7% to SEK 915 million. Despite a 35% increase in orders, deliveries were down 17%. Margin stood at 18.3% (down from 19.1%).
Volvo maintained its forecast for 290,000 heavy-duty truck units in Europe in 2025, but cut its North America forecast to 275,000 units from 300,000.
The Brazil heavy-duty forecast was reduced to 85,000 from 90,000. In construction equipment, the North American market is now expected to decline 15% to 5%, wider than the previously expected 10% to 0% drop.
The company declared a total dividend of SEK 18.50 per share (SEK 8 ordinary and SEK 10.50 extraordinary), with a record date of April 4.