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Investing.com -- Volvo (ST:VOLVb) (OTC:VLVLY) Cars reported a sharp drop in second-quarter earnings, citing weaker consumer demand and the impact of new tariffs.
Adjusted operating profit fell to 2.9 billion Swedish crowns ($297.89 million), down from 8.0 billion a year earlier.
"Demand remains soft and volatile, impacted by weakening consumer confidence and the introduction of additional tariffs, which continue to pose challenges for the automotive sector," the company said in its earnings release.
Profitability was hit by 1.4 billion kronor in restructuring charges and 11.4 billion kronor in impairments tied to its cost-saving efforts and difficulties in the U.S, though the company said its turnaround plan is beginning to show early signs of success.
Including the restructuring charge—bringing the figure in line with company-compiled consensus—operating profit came in at SEK 1.5 billion with a 1.6% margin, slightly above the consensus estimate of SEK 1.2 billion and a 1.3% margin.
The Sweden-based automaker posted a net loss of 7.51 billion kronor for the quarter, compared to a profit of 5.35 billion kronor in the same period last year.
Revenue declined 7.8% to 93.49 billion kronor.
Gross margin dropped to 13.5% from 18.2% in the first quarter. On an adjusted basis, excluding one-offs, the margin stood at 17.7%. Analysts have been watching the figure closely to gauge the effects of rising tariffs.
Separately, Morgan Stanley (NYSE:MS) analysts said they "expect Volvo shares to see a neutral market reaction (relative to SXNP)" following the release.
Volvo is the first major European carmaker to report this season, which is expected to reflect a tough environment marked by sluggish EV demand, intensifying competition from China, and escalating trade barriers in the U.S.