Volvo AB shares fell the most in more than a year as the truck division’s profitability shrank in the second quarter amid a continuing decline in North American deliveries.
Volvo dropped as much as 7.8%, the steepest intraday plunge since June 27, 2016, and was trading down 5.8% at 137.1 kronor as of 12:37 p.m. July 19 in Stockholm, valuing the Gothenburg, Sweden-based manufacturer at 292 billion kronor ($35 billion).
Adjusted earnings before interest and taxes at the truck unit narrowed to 9.6% of revenue in the quarter from 10% a year earlier, even as the division’s profit rose, according to a statement Volvo released July 18.
The second-quarter figures “underscore the picture from the first quarter: The truck division is increasingly replaced by construction equipment as the motor behind Volvo’s year-on-year earnings growth,” Michael Raab, a Frankfurt-based analyst at Kepler Cheuvreux, wrote in a report to clients. The period “marks the first time in many quarters that the truck division’s profitability has not advanced.”
Group earnings excluding one-time items jumped 39% to 8.54 billion kronor, matching analyst estimates. While North American truck deliveries fell 11% in the period and 22% in the first half, CEO Martin Lundstedt said the regional market has bottomed out.
“When it came to the truck division, the margin was down a little bit lower on the back of some supply restrictions toward the end of the quarter,” CEO Martin Lundstedt said in an interview on Bloomberg Television’s Surveillance program with Francine Lacqua. “The quality in the business is still solid.”
Net income tripled to 5.92 billion kronor, helped by revenue growth of 12%, currency gains and a year-earlier credit provision that wasn’t repeated. Adjusted earnings before interest and taxes at the truck business rose 3.7% while surging threefold at the unit that makes equipment such as excavators and loaders for the building and mining industries.