AB Volvo profit jumps but warns on costs; shares sink 5%

Oct 20 (Reuters) – Swedish truck maker AB Volvo (VOLVb.ST) posted a higher third-quarter profit on Thursday as customers replaced ageing fleets but warned that energy and material costs and supply disruptions would pose challenges, sending shares lower in morning trading.

Rising energy prices have mounted financial pressure on suppliers, said Volvo, which is also grappling with a global shortage of semiconductors and other components and difficulties shipping its trucks to customers due to a lack of drivers.

“We will therefore continue to have disruptions, stoppages and extra costs both in the production of trucks and in other parts of the Group,” Chief Executive Martin Lundstedt said in a statement.

Shares were down 5% at 167 Swedish crowns in morning trading as operating profit at its Volvo Trucks unit, which climbed to 7.31 billion crowns from 5.1 billion a year ago, was still short of analysts’ estimates.

Adjusted operating profit at the Gothenburg-based manufacturer of trucks, construction equipment, buses and engines, jumped to 11.87 billion Swedish crowns, in line with analysts’ forecasts.

Revenue shot 35% higher to 114.9 billion crowns.

Net orders for trucks, sold under brands such as Mack and Renault as well as its own name, rose 27% to 64,700 vehicles. Pent-up demand to replace ageing fleets in Europe offset a decline in sales in North America.

Currency effects had a positive impact of 2.42 billion crowns.

Volvo kept its 2022 forecasts for truck registrations in Europe and North America unchanged at 300,000 for both regions, expecting the same number for both next year.

Reporting by Marie Mannes; Editing by Michael Kahn, Edwina Gibbs and Bernadette Baum