Volvo AB (STO:VOLV-B) has decided to replace its chief executive Olof Persson with Martin Lundstedt from rival Scania, known for his “winning leadership style”, as the company focuses on growth and increased profitability. The group also released its first-quarter results, revealing a sharp increase in operating income, despite lacklustre adjusted sales.
Volvo’s shares had surged as much as 16 percent earlier today and were trading at SEK 113.60 per share as of 09:44 BST, up 12.25 percent. The company’s stock has added more than 33 percent in the year-to-date but is only seven percent up on an annual basis.
The Gothenburg, Sweden-based company appointed Martin Lundstedt, CEO and a veteran of more than 20 years at rival Scania, as President and chief executive with effect from October.
“After three years of focus on product renewal, internal efficiency and restructuring, the Volvo Group is gradually entering a new phase with an intensified focus on growth and increased profitability,” Volvo’s chairman Carl-Henric Svanberg commented. “Martin Lundstedt has 25 years of experience from development, production and sales within the commercial vehicle industry. He is also known for his winning leadership style.”
The head of Volvo for the past four years Olof Persson was immediately relieved of his duties and the group’s financial chief Jan Gurander was appointed interim President and CEO until Lundstedt takes the lead.
There had been mounting pressure on Persson to boost profitability, with speculation emerging last month that a replacement was being sought. Persson was credited by Svanberg with leading the company to a “considerably better position to compete for leadership in our industry”, but was denied the chance to present the results for his last quarter at the helm of Volvo.
Net sales in the first three months of the current year were up nearly 14 percent on an annual basis to SEK 74.8 billion, but excluding the movements of currency valuation, the figure came in one percent lower. Meanwhile, operating income excluding restructuring charges and the sale of shares in Eicher Motors Ltd. almost doubled to SEK 4.595 billion, bumping the company’s operating margin to 6.1 percent from 3.9 percent.
“For the Group, we are reporting a clearly improved first quarter for 2015 in terms of both operating margin and cash flow,” Volvo’s acting president and CEO Jan Gurander commented. ”The earnings improvement we saw in this quarter shows that we have taken another step in improving the profitability of the Group.”