AB Volvo’s Q2 profit comes in stronger than expected as production resumes after COVID-19

AB Volvo (OTCMKTS:VOLVF) said on Friday that its profit came in stronger than anticipated in the second quarter as production resumed after months of inactivity due to the Coronavirus pandemic. The company, however, warned that the health crisis is likely to continue hurting demand in the upcoming months.

Shares of the company closed more than 2% down on Friday. At £14 per share, AB Volvo is currently trading around the same level at which it started 2020. In March, the stock had dropped to as low as £8.50 per share as COVID-19 wreaked havoc on the global manufacturers. Learn more about how do people make money on the stock market.

AB Volvo reports £286.44 million in adjusted operating profit

The manufacturer said that its namesake, Mack, and Renault brands saw a 45% increase in order intake for trucks in Q2 as compared to the same quarter last year. Much of the improvement in bookings, it added, was seen in the last few weeks of the second quarter. AB Volvo held its annual general meeting in June.

The Swedish multinational company recorded its adjusted operating profit at £286.44 million in the second quarter versus £1.33 billion in the comparable quarter of last year. Analysts, however, had forecast the company to print an even lower £1.49 million in adjusted operating profit in Q2.

The Gothenburg-based manufacturer of trucks, buses, and construction equipment said on Friday that government financial support including furlough schemes contributed greatly to upholding the truck industry and a range of other production facilities at large in Sweden in recent months.

Nonetheless, in a bid to shore up finances amidst the worldwide outbreak of the novel flu-like virus, AB Volvo announced to have suspended its dividend and expressed plans of laying off thousands of white-collar employees.

AB Volvo’s bookings were only 5% down in June

In terms of bookings, the company said that it was only 5% behind in June as compared to a massive 90% year over year decline reported in April.

The pandemic, Volvo added, also delayed its business plans. Its strategic alliance with Isuzu (Japan’s commercial vehicle and diesel engine manufacturing company) that was originally planned for the end of 2020, is now expected to finalise in the first sixth months of 2021.  

AB Volvo performed largely upbeat in the stock market last year with an annual gain of 40%. At the time of writing, it is valued at £29.93 billion and has a price to earnings ratio of 10.88.