Volvo falls after outlining truck output cut on lower demand

Volvo AB declined after saying the truckmaker will gradually reduce production to move in line with normalizing demand following years of supply-chain disruptions that left manufacturers with record order banks.

“The pent-up demand situation which characterized 2022 and 2023 has largely been absorbed by the transport industry and lead times, particularly in Europe, are back to more normal levels,” the world’s second-biggest truckmaker said Friday.

The shares fell 4.6% in early Stockholm trading with the stock rising 21% over the past year. 

Demand is returning to more average levels in several segments and markets, Volvo said in a statement reporting fourth-quarter earnings that beat expectations. Truck net order intake declined 9% during the fourth quarter to just over 49,000, led by a 24% slump in Europe. 

Volvo is reducing output at its Tuve plant in Sweden, though other locations will also be affected, Chief Executive Officer Martin Lundstedt told Sweden’s news agency TT, confirming an earlier report by broadcaster Sveriges Radio Ekot.

Outlook Cut

The company also adjusted lower its market forecast for heavy duty truck registrations in Europe from last year’s record highs to 280,000, while leaving unchanged its forecast for North America. 

Truckmakers have been buoyed by pent-up demand and high prices after years of supply-chain disruption. This year markets are expected to return to more average demand levels, Volvo has said. The company alongside main competitor Daimler Truck Holding AG has a strong presence in North America and Europe, two markets facing recession risks over the next 12 months.

For the fourth-quarter, Volvo’s results beat estimates after the company stayed on top of cost pressures and managing renewed supply-chain disruptions. Adjusted fourth-quarter operating profit rose to 18.4 billion kronor ($1.76 billion), compared with an analyst forecast of 17.5 billion kronor. 

The company proposed a dividend of 7.50 kronor, and an extra dividend of 10.50 kronor a share.