STOCKHOLM (Reuters) – Swedish carmaker Volvo (OTC:) Cars said on Wednesday it expects good demand for its vehicles this year after a rise in unit sales in the first quarter, although operating profit missed forecasts as due to lower revenues and losses at its Polestar (Reuters). NASDAQ:) business.
Operating profit (EBIT) for the first quarter fell to 4.7 billion Swedish crowns ($434.78 million) from 5.1 billion a year ago, due to a drop in sales due to a negative exchange rate and lower contract manufacturing revenue.
This was lower than the consensus referenced by JPMorgan, which had expected an operating profit of 5.93 billion crowns.
However, adjusted operating profit, excluding joint ventures, associates and one-off activities, rose 8% to 6.8 billion Swedish kronor ($629.27 million).
“Overall, a good start to the year as Volvo reported double-digit sales growth and continued to ramp up production of the EX30,” JPMorgan said, referring to unit sales.
“We expect demand for our vehicles to remain robust in the coming quarters, in line with our expectation of full-year sales growth of at least 15 percent,” CEO Jim Rowan said in a statement.
Rowan has expressed confidence in the company’s ability to achieve high margins in the electric vehicle (EV) space and remain on a profitable path despite the challenges facing the sector.
As automakers and suppliers gamble on future demand for electric vehicles, sales growth has slowed, with investment in capacity and technology development outpacing demand, increasing pressure on companies to cut costs.
The company’s BEV (battery electric vehicle) gross margins were 16% in the quarter, up from 13% in the previous quarter, supporting Rowan’s view that margins will continue to rise.
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In February, Volvo said it would seize further funding from loss-making luxury car brand Polestar, which had been criticized for some time before the decision by analysts who saw the company as a drag on Volvo’s resources.
“Overall, there were higher losses at Polestar during the quarter that negatively impacted reported EBIT,” Handelsbank analyst Hampus Engellau told Reuters.
($1 = 10.8061 Swedish Krona)
