Volvo’s fourth-quarter net sales fell 6% to SEK 138.4bn, ignoring exchange rate impacts. The decline was driven by lower vehicle sales, while service sales remained broadly flat.
Underlying operating income fell 24% to SEK 14.0bn. This faster decline was due to lower volumes weighing on margins, increased Research & Development, and additional costs associated with supply chain issues.
Order intake increased across all divisions except Buses in the final quarter, including a 24% increase to 61,200 vehicles in the truck division.
Free cash flow improved from SEK 8.6bn to SEK 14.0bn, largely due to favourable timing of payments from customers and payments to suppliers. Net debt was SEK 170.2bn at the end of 2024.
No guidance was given for 2025, but market forecasts are expecting both revenue and underlying operating profits to remain broadly flat at SEK 526bn and SEK 66bn respectively.
The shares rose 2.8% in early trading.
Our view
Volvo’s fourth-quarter numbers showed the brakes continued to be applied to vehicle sales, causing revenues and profits both fall lower. But order intake in the important truck division shot up by 24% in the final quarter, which is positive for the outlook heading into 2025.
2024 was always going to be a year of normalising market demand as freight and construction activity came down in many regions after a couple of years of very strong growth in the post-pandemic boom. And while revenue and profits are feeling the impact, operations under the hood are running efficiently. The group managed to grow its operating cash flow, with record numbers generated in the fourth quarter.
It’s worth pointing out that this isn’t the car maker – that part was sold off a while ago. This Volvo is an industrial giant that manufactures trucks, buses, diesel engines, and construction equipment.
The group not only produces these vehicles but also services them. If your truckload of goods gets stuck somewhere, a 24/7 global servicing support network is on hand to get you up and running ASAP. It’s a win-win situation. Customers get peace of mind, and Volvo gets a reliable recurring revenue stream to help smooth out the ups and downs of economic cycles.
Importantly, there are early signs that demand’s turning a corner as truck and construction equipment orders have rebounded higher. These take some time to convert into sales, but they can often be seen as a leading indicator of where the economy’s heading, especially the latter. Companies only tend to order construction equipment if they’re confident that more work is on the horizon. We’re hopeful that momentum can build further, but remember, nothing is guaranteed.
Looking further out, transportation and infrastructure are vital and exciting industries with long-term growth drivers, and we think Volvo’s in a good position to meet this demand. There are significant barriers to entry in this field as well. The group's vast manufacturing and supply chains play a crucial role in safeguarding its market share.
The balance sheet remains in good shape, and there’s currently a prospective 5.9% dividend yield on offer. Please remember nothing is guaranteed. Overseas dividends can be subject to withholding tax which might not be reclaimable.
The valuation is sitting below the long-term average, reflecting the slowdown in activity and falling profits. While it’s not guaranteed, there are some early signs of activity picking back up. In the long term, we see growth potential at Volvo, but ups and downs along the way can’t be ruled out.
Environmental, social and governance (ESG) risk
General Industrial companies are medium risk in terms of ESG but can trend up to the higher end of the spectrum depending on subindustry. The primary risks can include labour relations, emissions (either product or production-based), business ethics and product governance. Other concerns are waste and health & safety.
According to Sustainalytics, Volvo’s management of ESG risk is average.
Volvo is addressing its substantial risks related to greenhouse gas emissions by investing in electric and hybrid vehicle technology. The group has also committed to net zero emissions by 2040. However, Volvo is facing consumer lawsuits throughout Europe relating to its previous involvement in a price-fixing scheme in the region.
Volvo key facts
All ratios are sourced from Refinitiv, based on previous day’s closing values. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
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