Volvo’s first-quarter net sales fell 7% to SEK 121.8bn, ignoring exchange rate impacts. The decline was driven by lower sales across all regions and in all segments except Buses.
Underlying operating profit dropped 27% to SEK 13.3bn, missing market expectations by 12%. This faster decline was due to lower volumes and an unfavourable sales mix which weighed on margins.
Free cash flow fell from SEK 6.1bn to SEK 2.0bn, largely due to the lower profitability. Net debt, excluding lease liabilities fell from SEK170.2bn to SEK 155.8bn.
Order intake was ahead of analyst consensus, rising 13% to 55,227 trucks, with increases across all markets except South America.
No full-year guidance was given, with Volvo stating that “it’s too early to assess the full implications from the imposed tariffs”. Market forecasts expect underlying operating profits to fall around 6% to SEK 32.3bn.
The shares fell 1.2% in early trading.
Our view
Volvo’s saw the brakes applied to vehicle sales in the first quarter, causing profits to drop sharply. Despite all the uncertainty around tariffs, order intake in the important truck division shot up by 13%, which is a major positive for the rest of 2025.
Recent trends have become more exaggerated, with weakness in North America continuing. Volvo’s market share here slipped lower, partly due to model changeovers, which also weighed on profitability.
Things are looking much brighter in Europe though. Volvo achieved record market share on the continent, and order intake for its trucks was well ahead of market forecasts.
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.
After a tough period, there are early signs that demand is turning a corner. The uplift in orders takes some time to convert into sales, but they can often be seen as a leading indicator of where the economy’s heading. 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 7.6% 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. But recent US-led tariffs have the potential to throw a spanner in the works. 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 LSEG Datastream, 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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