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Truck maker Volvo warns of lingering supply strains

Truck maker Volvo warns of lingering supply strains
By Reuters
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By Marie Mannes

-Swedish truck maker AB Volvo's supply chain struggles are set to linger, it said on Thursday after reporting fourth-quarter core profit close to analyst expectations.

Volvo and rivals such as Germany's Daimler Trucks have struggled with a global shortage of crucial components such as semiconductors, broader supply chain issues and strained freight capacity resulting from the COVID-19 pandemic and Russia's war on Ukraine.

The Swedish company's adjusted fourth-quarter operating profit rose almost 21% to 12.2 billion Swedish crowns ($1.19 billion) against an average forecast of 12.5 billion crowns in a Refinitiv poll of analysts, but Chief Executive Martin Lundstedt said the business continues to be affected by a volatile supply chain for components.

Lundstedt also highlighted pressures on Volvo's supplier base from high energy prices and input costs.

"We will therefore continue to have disturbances, stoppages and extra costs in the production of trucks and in other parts of the group," his statement said.

Volvo continued to support its suppliers financially in the fourth quarter because of the ongoing energy crisis in Europe, having begun to provide help in the previous quarter, finance chief Tina Hultkvist said on a conference call.

Supply issues have affected lead times, with soaring inflation and the energy crisis complicating matters.

Long lead times have hampered the whole sector. German truck maker Traton has had to restrict new orders despite selling 300,000 vehicles for the first time last year.

Like its German peer, Volvo said it also had to restrict new order bookings in the past quarter.

Lundstedt, however, said that Volvo reopened its order book for both Europe and North America in the first quarter, with new orders coming in.

The group repeated its October outlook for unchanged registrations in the coming year.

Shares in Volvo, the world's second-biggest truck manufacturer with brands including Mack and Renault, were down 3% at 1028 GMT.

Volvo proposed an ordinary annual dividend of 7 crowns per share and a extra dividend of the same amount.

($1 = 10.1895 Swedish crowns)

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