Mikael Sjöberg | Bloomberg | Getty Images
Swedish Volvo Cars Group reported stronger-than-expected third-quarter profit on Thursday, helping its shares rebound about 40% and putting the stock on track for its best trading day ever.
Volvo Cars, which is owned by China’s Geely Holding, reported an operating profit for the July-September period of 6.4 billion Swedish crowns ($680.4 million), well above analysts’ expectations and up from 5.8 billion crowns a year earlier.
Its earnings before interest and tax (EBIT) margin stood at 7.4% for the third quarter, compared to 6.2% in the same period last year.
Volvo Cars said the result was largely due to its ongoing 18 billion crown cost savings program, as well as some one-off items.
The Stockholm-listed share price jumped 41% on Thursday morning, before paring its gains to trade up 33.1%. This still reflects the company’s biggest intraday gain since it began trading four years ago.
“In a difficult market, we delivered a strong third-quarter result and our cost and cash flow measures are paying off,” Håkan Samuelsson, CEO of Volvo Cars, said in a statement.
“We returned to modest sales growth in September and are now accelerating sales of our BEV cars. We are well on our way to the very important January launch of the EX60 in the largest and most popular electric segment,” he added.
Looking ahead, Volvo Cars said it expects to see more positive effects from its cost-cutting campaign in the last three months of the year.
He noted, however, that the near-term outlook appears increasingly difficult, citing lingering macroeconomic challenges, including price competition and the effects of U.S. tariffs on imports.
Job cuts
Volvo Cars announced 3,000 job cuts and withdrew its financial guidance earlier this year, citing pricing pressure and strong competition in the electric vehicle market.
The automotive sector is considered extremely vulnerable to tariffs, given the high globalization of supply chains and the heavy reliance on manufacturing operations across North America.
The US and EU agreed a framework trade deal in July, with Donald Trump’s US administration imposing across-the-board tariffs of 15% on most European goods. The deal marks a significant reduction from Trump’s threat to impose 30% tariffs and cuts the tariff rate on the European auto sector by almost half, from 27.5%.
Industry groups, which have tepidly welcomed the trade deal, have expressed deep concerns about the costs associated with the new tariff reality.
