Stockholm (Reuters) – Volvo Cars announced on Thursday a sharp drop in operating profit in the second quarter, however, exceeding analysts’ expectations, which increased its title, despite challenges related to customs duties and lower demand.
Volvo Cars is the first European automaker to publish its results in what promises to be a gloomy season, because the low demand for electric vehicles and the growing competition from China are combined with the increase in American customs tariffs.
However, a large part of the decline had already been taken into account in the estimates of analysts and investors, the impact of customs and lower sales duties having been largely anticipated.
Around 8:58 a.m. GMT the title climbs 9.06% to 19.38 Swedish crowns (1.71 euros).
“The demand remains low and volatile, affected by the weakening of consumer confidence and the introduction of additional customs duties, who continue to make challenges in the automotive sector,” the group said a press release.
In addition to a 27.5% customs duty on Volvo cars made in Europe entering the United States, the company was also struck by a 25% right on automotive parts as well as on steel and aluminum.
The President and CEO of Volvo Cars, Hakan Samuelsson, thus called on the European Union to reduce its customs duties by 10% on cars built in the United States, during an interview with Reuters on Thursday.
“If Europe is in favor of free trade, it is we who should show the way and start by applying very low customs duties,” he said.
“The European automotive industry absolutely does not need to be protected against American automakers,” according to Hakan Samuelsson.
Despite this gloomy environment, the second quarter results were better than dreaded, Bernstein analysts said in a note.
“Given the weakness of the position of the actions, this should be enough to cause a positive reaction to the market,” according to Bernstein.
Volvo Cars recorded a quarterly operating profit, excluding elements affecting comparability, of 2.9 billion Swedish crowns (256.19 million euros), compared to 8.0 billion Swedish crowns last year.
The gross margin of Volvo Cars fell to 13.5%, against 18.2%in the first quarter, and 17.7%.
(Written by Marie Mannes, Elena Smirnova, edited by Augustin Turpin)
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