• Net Sales: Declined 6% to SEK138 billion, impacted by softer markets and negative FX of SEK1.1 billion.
• Adjusted Operating Income: SEK14 billion, with a margin of 10.1%.
• Operating Cash Flow: Record high of SEK24.3 billion for the quarter.
• Return on Capital Employed: Almost 36% in Industrial Operations.
• Earnings Per Share: SEK5.28.
• Total Truck Deliveries: Declined 11% in Q4.
• Construction Equipment Deliveries: Down 5%, with Volvo down 23% and SDLG up 20%.
• Service Sales: Flat year-over-year, adjusted for currency, with a 4% increase excluding Arquus divestment.
• Book-to-Bill Ratio: Positive at 106% for medium and heavy-duty trucks in Q4.
• Financial Position: SEK86 billion.
• Dividend Proposal: Ordinary dividend of SEK8 per share and an extra dividend of SEK10.5 per share.

• Warning! GuruFocus has detected 7 Warning Sign with VLVLY.

Release Date: January 29, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Volvo AB (VLVLY) reported a strong operating cash flow of SEK24.3 billion for the fourth quarter, marking an all-time high for the company.
• The company maintained a solid return on capital employed in Industrial Operations at nearly 36%, indicating strong financial health.
• Volvo AB (VLVLY) achieved a positive book-to-bill ratio in Q4, with significant order intake improvements across major regions, particularly in North America.
• The company successfully launched the all-new VNL in North America, which is expected to enhance market share and future growth.
• Volvo AB (VLVLY) continues to lead in the electrification space, with a 62% increase in orders for fully electric vehicles and machines, driven by Renault Trucks and SDLG machines.

Negative Points

• Net sales declined by 6% in Q4, impacted by softer markets and lower volumes, along with a negative currency effect of SEK1.1 billion.
• Group Trucks North America faced specific challenges, including supply chain disruptions due to storm Helen and additional costs related to the VNL ramp-up.
• Total truck deliveries declined by 11% in Q4, with a notable decrease in heavy-duty deliveries.
• The Construction Equipment segment experienced a 19% decline in sales, driven by continued declines in Europe and North America.
• Volvo AB (VLVLY) revised its forecast for the Chinese market, expecting it to move sideways rather than expand, reducing the forecast by 110,000 units.

Q & A Highlights

Q: Can you explain the impact of price versus mix on the average sales per truck, and the pricing environment in general? A: Mats Backman, CFO, explained that the mix impact was significant due to light commercial vehicles. There were no year-over-year pricing effects, but prices are being maintained. Martin Lundstedt, CEO, added that the mix effect was primarily due to changes in light commercial vehicle deliveries.

Q: What was the impact of the VNL launch and supply chain issues on Q4, and how long will these impacts last? A: Martin Lundstedt stated that the impact was slightly better than in Q3, where it was about 100 basis points. The issues are expected to gradually fade as the ramp-up progresses.

Q: With several quarters of book-to-bill below 1 now turning positive, do you expect any unusual seasonality in 2025? A: Martin Lundstedt noted that the order intake is encouraging, and they are ready for a gradual adjustment upwards. Mats Backman added that the company has a good starting point with lower inventories, which should help manage any seasonality.

Q: How do you see the potential for prebuy in the second half of 2025 due to EPA regulations, and how will you position your pricing? A: Martin Lundstedt mentioned that while there is a psychological effect of new regulations, they hope for minimal prebuy to maintain market alignment with economic activities. They remain positive about the market's return.

Q: Can you comment on the key actions to improve the gross margin in the Truck division in 2025, and any updates on the Mexico ramp-up plan? A: Martin Lundstedt highlighted that the gross margin was well managed, with specific North American issues gradually fading. The Mexico ramp-up is proceeding according to plan, supporting a strong position in North America.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.