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Volvo Car says costs, crown to weigh on results

Volvo Car says costs, crown to weigh on results
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First Published: Thu, May 12 2011. 06 47 PM IST
Updated: Thu, May 12 2011. 06 47 PM IST
Stockholm: Volvo Car Corp posted a fifth straight quarterly profit, thanks in part to demand for its XC60 crossover model, and said high raw material costs and a strong Swedish currency could hit its performance.
It was the first report from Volvo since its takeover by Chinese group Zhejiang Geely, which also owns Geely Automobile, and was in stark contrast to rival Swedish carmaker Saab which is struggling for survival.
Volvo, bought from Ford, said on Thursday first-quarter operating earnings rose to 640 million crowns ($103 million).
Chief executive Stefan Jacoby signalled worries ahead. “We see that we have additional burdens with raw material price developments and we see also that with the strong Swedish krona (crown) we have an exposure we need to digest. This is affecting our bottom line. The crown has strengthened around 10% versus the dollar this year.
“We have identified counter meassures and we intend, of course, to stay profitable but I cannot promise now that we will continue with this because of these external factors.”
Volvo, which slumped to a deep loss during the financial crisis, has seen sales recover strongly over the past year. It said it had seen volumes grow in all markets.
“It is our our mid to long-term objective to balance our exposure to the US dollar,” Jacoby said. Possible solutions could see the company source more from North America, or possibly China since the yuan is pegged to the dollar.
Zhejiang Geely has rolled out ambitious plans for expansion for Volvo, not least in China, but also at its Torslanda plant in Sweden and a factory in Ghent, Belgium.
Volvo’s deputy chairman said last month it expected to sell 450,000 units this year, up from 380,000 in 2010.
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First Published: Thu, May 12 2011. 06 47 PM IST