Volvo Car Group increased its revenue by 1.7% in the second quarter, but its net income dropped by more than half as the company faced the headwinds buffeting the global auto industry, prompting it to mount a cost-cutting campaign.
For the second quarter of the year, operating profit fell to Swedish Kroner 2.6 billion, while revenue rose to Swedish Kroner 67.2 billion. Hakan Samuelsson, Volvo’s chief executive officer, said the second quarter and first half year have demonstrated the attractiveness of the company’s product portfolio.
“At a time when most markets in the world have stagnating car sales, we experienced strong growth, increasing the number of cars sold in the quarter by 5.4% and in the half year by 7.3% compared with the same periods last year, and we continued to take market share in all regions,” he said.
“In the German market, as an example, our sales grew over 30%. This shows that we are now a real premium alternative in this demanding market,” Samuelsson said.
Samuelsson said the current operating environment of increased pricing pressure and new tariffs decreased the automaker’s operating profit. To counterbalance these effects, Volvo’s initiated additional cost measures within the company on top of already planned measures with a goal of cutting 2 billion Swedish Kroner.
By the end of second quarter, the company cut more than 750 workers, mainly consultants. Additionally, the company is reducing costs for bought services. All of these actions combined will lower Volvo’s fixed cost run rate by approximately 1 billion Swedish Kroner or roughly $107.5 million as it enters the second half of the year, Samuelsson said.
“Further actions will lower cost with an additional billion as we enter 2020.To increase capacity and to benefit from local production, we have started producing the XC40 in the Luqiao plant. The high demand for this car continues to exceed our expectations,” Samuelsson said.
Volvo’s revenue increased by 1.7% in the second quarter and by 5.9% for the first six months of 2019. Net income dropped by 53.5% in the second quarter and by 38.3% in the first half.
Margins before earnings interest and taxes or EBIT dropped to 3.9% and 6.4% in the same period in 2018.