I almost got a sinking feeling this morning when I Googled the headline “third quarter loss, plans job cuts”. Once the sleep cleared from my eyes, fortunately, this turned out to be the headline for Volvo Cars. These two Volvos could really make some sort of gentlemen’s agreement not to release their reports on the same day.
From a broader perspective, an interesting takeaway from the report is the European momentum in heavy and medium-duty equipment. Quarterly growth compared to last year was +25%. In stable markets, this kind of trend has sometimes been seen as an early indicator of general economic growth.
The order backlog is also doing very well in general. Sure, the company sells more than just trucks, but trucks are the main revenue driver monitored in the order backlog. In new orders, the quarterly year-on-year growth was +26%, and the 9-month growth was +24%. So far this year, new truck orders stand at around 173,000 units and deliveries at 153,000.
This is a strong report—cash flow and the order backlog are solid, and those are likely the key factors. That said, since the market is fearful right now, it might seize on the Q3 book-to-bill ratio, where around three thousand more trucks were delivered than new orders received. In addition, the wild order growth seen in the US earlier this year cooled down, with the quarterly year-on-year growth sitting at “only” +18%, compared to +71% across the entire first nine months. To my eye, these seem cosmetic, but they are the kind of things the market might latch onto.