By Marie Mannes
STOCKHOLM (Reuters) -Truck maker Volvo reported a smaller drop in first-quarter profit than expected on Wednesday as demand returns to more normal levels in many markets following a strong 2023.
With the sector bracing for a tougher 2024, Volvo in January forecast fewer trucks would be registered this year, with a particular downturn in Europe.
"In Europe, order backlogs and lead times have normalised. Through the quarter we gradually reduced production capacity in Europe and anticipate to be in balance during Q2," CEO Martin Lundstedt said on Wednesday.
Handelsbank analyst Hampus Engellau said that while Volvo's underlying operational performance was better than expected, the first quarter results were "very plain vanilla". He forecast a continued slowdown in earnings throughout the year.
Volvo reiterated its forecasts for the overall European and North American heavy truck markets this year - for sales of 280,000 and 290,000 respectively - having lowered its European market outlook in January.
Lundstedt said market conditions were normalising both in Europe and North America as transport volumes and freight rates eased from very high levels.
"Many fleets continue their replacements, while retail customers are more in a wait-and-see mode. Utilisation of the installed truck fleet remains on good levels," he said.
Volvo's first-quarter adjusted operating profit fell to 18.2 billion crowns ($1.66 billion) from 18.6 billion a year earlier, but beat a mean forecast of 16.9 billion in an LSEG poll of analysts. Sales were little changed at 131.2 billion crowns.
The maker of vehicles under brands such as the Mack Trucks and Renault (EPA:RENA) as well as its own name said price hikes implemented last year helped boost profits despite its order intake falling by nearly 20% from a year earlier.
Volvo's shares were up roughly 2% at 0749 GMT.