Recession is affecting Volvo Buses’ earnings

The recession and the financial crisis are now also beginning to increasingly affect the bus industry. Although Volvo Buses reports an increase in sales during the first quarter, the number of delivered buses was lower.

The coach market in Europe declined 20% compared with the preceding year, while the city bus market declined to a lesser degree. Demand continues to rise for environmentally adapted vehicles and hybrids.

The recession in North America has resulted in a very weak coach market. In contrast, the city bus segment continues to grow and interest in hybrid vehicles remains high. The same pattern applies in Mexico as in North America, with a significant decline in coaches. However, there is still favorable potential for Bus Rapid Transit.

The bus market in South America weakened very rapidly in the first quarter and it is becoming increasingly difficult to secure financing solutions for large city bus transactions. The bus market in Asia still continues to grow, but at a lower rate. The increase is related primarily to city buses.

The order intake in the first quarter was 2,394 buses and chassis, down 8% compared with 2,608 a year earlier. Order intake rose sharply in the International Region. Europe reported a slight decline, while order intake in North America weakened considerably.

During the quarter, 1,770 (2,214) buses were delivered, which is a decline of 20% compared with the first quarter of 2008.

Net sales in the first quarter increased by 10% to SEK 4,006 M (3,647). Adjusted for exchange-rate movements, net sales increased by 3%.

The operating loss amounted to SEK 95 M compared to a loss of SEK 122 M in the first quarter of 2008. The operating margin was a negative 2.4% (negative 3.3%). Lower volumes, which resulted in reduced capacity utilization, and currency movements had an adverse effect on earnings in the first quarter of 2009. In the first quarter of 2008, the operating income included a charge of SEK 120 M relating to the restructuring of the operation in Finland.

Volvo Buses’ global profitability program continues, with the focus on cost reduction as well as volume and resource alignment. During the first quarter, about 600 people have been given notice of redundancy globally. The decline in the global economy has resulted in the necessity to further reduce cost and to focus heavily on cash flow.

Nova Bus continues to report a favorable order intake in North America and the new plant in Plattsburgh in the US is now completed. Deliveries to customers are planned for autumn 2009.

During the quarter, Volvo Buses received a major order from India for more than 300 buses. In addition, Volvo Buses received the Automotive Technology of the Year award in India for the Volvo 9400 6x2.