Volvo Cars’ profits driven by demand for SUVs – Financial Times

A Volvo Cars XC90 hybrid sport utility vehicle stands on display at the Beijing International Automotive Exhibition in Beijing, China, on Tuesday, April 26, 2016. The show opens to the public on April 27. Photographer: Qilai Shen/Bloomberg©Bloomberg

One in 5 of the 121,000 cars sold by Volvo in the current quarter was an XC90

Volvo Cars booked a lot more profit in the initial 3 months of 2016 compared to the initial half of 2015 as booming consumer necessity for bigger vehicles across Europe and China fuelled the company’s sales.

The Swedish carmaker moved in to the black in the initial quarter, along with an operating profit of SEK3.1bn (€341m), compared to a loss of SEK11m (€1.2m) one year earlier.

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One in 5 of the 121,000 cars sold by Volvo in the current quarter was an XC90 sport utility vehicle.

Falling oil prices and rising driver hunger for practicality has actually led to a surge in SUV sales — accounting for a quarter of cars sold by every one of Auto makers across Europe last year.

This has actually additionally steered margin growth for carmakers, as bigger vehicles usually be a lot more profitable.

Volvo’s operating margins in the initial quarter were 7.5 per cent, compared to zero in the very same interval last year. Revenues climbed from SEK33.7bn to SEK41.8bn.

“The [XC90] contributed a lot,” said Håkan Samuelsson, chief executive of Volvo Cars.

He added that safety features, such as collapse avoidance software — which involves a big pet detection unit — and a brand-new make had proved popular.

“We have actually taken a step in to the premium league,” he said.

The XC90 competes versus models such as the Audi Q and the BMW X5.

Volvo’s sales in China flower 13.4 per cent to 19,636 vehicles in the initial quarter, while in western Europe they climbed 13.3 per cent to 49,305 cars.

This is the initial time Volvo Cars has actually issued quarterly trading outcomes due to the fact that it was bought by Chinese group Geely in 2010 — increasing speculation it can be days away from returning to the bond market.

Analysts said moves to the very same disclosure standards as a listed business laid the groundwork for re-engaging along with capital markets.

“It wouldn’t surprise me,” said Arndt Ellinghorst, analyst at Evercore ISI.

Carmakers such as Audi and Porsche issue routine investor updates despite being owned by Volkswagen group, in order to prove their viability as businesses and drive management performance, he said.

Mr Samuelsson said: “We hope to act as a listed company. For years Volvo has actually merely been a division in a person else’s business. We hope to be scrutinised as a listed business would.”

In an interview along with the Financial Times in December, he meant the business was anticipating a return to the bond markets throughout 2016.

A bond issue would certainly mark the current step in the company’s turnround due to the fact that its sale by Ford in 2010.

Volvo Cars strategies to sell 800,000 cars a year prior to the end of the decade, compared to the 503,000 it sold in 2015.

It has actually produced an $11bn platform on which to construct brand-new vehicles, of which the XC90 was the first.

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