Shares in Volvo Group jumped by 6 per cent after the Swedish truckmaker unveiled aggressive new long-term financial targets.
The world’s second-largest truckmaker will target an average operating profit margin of more than 10 per cent over the business cycle.
That is well above most analysts’ forecasts. For instance, Citi had estimated an average 8 per cent margin with a peak of 11 per cent and a trough of 5.5 per cent.
Klas Berglind, Citi’s analyst, said the new guidance from Volvo suggested its peak margin could be as much as 14-15 per cent. In the second quarter, Volvo had an underlying operating margin of 9.7 per cent, up from 7.8 per cent a year earlier.
Volvo has been shaken up by its new chief executive, Martin Lundstedt, who came from Scania, the smaller Swedish truckmaker that is an industry leader in profitability. Supported by Europe’s largest activist investor, Cevian Capital, Mr Lundstedt has made boosting Volvo’s margins a priority. Volvo’s shares have risen by more than 70 per cent since he took over in October 2015, to stand at SKr144 on Friday.
Volvo said: “A clear and straightforward operating margin target supports the efforts to drive performance across the group.”
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