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By Helena Soderpalm
STOCKHOLM (Reuters) – Automaker Volvo Cars said on Thursday demand for its products remained strong as pressure on chips improved, after posting better-than-expected gains.
The global semiconductor shortage has forced the Gothenburg-based automaker and its global peers to reduce vehicle production despite strong physical demand.
As with many companies, the war in Ukraine has led to higher prices for raw materials, energy and freight for Volvo, which will mitigate the effects by adjusting prices.
“So far, those value increases have materialized and have not decreased demand at all,” Chief Financial Officer Bjorn Annwall told Reuters.
Volvo shares, which were down 16% this year through Wednesday but up 22% from its IPO price, rose 3. 9% at the start of the deal.
Investment bank JPMorgan said in a note that Volvo had performed well, adding that supply chain issues and control of raw cargo would be critical at the time and in the third quarter.
Volvo said the charge accumulation had a limited effect in the first quarter, will have a partial effect in the current quarter and will have a full effect on the current part of the year.
In February, the company suspended all sales and production in Russia, which last year accounted for about 3% of the group’s net sales.
“Obviously, we don’t expect any activity in Russia for the foreseeable future,” Annwall said.
Volvo said production declined at the end of the first quarter due to a transient shortage of a fast semiconductor and warned that the source challenge is expected to persist into the current quarter.
Its first-quarter operating profit fell to SEK 6 billion ($607. 4 million) from SEK 8400 million a year earlier, surpassing the SEK 4130 million expected through 4 analysts surveyed through Refinitiv.
Revenue rose 8 to 74. 3 billion kroner, surpassing the 71. 15 billion expected by analysts.
Volvo, majority-owned through China’s Geely Holding, maintained its 2022 forecast of marginal delivery growth year-over-year.
Its auto sales fell 20 in the first quarter to 148,295 cars, it reported this month.
($1 = 9. 8776 Swedish kroner)
(Reporting via Helena Soderpalm; editing via Niklas Pollard, Robert Birsel)