China offers Volvo millions new loan deal

Car maker Volvo, the Swedish subsidiary of China's Geely Group, announced on Monday it had signed a second loan agreement with the China Development Bank as it aims to boost sales in the Chinese market.

China offers Volvo millions new loan deal
The $800 million loan, with a maturity in 2021, "will support Volvo Car Group in further developing its product programme as well as strengthening the capital structure over the coming years," the company said in a press release.
The previous $922 million loan from the state-owned bank helped the firm pay back in advance another loan with the European Investment Bank.
Volvo, which has sustained losses since 2011, has high hopes for the Chinese market.
The company is about to start production in its second and third Chinese factories, and the Asian country will soon become Volvo's largest national market ahead of the United States, where sales are dropping.
China Development Bank is the first creditor of the company, which on June 30th this year had an approximate total debt of 9.5 billion kronor ($1.44 billion) with financial institutions.
Volvo was purchased by Geely in 2010 and hopes to double sales in the Chinese market by 2020. China has been Volvo's largest market for the past two months.

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Sweden’s Volvo regains strength after pandemic puts brakes on earnings

Swedish truck maker Volvo Group was hit by a sharp drop in earnings due to the coronavirus pandemic, but business rebounded at the end of the year.

Sweden's Volvo regains strength after pandemic puts brakes on earnings
Volvo Group CEO Martin Lundstedt. Photo: Adam Ihse/TT

In 2020, the group saw “dramatic fluctuations in demand” due to the Covid-19 pandemic, chief executive Martin Lundstedt said in a statement.

For 2021, Volvo raised its sales forecasts in its trucks division – its core business – in Europe, North America and Brazil.

However, it said it also expected “production disturbances and increased costs” due to a “strained” supply chain, noting a global shortage of semiconductors across industries.

The truck making sector is particularly sensitive to the global economic situation and is usually hard hit during crises.

In March, as the pandemic took hold around the world, Volvo suspended operations at most of its sites in 18 countries and halted production at Renault Trucks, which it owns, in Belgium and France.

Operations gradually resumed mid-year, but not enough to compensate for the drop in earnings.

With annual sales down 22 percent to 338 billion kronor (33.4 billion euros, $40 billion), the group posted a 46 percent plunge in net profit to 19.3 billion kronor (1.9 billion euros).

Operating margin fell from 11.5 to 8.1 percent.

However, the group did manage to cut costs by 20 percent.

“We have significantly improved our volume and cost flexibility, which were crucial factors behind our earnings resilience in 2020,” the group said.

Volvo's business regained strength in the second half of the year.

“Customer usage of trucks and machines increased when the Covid-19 restrictions were eased during the summer and this development continued during both the third and fourth quarters,” it said.

“Both the transport activity and the construction business are back at levels on par with the prior year in most markets.”

For the fourth quarter alone, the company reported a 38-percent rise in net profit from a year earlier.