Volvo said Russia’s war in Ukraine forced it to take a total of 4 billion kronor ($423 million) in provisions in the first quarter, which will negatively impact operating profit.
All sales, service and production of the Swedish truck manufacturer in Russia have been suspended since the beginning of the war and sanctions have been imposed, the company said on Friday.
Last year, about 3 percent of Volvo’s net sales came from Russia, with the provision for expected credit losses on customers there.
Volvo has total assets worth about 9 billion kroner related to Russia, of which 6 billion kroner are classified as cash, the company said, related to its leasing business, which is funded through the bond market.
“Of course, as we believe customer credit losses will increase, we will receive less revenue from customers but still pay the bonds when due,” spokesman Claes Eliasson said.
Volvo takes a hit as vehicle manufacturers largely pull out of Russia after the invasion of Ukraine.
Volkswagen AG, Ford Motor Co. and Renault SA have all ceased operations, while Renault has announced it will write down €2.2 billion of its assets in Russia.
Volvo is one of the largest issuers of corporate bonds in Sweden and currently has about 107.6 billion kroner in bonds outstanding, according to Bloomberg data.
It is comfortably investment grade, rated A2 by Moody’s and A- by Standard & Poor’s.
Analysts at Danske Bank said in a statement that the impairment was slightly credit-negative. However, “it could, along with increasing supply chain pressures from the war, delay a potential S&P rating upgrade from ‘A-‘ to A.”
https://www.independent.ie/business/world/volvo-takes-423m-hit-as-russia-business-halted-41532775.html Volvo suffers $423 million in damage as it closes business in Russia