Feb 5 (Reuters) - Volvo Cars' fourth-quarter profit fell 68%, hit by tariffs and weak demand, as the Sweden-based automaker warned on Thursday that external factors continued to pose challenges.
Operating profit excluding items affecting comparability at the group, which is majority-owned by China's Geely Holding, fell to 1.8 billion crowns ($199.9 million) from 5.6 billion crowns a year earlier on a 16% sales drop.
"External factors (affected) our performance, such as EU-U.S. import tariffs and the
negative currency effect of a stronger Swedish krona," CEO Hakan Samuelsson said in a statement.
"On top of that, revenues were affected by weak demand putting pressure on pricing, and the removal of EV incentives in the U.S., which negatively impacted sales."
Analysts at J.P. Morgan said in a note to clients that both profits and sales lagged market expectations.
VOLVO'S TRUMP TARIFF HIT
U.S. President Donald Trump initially hiked import tariffs on cars from the European Union to 27.5% from 2.5% as part of his push last year to reset Washington's global trade relations.
That rate was later reduced to 15%, applied retroactively to August 1, following trade negotiations.
Volvo Cars exports the majority of its U.S.-bound cars from Europe. The company's gross margin - a metric monitored by analysts to assess the impact of tariffs - was 15.8%, against 20.4% in the third quarter and 17.1% a year earlier.
Volvo Cars said it aimed to return to year-on-year volume growth in 2026, and that an ongoing turnaround plan was on track.
"We have a long list of cost savings ideas, which we are yet to execute," Chief Financial Officer Fredrik Hansson told Reuters.
"We also see that in terms of synergies and collaborations with Geely to reduce costs, especially on mechanical components, we've only started to scratch the surface," he added.
The company proposed no dividend for 2025.
($1 = 9.0039 Swedish crowns)
(Reporting by Alessandro Parodi, additional reporting by Marie Mannes; Editing by Anna Ringstrom and Joe Bavier)
