S&P shifts Volvo Car outlook to stable

S&P said it revised its outlook for Volvo Car AB to stable from positive and affirmed the BB+ ratings on the company and its senior unsecured debt.

“Volvo Car's operating profitability is suffering more than most of its peers this year, due to more severe production stoppages and the geographic mismatch between its production footprint and sales in the profitable U.S. market. Although most Europe-based automakers will offset supply-constrained volumes and input cost inflation through a strong price and product mix in 2022, we do not expect this for Volvo Car and think the company is set to deliver weaker operating results this year,” S&P said in a press release.

The agency said it estimates Volvo Car’s EBITDA margin will fall to about 5%-6% in 2022 from a 9.7% high in 2021.

“The stable outlook reflects our expectation that, over the next 12 to 18 months, Volvo Cars will focus on cost discipline to improve its S&P Global Ratings-adjusted EBITDA margin to above 6% (including the pro rata consolidation of its affiliate Polestar) and maintain its solid balance sheet despite the persisting supply chain issues, high input costs, and investments related to its EV transformation,” S&P said.

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