Volvo Cars sees more than expected profit in first quarter

Volvo Cars said on Thursday posted profits above forecasts and said that demand for its products continues to be strong while chip constraints were gradually improving.

The ongoing shortage of semiconductors has forced automakers to reduce vehicle output despite robust demand.

The automaker in February suspended all activities in Russia. The country accounted for about 3% of its net group sales and got one factory there.

The ongoing war in Ukraine has resulted in higher costs for raw materials, energy and freight for Volvo.

“So far those price increases have come through and it hasn’t dampened demand at all,” Chief Financial Officer Bjorn Annwall informed Reuters.

Volvo said the higher costs had a limited impact in the first quarter, and it can have some impact on the second quarter, and would fully impact the second half of the year.

Its first-quarter operating profit declined to 6.0 billion Swedish crowns ($607.4 million) from 8.4 billion a year earlier but it was better than 4.13 billion expected by four analysts polled by Refinitiv.