Volvo Cars to pay $310 million dividend, second under China’s Geely

March 14, 2019

STOCKHOLM (Reuters) – Volvo Cars will pay a dividend of 2.9 billion Swedish crowns ($311 million) after record sales in 2018, the company said on Thursday, with almost all of it slated to boost the coffers of its debt-laden Chinese parent Geely.

The payment comes as carmakers are grappling with the fallout of trade wars, rising costs for developing electric and driverless cars, and an industry downturn that has dented even the most profitable companies.

The trade war caused Volvo to postpone plans for a listing last year and generated additional costs to retool its factories to limit the tariff impact.

Premium rival Daimler cut its dividend in February after its fourth-quarter profit plunged. In the same week Volvo reported a fall in 2018 profit margins and said margins would remain under pressure this year.

Volvo has a stated goal to spend roughly 5 percent of its annual revenue on building electric and autonomous cars, and a spokeswoman said on Thursday Volvo believed it had enough cash to cover both the dividend and its development costs.

This will be the second time that the Gothenburg-based company has paid a dividend since being bought in 2010 by China’s Zhejiang Geely Holding Group, which owns the Chinese car brand of the same name.

Volvo had paid a dividend of 2.2 billion crowns for 2016.

The Swedish carmaker said its owner will receive around 2.8 billion crowns of the dividend and Swedish insurance and savings group Folksam and pension fund investor AMF, which hold preference shares, will get around 125 million crowns.

Geely has taken on debt after making recent stake acquisitions in Daimler and truck rival AB Volvo.

Volvo, which did not make a profit for a decade under previous owner Ford, sold a record 642,253 cars last year and recorded an operating profit of 14.2 billion Swedish crowns. It has set a goal of reaching sales of 800,000 cars within the next few years.

(Reporting by Simon Johnson and Esha Vaish in Stockholm; editing by David Evans)

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