STOCKHOLM -- Volvo Cars swung to a profit in the first quarter as its new XC90 helped the automaker reach a level more in line with bigger rivals.
Operating earnings rose to 3.1 billion Swedish crowns ($392 million) in the quarter from a year-ago loss of 11 million crowns, Volvo said in a statement today.
Volvo, a small player compared with Daimler's Mercedes-Benz and BMW, has said it must boost profitability to the level of rival premium carmakers in the coming years, targeting an operating margin of around 8 percent as a benchmark level.
While launch costs for its new S90 sedan and V90 station wagon are likely to weigh later this year, Volvo posted an operating margin of 7.5 percent in the quarter as the pricier XC90 lifted both sales and earnings. By comparison, BMW's operating margin was 9.4 percent in the first quarter.
Net revenue increased 24 percent to 41.7 billion crowns, Volvo said.
"The new XC90 proves that customers like what they see from the transformed Volvo -- one in five new Volvo cars sold in the first quarter was an XC90," CEO Hakan Samuelsson said in the statement.
Samuelsson said he expects the new S90 and V90 to have a "similar positive impact" on sales. The cars go into production later this year.
China's Zhejiang Geely Holding Group bought Volvo from Ford in 2010. The XC90 was its first model developed under Geely ownership.
Volvo is banking on a 75 billion crown investment plan in new models and plants to secure a firm foothold in a premium market where it had struggled to make inroads under Ford.
The unlisted carmaker has previously not issued quarterly results and its decision to do so is likely the strongest sign to date it is gearing up to tap international capital markets and loosen its reliance on loans out of China.
Volvo also repeated its expected retail sales of its cars to rise this year as new models increasingly are added to the lineup.
"Based on the volume increase, albeit influenced by launch costs for the new models reaching markets during the year, we anticipate our full-year net revenue and operating income to increase year over year," Samuelsson said.
Volvo's vehicle sales increased 12 percent to 120,591 in the first quarter.
Separately, Volvo said on Tuesday that its vehicle sales grew 11 percent to 42,434 in April as gains in the U.S. and Europe helped to offset lower demand in China. Four-month global sales rose 12 percent to 145,845.