Bloomberg News

Volvo Quarterly Profit Rises on U.S., Europe Truck Demand

July 22, 2011

(Updates with shares in sixth paragraph.)

July 22 (Bloomberg) -- Volvo AB, the world’s second-largest truckmaker, reported a larger-than-expected jump in profit as demand in Europe and North America advanced and the Swedish company held down costs.

Second-quarter net income jumped 62 percent to 5.12 billion kronor ($816 million) from 3.15 billion kronor a year earlier, the Gothenburg, Sweden-based company said today in a statement. Profit beat the average estimate of 4.82 billion kronor in a Bloomberg survey of 14 analysts. Revenue rose 15 percent to 79 billion kronor.

“There’s almost no signs of them slowing down, especially in the truck division,” Morten Imsgard, an analyst at Sydbank A/S in Aabenraa, Denmark, with an “overweight” recommendation on Volvo’s shares, said by phone. “They keep on going with a very impressive cost control.”

The company’s operating margin widened to 9.7 percent of sales from 6.9 percent a year earlier. Volvo reiterated its industry forecast for heavy trucks sales this year of 230,000 to 240,000 vehicles in both North America, where it said demand is being driven by fleet replacements, and Europe. Truck orders in the quarter increased 34 percent to 65,006 vehicles, led by the two regions.

Volvo rose as much as 5.3 percent to 107.40 kronor, the biggest intraday gain since Dec. 1, 2010, and was up 4.1 percent as of 9:17 a.m. in Stockholm.

Mack Trucks

“The improvement in earnings comes from higher sales combined with improved efficiency of the industrial system as well as higher gross margins attributable to competitive products,” Chief Executive Officer Leif Johansson said in the statement.

Volvo, the maker of Mack trucks in North America and Renault trucks in Europe, recalled 700 workers at its plant in New River Valley, Virginia, in March to boost production. Registrations of heavy commercial vehicles in the European Union rose 62 percent this year through May compared with the same period last year, the European Automobile Manufacturers Association said last month.

The total market for heavy trucks in North America rose 45 percent to 93,088 trucks through June, Volvo said.

Market conditions for Volvo’s construction-equipment business, its second-biggest unit, are “expected to remain positive” through 2011, with North America set to grow by a range of 25 percent to 35 percent, the company said. The Chinese market has “slowed down” due to the government’s effort to limit inflation, it said.

Swedish rival Scania AB reported yesterday that net income rose 2.4 percent to 2.43 billion kronor as sales climbed 12 percent to 23 billion kronor. Daimler AG, the world’s largest truckmaker, will publish figures on July 27, and MAN SE will report results on July 28.

--Editors: Tom Lavell, Thomas Mulier

To contact the reporter on this story: Ola Kinnander in Stockholm at okinnander@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net


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