Volvo foresees 'difficult' quarter following loss

Volvo AB, the world's second-largest truckmaker, said it's confronting a "difficult" third quarter as a decline in sales and late customer payments caused a wider loss than analysts predicted in the three months through June.

The second-quarter net loss was 5.57 billion kronor ($728.1 million), or 2.75 kronor a share, Gothenburg, Sweden-based Volvo said today in a statement. Analysts had estimated a loss of 3.9 billion kronor, according to a survey compiled by Bloomberg.

Volvo reiterated forecasts that its main truck markets will shrink by at least 30 percent and said provisions for bad loans caused a loss at its financial-services unit. The manufacturer said it's "working actively" with buyers that are having difficulty with repayments. Volvo is building fewer trucks this quarter than in the three months through June, Chief Executive Officer Leif Johansson said at a press conference.

"It shows some signs of stabilization." said Michael Andersson, an analyst at Evli Bank in Stockholm. Excluding one- time charges, "the numbers look OK."

Volvo fell 0.75 krona, or 1.4 percent, to 52.25 kronor in Stockholm trading in the biggest drop since July 8. The shares have gained 22 percent this year.

The European Central Bank forecast on July 9 that the economy of the countries sharing the euro will emerge from recession in mid-2010. The Organization for Economic Cooperation and Development is predicting that the U.S. economy will contract by 2.8 percent this year.

Volvo sold its car business to Ford Motor Co. in 1999. Its products now include heavy trucks, buses, construction equipment, ship engines and aerospace components.

Cash Flow Focus

The company will focus on improving cash flow and margins, Johansson said, adding that Volvo isn't interested in increasing its market share or merging with rivals as the recession eases.