Volvo sees firm growth as Q3 profit tops forecast

Volvo (VOLVb.ST), the world's second-biggest truck maker, said market growth should remain in double digits in both Europe and North America next year as it rolled out stronger-than-expected quarterly earnings on Friday.

Volvo and rivals such as market leader Daimler (DAIGn.DE) have seen the highly cyclical demand for heavy-duty trucks pick up in recent months after weathering the worst downturn in decades due to the global financial crisis.

The firm posted an operating profit of 4.9 billion crowns ($736 million) in the third quarter, having lost 3.3 billion in the same period last year. Analysts had on average forecast a profit of 4.3 billion crowns, according to a Reuters poll.

Volvo shares were down 1.1 percent to 94.7 crowns by 4:21 a.m. ET as the company rolled out little in the way of positive surprises after seeing its shares surge more than 50 percent this year on the hopes of a robust recovery.

"We think the figures were quite good overall," Swedbank analyst Niclas Hoglund said.

"What is making the market a bit uncertain is that they had hedging gains at the group level of 598 million crowns, and adjusted for that the earnings look a little bit less strong."

Daimler shares were down 0.5 percent.

The recovery has been led by booming growth in emerging markets in Latin America and Asia, but truck markets in Europe and the United States have also rebounded from lows hit during the crisis as the broader economy has improved.

Gothenburg-based Volvo, which also makes buses, construction equipment, engines and aerospace components, said order bookings for trucks rose 59 percent year-on-year in the third quarter.

Volvo, which makes heavy-duty trucks under the Renault, Mack, UD Trucks and Eicher brands, also repeated its forecast for the truck market to grow about 10 percent in Europe this year and 20-30 percent in North America.

The company said it expected market demand to rise further next year and reach a level above 200,000 vehicles in both North America and Europe, implying growth of roughly 10 percent in Europe and 30 to 40 percent in North America.

But Volvo also injected a note of caution.

"For 2011 it is difficult to assess what impact austerity packages in Europe will have on the overall economy," the company said, adding that the economic recovery in the United States remained weak.

GAINS

European car sales have dipped in recent months, smarting from the loss of government incentives to encourage new purchases.
In sharp contrast, demand for heavy-duty commercial vehicles, which was not propped up by government schemes during the crisis, has risen strongly. Industry-wide sales climbed 34 percent in August alone.

Fortified by sweeping cost cuts during the downturn, Volvo has seen the growing demand lift earnings in recent quarters while its shares have gained about 50 percent since the start of the year, in line with gains for MAN and Scania.

Capitalizing on Volvo's rising share price, its biggest owner, French carmaker Renault SA (RENA.PA), unloaded about 3 billion euros worth of shares this month though it remained the most influential voting shareholder.

Volvo is the first of Europe's blue-chip commercial vehicles makers to unveil its third-quarter results. Figures from its domestic rival Scania (SCVb.ST) are due on October 25 and Germany's Daimler and MAN SE (MANG.DE) are both scheduled for October 28.