Reuters logo
UPDATE 3-Volvo hikes trucks outlook after construction slide stymies Q4 profit
February 5, 2015 / 6:59 AM / 3 years ago

UPDATE 3-Volvo hikes trucks outlook after construction slide stymies Q4 profit

* Raises Europe, N America truck market outlook

* Q4 core profit 3.0 bln SEK vs forecast 3.7 bln

* Construction woes weigh on earnings

* Shares fall 2.8 percent (Adds CEO, analyst comment, share price)

By Niklas Pollard and Johannes Hellstrom

STOCKHOLM, Feb 5 (Reuters) - Truck maker Volvo raised its outlook for truck markets on both sides of the North Atlantic, after an expected fourth-quarter rise in core earnings fizzled in the face of weak demand for construction equipment, sending its shares down.

The group, locked in battle with Daimler and Volkswagen’s truck brands for market leadership, is facing strong U.S. demand for trucks but also a deep downturn for its construction gear arm in a slowing China.

Gothenburg-based Volvo raised its forecast for its two biggest truck markets, forecasting growth to 240,000 units in Europe and to 310,000 units in North America. The outlook is weaker for construction gear, where Volvo is cutting 1,000 jobs.

Germany’s Daimler separately struck a more guarded note on the European truck market, saying it was seen roughly flat in 2015, though it forecast significantly higher truck sales this year on the back of a strong order backlog.

Sweden’s biggest company by sales and top private sector employer said operating profit excluding provisions and restructuring charges dipped to 3.02 billion crowns ($364 million) from a year-ago 3.08 billion, lagging a mean forecast of 3.73 billion in Reuters poll of analysts.

“It is hard to say anything else than that construction equipment has a weak development at the moment, and it looks like it will continue to be weak also in the first half,” DNB analyst Christer Magnergard said. Volvo shares eased 2.8 percent by 0837 GMT.

Volvo is under pressure to demonstrate the benefits of years of cost cuts aimed at boosting its profit margin by 3 percentage points by the end of 2015. Activist fund Cevian, its second- biggest owner by votes, has called for it to end 2014 with a double-digit margin.

The adjusted operating margin at Volvo, which sells trucks under the Mack, Renault and UD brands as well as its own name, fell to 3.9 percent in the final quarter of last year from 4.0 percent a year ago, shy of the 4.9 percent seen by analysts.

“If we look at the restructuring plan, it is going according to plan and we have good traction in the different activities,” Chief Executive Olof Persson, who has led Volvo’s 10 billion crown efficiency drive, told a news conference.

A surprise profit rise for the third quarter has helped Volvo shares outpace the broader industrial index with a 27 percent gain since late October, though it has sharply underperformed the sector since Persson took the helm in 2011. ($1 = 8.2873 Swedish crowns) (Editing by Alistair Scrutton and David Holmes)

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below