Volvo Second-Quarter Truck Orders Fall on North America

Volvo AB (VOLVB), the world’s second-largest truckmaker, said second-quarter vehicle orders dropped 19 percent because of a weakening economic outlook in North America and southern Europe.

Sales contracts fell to 52,946 trucks from 65,006 vehicles a year earlier, Gothenburg, Sweden-based Volvo said today in a statement. Drops of 47 percent in North America and 13 percent in Europe led the decline, which accelerated groupwide from a 1 percent slide in the first quarter.

Volvo, which makes Mack-brand trucks in the U.S., may cut production in response to falling demand, Chief Executive Officer Olof Persson said today. Confidence among U.S. small companies dropped in June to the lowest since October, while manufacturing output in the 17 countries that share the euro shrank at the fastest pace in three years as governments worked to stem the sovereign-debt crisis.

“It’s a significant miss on the order side,” said Morten Imsgard, an analyst at Sydbank A/S (SYDB) in Aabenraa, Denmark, with an overweight recommendation on Volvo stock. “Truck-fleet operators in North America have grown more cautious after a healthy start to the year. They’re stepping back and looking where the economy is going before deciding to invest in renewing fleets.” Imsgard had estimated orders at about 57,000 trucks.

Photographer: Jochen Eckel/Bloomberg

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Photographer: Jochen Eckel/Bloomberg

Volvo AB trucks.

Drop Reversed

Volvo rose 1 percent to 79.6 kronor at 12:28 p.m. in Stockholm, reversing a decline earlier in the day of as much as 2.9 percent. The shares have gained 5.6 percent this year, valuing the manufacturer at 169 billion kronor ($24.3 billion).

Second-quarter earnings before interest and taxes fell 4.1 percent from a year earlier to 7.34 billion kronor, beating the 6.73 billion-krona average of 12 analyst estimates compiled by Bloomberg. Revenue increased 6.3 percent to 83.9 billion kronor.

Volvo reiterated forecasts from April that European industrywide sales in 2012 will fall to 230,000 trucks, while North America’s market will increase to 250,000 vehicles. That would amount to a 5.1 percent drop in Europe and 16 percent growth in North America, based on Volvo’s industry estimates for 2011. The company scaled back its forecast for Brazil’s market to 90,000 trucks from an earlier prediction of 105,000 vehicles.

Deliveries Fall

The Swedish company’s second-quarter truck deliveries fell 2 percent to 58,769 vehicles, Volvo said. South American sales dropped 27 percent, hurt by a slowing economy and a shift in emissions regulations in Brazil, and European deliveries declined 14 percent in Europe. North American truck sales jumped 34 percent, helped by vehicle replacements.

A Mack Trucks factory in Macungie, Pennsylvania, and a Volvo-brand plant in Dublin, Virginia, will suspend production for a much as three weeks this autumn in response to declining U.S. demand, Persson said today in an interview in Stockholm.

“The big macro uncertainty creates a big wait-and-see attitude in North America” among customers, the CEO said at a press conference.

The only other production cutbacks planned globally are a previously announced reduction in Brazil, Persson said. Truckmaking will be increased later this year in Russia and Sweden, he said. Volvo’s construction-equipment unit in Sweden will let contracts expire for about 200 temporary workers as sales at that business are slowing, Persson said.

Lead times from order to delivery remain unchanged at two to three months across Volvo’s businesses, Persson said.

“That’s an indication we have balance in our system,” the CEO said. “That’s where we should be.”

Swedish competitor Scania AB (SCVB), which reported a 40 percent drop in second-quarter net income to 1.46 billion kronor, said July 20 that orders rose from the previous three months because of Russian demand. It also predicted a growing need in Europe to replace vehicles. Stuttgart, Germany-based Daimler AG (DAI), the world’s largest truckmaker, plans to publish figures tomorrow. Munich-based MAN SE (MAN) is scheduled to report results on July 31.

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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