Scania Orders Jump 29% in Europe Emissions-Rules Change

Scania AB (SCVB), the Swedish truckmaker controlled by Volkswagen AG (VOW), said third-quarter orders rose 29 percent as customers replaced vehicles and the prospect of stricter emissions rules in Europe pushed demand.

Sales contracts jumped to 21,809 trucks and buses from 16,925 vehicles a year earlier, while deliveries increased 23 percent to 18,244, Soedertaelje-based Scania said today in a statement. Net income declined 2.8 percent to 1.46 billion kronor ($229 million), held back by a strengthening Swedish currency and truck-price pressure. Revenue rose 10 percent to 19.7 billion kronor.

Scania is rolling out additional models, including the Streamline long-distance lineup, as well as engines that meet tighter emissions regulation as the manufacturer prepares for an economic rebound in Europe. Truck orders in the region surged 84 percent as customers sought cheaper vehicles before European Union rules, dubbed Euro 6, limit new sales next year to models using more expensive antipollution technology, the company said.

“There are good growth opportunities and the expansion of annual technical production capacity toward 120,000 vehicles is continuing,” Chief Executive Officer Martin Lundstedt said in the statement. “To strengthen competitiveness, the level of activity related to development projects remains high,” while the company continues to add business in emerging markets.

Stock Rises

Scania rose as much as 2.2 percent and was trading up 0.9 percent at 138.2 kronor as of 10:25 a.m. in Stockholm. The stock has gained 2.9 percent this year, valuing the truckmaker at 108 billion kronor.

Henrik Henriksson, Scania’s head of sales and marketing, reiterated in September that the company is targeting deliveries of 120,000 trucks a year by 2020 while safeguarding profitability during its expansion. The strategy for raising market share in Europe includes adding vehicles for industries such as mining and forestry to a lineup focused on long-haul freight trucks.

Industrywide registrations in Europe of commercial vehicles heavier than 16 metric tons, excluding buses and coaches, fell 8 percent in the first eight months of 2013, with double-digit declines in all major markets apart from the U.K., the ACEA automotive trade group said on Sept. 27.

Latin America

Third-quarter operating profit rose 5 percent to 1.97 billion kronor, while earnings as a proportion of sales narrowed to 10 percent from a 10.5 percent margin a year earlier, Scania said today. Truck orders in Latin America fell 17 percent from a year earlier, though demand remained “at a good level” in Brazil and Argentina, while sales contracts for the vehicles in Asia increased 56 percent.

Currency effects reduced third-quarter profit in the vehicle and services business by about 425 million kronor, Scania said. The Brazilian real and Argentinian peso declined against the krona in the period.

The operating margin will return to previous highs exceeding 14 percent, though setting a deadline isn’t possible, as earnings will depend on the global economy, Chief Financial Officer Jan Ytterberg said last month. Investment spending that holds back profitability has been necessary to prepare for more production, he said.

Volkswagen, Europe’s biggest automaker, is forging a truck alliance between its Munich-based MAN SE (MAN) division and Scania to reap cost savings and take on global market leader Daimler AG. A domination and profit-transfer agreement giving VW full control of MAN took effect in July. Wolfsburg, Germany-based VW promoted former Scania CEO Leif Oestling last year to run group truck operations and lead the efforts for joint projects.

Scania said on Aug. 29 that an arms-length policy on cooperation with VW and MAN remains in place.

To contact the reporter on this story: Tom Lavell in Frankfurt at tlavell@bloomberg.net

To contact the editor responsible for this story: David Risser at drisser@bloomberg.net

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