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Volvo Keeps Truck-Market Forecasts as Earnings Increase

Volvo reiterated a forecast from October that industry wide sales in 2012 will drop 10 percent in Europe and gain 20 percent in North America. Photographer: Andrew Harrer/Bloomberg
Volvo reiterated a forecast from October that industry wide sales in 2012 will drop 10 percent in Europe and gain 20 percent in North America. Photographer: Andrew Harrer/Bloomberg

Feb. 3 (Bloomberg) -- Volvo AB, the world’s second-largest truckmaker, stuck to its estimates for the North American and European heavy-vehicle markets this year as sales growth helped fourth-quarter operating profit increase 26 percent.

Industrywide sales in 2012 will total 220,000 trucks in Europe and 250,000 in North America, the Gothenburg, Sweden-based manufacturer said today in a statement. Fourth-quarter earnings before interest and taxes rose to 6.96 billion kronor ($1.03 billion) from 5.52 billion kronor a year earlier. Revenue increased 18 percent to 86.5 billion kronor, and the operating margin was 8 percent of sales.

Chief Executive Officer Olof Persson, who took his post on Sept. 1 after running Volvo’s construction-equipment business for almost three years, is targeting operating margins at the top of the heavy-equipment industry, shifting focus to profitability from sales growth. Volvo is scaling back manufacturing at its Renault Trucks unit in France in response to an expected decline in European demand.

The company has “a diversified portfolio of products and geographic sales mix that will help them be one of the winners in the truck and construction industries in 2012,” Morten Imsgard, an analyst at Sydbank A/S in Aabenraa, Denmark, with an “overweight” recommendation on Volvo stock, said by phone.

Stock Rises

Volvo rose as much as 2.2 percent to 92.75 kronor and was trading up 1.6 percent at 1:05 p.m. in Stockholm. The stock has gained 22 percent this year, valuing the company at 196.4 billion kronor.

Volvo has no further plans to cut production or jobs after scaling back manufacturing and not extending the contracts for hundreds of temporary workers in Sweden and at its Renault Trucks unit in France in recent months, Persson said.

“Right now, we have a good balance between production and demand throughout the system, including in the Europe or U.S.,” Persson said in an interview today in Stockholm. “We see now that we can handle upturns and downturns in a pretty good way.”

Volvo’s truck-market estimates would amount to a 9.2 percent contraction for Europe, based on the 242,400 vehicles that Volvo said were sold industrywide in the region in 2011, and a 16 percent increase in North America from last year’s 216,000 deliveries.

Demand for trucks in Europe declined in the third quarter and now seemed to have stabilized, Persson said.

Net Income Jumps

Fourth-quarter net income jumped 46 percent to 4.72 billion kronor. Full-year profit rose 63 percent to 17.8 billion kronor as sales gained 17 percent to 310.4 billion kronor and operating profit increased 49 percent to 26.9 billion kronor.

A 7 percent decline in Volvo’s fourth-quarter truck orders was led by drops of 24 percent in Europe and 18 percent in South America. The order total of 57,704 trucks was less than the 59,000 vehicles that Sydbank’s Imsgard said he had expected. The 8.6 percent operating margin at the trucks unit also missed his estimate of 9.2 percent.

Swedish truckmaker Scania AB, which is cutting production in Europe and Latin America, reported fourth-quarter net income of 2.13 billion kronor on Feb. 1, missing analysts’ estimates as sales growth slowed. Stuttgart, Germany-based Daimler AG, the world’s largest truckmaker, will publish figures on Feb. 9, and Munich-based MAN SE is scheduled to report results Feb. 14.

Operating profit at Volvo’s construction-equipment division, its biggest business after trucks, fell 6.2 percent in the quarter to 1.65 billion kronor. China’s construction market contracted 13 percent from September through November, in contrast to a 9 percent global expansion, driven by measures the country’s government took to curb inflation, Volvo said.

Earnings at the aero division, which makes plane engines, fell 46 percent to 151 million kronor as sales increased 1.1 percent to 1.87 billion kronor. Efforts to dispose of the unit are “continuing,” Persson said, declining to give details.

To contact the reporter on this story: Ola Kinnander in Stockholm at

To contact the editor responsible for this story: Chad Thomas at

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