Volvo Sees Europe Market Recovery as Trucks Introduced

Volvo AB, the world’s second-largest truckmaker, said U.S. and European commercial-vehicle markets will probably recover this year as global economic growth rebounds. The shares rose the most in almost five months.

The manufacturer’s Renault Trucks brand will bring out new models in mid-2013, building on the introduction of Volvo’s FH lineup last year, amid a “gradually” improving industry, Chief Executive Officer Olof Persson said today at a press conference.

Volvo, which ranks second to Daimler AG in global truck sales, predicted that the European truck market will expand 4.1 percent this year to 230,000 vehicles. Industrywide sales in the region fell in 2012 as the economy of the 17 nations sharing the euro went into recession in the third quarter. The Gothenburg, Sweden-based truckmaker posted an 84 percent drop in fourth-quarter operating profit because of falling deliveries and spending on a reorganization that included job cuts.

The quarter “marks the operational trough” after the company “focused on clearing inventories,” Stefan Burgstaller, an analyst at Goldman Sachs & Co., wrote in a report to investors.

Volvo jumped as much as 4.3 percent to 96.9 kronor, the biggest intraday gain since Sept. 14, and was trading up 4 percent at 10:22 a.m. in Stockholm. The shares have gained 8.9 percent this year, valuing the manufacturer at 205.8 billion kronor ($32 billion).

Quarterly Plunge

Fourth-quarter earnings before interest and taxes plunged to 1.12 billion kronor as sales declined 2.2 percent to 303.6 billion kronor. Net income dropped 83 percent to 793 million kronor. Volvo plans an unchanged dividend of 3 kronor a share.

Persson predicted a “difficult” first quarter following an order decline, “low” capacity utilization and spending on research and model introductions. Volvo said it’s “investing heavily” in new vehicles, including a range of cheaper trucks for emerging markets.

The truckmaker eliminated about 2,000 jobs in the quarter, with half of the cuts in Japan, and posted 990 million kronor in costs as it reduced construction-equipment manufacturing and ended busmaking in Sweden and closed a remanufacturing plant in Japan. Volvo employed 98,717 people globally at the end of 2012.

“The market believes in the long-term restructuring,” analysts including David Arnold at Credit Suisse said in an e-mail to clients.

Keeping Forecasts

Volvo, which also makes Mack trucks in North America, reiterated a forecast that the region’s truck market this year will about match the 250,000 deliveries estimated for 2012. European industrywide sales last year probably totaled 221,000 trucks, Volvo said, a decline from an earlier estimate.

Demand in Brazil is expected to increase to 105,000 trucks, compared to an earlier forecast of 95,000 vehicles.

Volvo’s fourth-quarter deliveries fell 15 percent to 58,626 trucks, while orders dropped 9.6 percent to 52,145 vehicles. Europe accounted for 40 percent of deliveries and 36 percent of orders.

Some production stoppages originally announced for March and April at the Volvo brand were dropped, Persson said. Because of strong order intake in South America, production levels will be increased in March.

Volvo said Jan. 28 that a 5.6 billion-yuan ($899 million) plan to buy a 45 percent stake in the truck unit of Chinese manufacturer Dongfeng Motor Group Co. will help Volvo overtake Daimler in worldwide commercial-vehicle sales. Volvo has a target of completing the transaction, which will form a new joint venture, within a year.

Russian Plant

Part of Volvo’s push outside its traditional markets includes a plan outlined in September to invest almost 800 million kronor in a truck-cab factory in Kaluga, Russia, that will start production in 2014.

Scania AB, the Swedish truckmaker controlled by Volkswagen AG, reported a 29 percent plunge in profit in 2012 because of lower sales and production in Europe, which accounted for 45 percent of its deliveries. Volkswagen is pressing for closer collaboration between Scania and MAN SE, the Munich-based truckmaker that Volkswagen controls and is seeking to buy out. Daimler is scheduled to release earnings figures tomorrow.

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