Swedish truck maker Volvo makes Q2 profit, helped by higher demand, improved productivity

Volvo returns to profit in Q2 as demand picks up

STOCKHOLM — Swedish truck maker AB Volvo returned to a profit in the second quarter from a loss a year earlier, helped by a gradual pickup in demand and improved productivity, it said Thursday.

The company, based in Goteborg, southern Sweden, said net profit for the quarter totaled 3.1 billion Swedish kronor ($420 million), up from a loss of 5.6 billion kronor in the same period a year ago.

The group said net sales increased by 27 percent to 68.8 billion kronor ($9.3 billion) from 54.0 billion in the second quarter 2009.

The profit sharply beat analysts’ expectations, despite the fact that sales were weaker than forecast.

Sydbank analyst Morten Imsgard said the report was very strong overall, showing the positive effects of previous cost-cuts, and that the construction equipment division performed particularly well.

“They have really pulled it off and surprise with very impressive margins in that business,” he said. “We can really see the cost cutting effect coming through in the smaller divisions.”

Imsgard added it was also positive for the future to see demand pick up in the North American truck market.

Shares in Volvo rose by nearly 3 percent to 89.85 kronor ($12.18) in early Stockholm trading.

Volvo’s CEO Leif Johansson said the pickup in sales helped improve the company’s profitability, combined with strict cost control and “a good productivity development.”

“The pace in the recovery in demand has been rather moderate, which is positive as it gives us a good opportunity to continue with the activities that contribute to further increasing productivity and efficiency,” Johansson said.

He added that the sales trend had been particularly strong in Asia and South America, while volumes in Europe, North America and Japan are still at low levels from a historical perspective.

“We anticipate that the demand for new trucks in North America will continue to rise during the second half of this year and that the gradual increase in Europe will also continue,” he said.

Johansson reiterated his previous forecast that the European truck market will growth some 10 percent in 2010, while the North American market growth is expected at between 20 and 30 percent.

Online: www.volvogroup.com