Volvo Upbeat About Europe, Cost Cuts Increase Profit

Volvo has forecast growth in the heavy duty truck market in Europe for 2016 but flat or slowing sales in the majority of other big markets after it reported a rise in its core profit that was bigger than had been expected for the third quarter helped by cuts in costs.

The outlook might help to assuage the concerns of a slowing global economy and the regional instability in places such as Greece and Ukraine derailing a recovery that started this year.

Volvo, a rival the other truck brands from Volkswagen and Daimler, said it was expecting the market in Europe to increase to over 275,000 trucks during 2016 from it expected count this year of 265,000, which would be the highest level its seen since prior to the financial crisis in 2008.

For its third quarter, the adjusted operating profit was up to 5.1 billion crowns equal to $604 billion from 2.9 billion last year, said Sweden’s largest business by sales and its top employer in the private sector.

That was higher than the forecast by analysts of 4.6 billion. Shares of Volvo, which lost 25% of their overall value the last six months amidst a drop in cyclical stocks, were up 0.4% in early Friday trading in Stockholm.

Carnegie the investment bank said in a note that it would likely increase estimates for the truck maker by 3% to 5% due to its quarterly earnings.

Martin Lundstedt the CEO at Volvo in just his second day at the helm, following the sacking in April of Olof Person amidst impatience over the progress on a cost-cutting plan of 10 billion crowns, is facing a number of challenges even as improvement is being seen in Europe.

The construction equipment arm of Volvo, which represents 20% of the sales for the group, is suffering from a slump in demand in China while its truck sales across Brazil have also tumbled due to a current recession in the South American nation.

Volvo truck sales are under its own name as well as Renault, Mack and UD brands, said the order intake of its own trucks dropped 15% during the third quarter, which is worse than the decline of 12% forecast by industry analysts.

 

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