Volvo Returns to Profit in Q2 as Demand Picks Up

Tue July 27, 2010 - National Edition

STOCKHOLM (AP) 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 July 22.

The company, based in Goteborg, southern Sweden, said net sales increased by 27 percent.

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

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 also will continue,” he said.

Johansson reiterated his previous forecast that the European truck market will