Volvo Credits Truck, Construction Vehicle Sales for Earnings Jump

Thu July 24, 2003 - National Edition

STOCKHOLM, Sweden (AP) Swedish vehicle maker Volvo said July 24 that second-quarter netprofit jumped 59 percent thanks mainly to cost savings and strong sales of new trucks and construction vehicles. But the company was cautious about the outlook for the rest of 2003.

The earnings announcement excluded the Volvo’s car division, which was sold to the U.S.-based Ford Motor Co. in 1999.

The Goteborg-based company posted a net profit of 1.72 billion kronor (US$210 million) for the three months ending June 30, compared with a profit of 1.08 billion kronor for the same period last year.

Revenue slipped 10 percent to 44.6 billion kronor (US$5.4 billion) from 49.3 billion kronor a year ago.

”After great uncertainty in the first quarter concerning the market trend, there are now signs of stabilization. Neither the situation in the Middle East nor the outbreak of SARS had any further negative impact on our primary markets, and we are seeing stabilization in several of our operations,’ Chief executive Leif Johansson said.

Johansson said the biggest boost came from cost-cutting and improved sales in Volvo’s truck business, which accounts for about 35 percent of revenues.

Volvo’s share of the heavy truck market in Western Europe improved to 28.3 percent through May from 27 percent a year earlier, thanks mainly to high deliveries of Volvo truck brands in the fourth quarter of 2002 and in the first quarter of 2003. Its market shares in North America through June improved to 10 percent from 7.9 percent, it said, due mainly to high demand for its Volvo VN truck model.

”While we do see signs of a more stable market trend, we feel it is too soon to change our outlook for the full year. We still expect a market of approximately 200,000 heavy trucks in Europe and 170,000 in North America. However, we also expect that the total market is more likely to differ from the forecast on the positive side rather than the negative,’ Johansson said in a statement.

The Construction Equipment business, the second-largest Volvo unit, saw profits decline slightly.

After initially rising early in the day, Volvo shares fell 0.5 percent to 193.5 kronor (US$23.63)in afternoon trading in Stockholm.