February 6, 2013 1:45 pm

Volvo profits hit as truck orders slump

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Volvo Group warned that the first quarter of this year would be difficult after it reported a drop in operating profits of 84 per cent in the last three months of 2012 as demand for trucks and construction equipment slumped.

Olof Persson, chief executive of the Swedish group, said that he expected economic growth globally to “gain momentum” during 2013 but that profitability in the first quarter would be weighed down by low production and high spending on new products and research and development.

“The first quarter of 2013 will also be difficult as a result of the low order intake in many markets during the fourth quarter of 2012,” he said.

Volvo last week said it would overtake Daimler to become the world’s largest maker of heavy-duty trucks after taking a 45 per cent stake in China’s main manufacturer of commercial vehicles.

But the Gothenburg-based company, which is also a big maker of construction equipment, has struggled to maintain profitability in its notoriously cyclical business areas.

Operating profit in the fourth quarter fell from SKr6.96bn a year earlier to SKr1.12bn ($180m) while sales dropped 17 per cent to SKr72bn.

Demand in Volvo’s truck division was lower worldwide, with deliveries down 17 per cent in South America and Asia and 23 per cent in North America. Europe fell 10 per cent.

The company said that forecasts for this year were difficult to make but stuck to its earlier estimate of unchanged sales in Europe and North America. Order intake in the quarter fell 10 per cent but that was better than analysts had predicted, and also an improvement on the previous three months, helped by stronger demand from Brazil.

Volvo has been cutting production and stock levels aggressively to avoid being caught out as it was in the 2008-09 financial crisis when net orders went negative for several months.   

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