Volvo first-quarter earnings fall on North America truck market

[FRANKFURT] Volvo AB's first-quarter operating profit fell 3 per cent as weak US economic growth hurt the Swedish truckmaker's North American orders and deliveries.

Earnings before interest and taxes, and excluding capital gains restructuring costs, declined to 4.46 billion kronor (S$740 million) from 4.6 billion kronor a year earlier, the Gothenburg- based manufacturer said Friday in a statement. Profit exceeded the 3.92 billion-krona average of eight analyst estimates compiled by Bloomberg. Revenue fell 4.1 per cent to 71.7 billion kronor.

The company, which owns the Mack Trucks brand in the US, outlined plans in February to scale back North American and Brazilian production in the first quarter following a drop in orders at the end of 2015.

US gross domestic product growth probably slowed in the quarter versus the last three months of last year, according to Federal Reserve forecasts, with the Atlanta Fed estimating expansion could have been as low as 0.1 per cent.

"Volvo has repeatedly stated in the past few quarters that it believes it is better prepared than before to handle the long-awaited US truck downturn, and we believe this is correct," Anders Trapp and Daniel Schmidt, analysts at SEB AB, wrote in a report before the company released earnings.

"However, we believe that such a dramatic decline has been difficult for Volvo to handle in terms of profitability." The company's truck orders fell 12 per cent, dragged down by a 54 per cent plunge in North America. Global deliveries slid 5 per cent, with vehicle sales in the region dropping 33 per cent.

BLOOMBERG