Volvo hikes North American outlook after Q2 profit

[STOCKHOLM] Swedish truck maker Volvo reported a slightly bigger than expected rise in second-quarter core earnings on Wednesday and lifted its forecast for the North American truck market this year as order intake picked up across the group.

The commercial vehicles rival of Germany's Daimler and Volkswagen has seen robust demand and years of sweeping cost cuts lift profitability, boosting its shares by nearly 40 per cent this year alone.

Adjusted operating profit at the group for the quarter rose to 8.54 billion Swedish crowns (S$1.40 billion) from a year-ago 6.13 billion to come in just ahead of a mean forecast of 8.48 billion in a poll of analysts.

With a 10-billion-crown cost-cutting drive safely in the rear-view mirror, the market has played into Volvo's hands with European demand for heavy-duty trucks at historically high levels and growing signs of an upturn in North America.

Order intake of trucks at the group, which sells trucks under brands such as Mack, Renault and UD Trucks as well as its own name, rose 22 per cent in the quarter, beating the 12 per cent increase seen by analysts.

"Recent trends on the truck markets continue with good demand in Europe, including a distinct recovery in Russia, and a gradual improvement in North and South America," the company said in a statement.

Sweden's biggest corporation by revenue raised its 2017 sales outlook for the North American heavy truck market to 225,000 trucks from 215,000 while keeping unchanged its guidance for robust industry-wide sales in Europe.

Volvo is the first of Europe's major truck makers to release second-quarter results, with Daimler and Volkswagen, as well as Iveco trucks maker CNH Industrial all due next week.

US Paccar Inc also reports next week.

Just as sales of commercial vehicles has firmed, a recovery in demand in China has helped bolster order intake and profits at Volvo's construction equipment arm, which accounts for roughly a fifth of group turnover, after several weak years.

Volvo said the adjusted operating margin at Volvo Construction Equipment jumped to 13.3 per cent from a year-ago 5.9 per cent, accounting for much the narrow beat on group earnings in the second quarter.

REUTERS