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Volvo releases brake on special dividend after good Q4 results

Stockholm

SWEDISH truckmaker Volvo said on Wednesday that it would pay a special dividend of five Swedish crowns (S$0.74) per share after reporting fourth-quarter profit marginally ahead of expectations and repeating its 2019 market demand outlook.

Operating income, adjusted for a seven billion-crown provision relating to an emissions issue, jumped to 10.60 billion from 7.33 billion a year ago, slightly ahead of the 10.47 billion forecast in a poll of analysts.

Volvo has been buoyed by robust demand in recent years as truck buyers renew fleets starved of investment during the last downturn but ignited worries in October that markets might have peaked with a forecast of slower demand for trucks in both Europe and China in 2019.

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However, the company on Wednesday reiterated its markets outlook for Europe, China and North America, saying that it expected European demand to be on "historically good levels" and North American economic growth to support the regional truck market.

The company warned this month that its fourth-quarter operating income would be hit by a seven billion provision to cover costs stemming from some of its engines running the risk of exceeding emission limits due to a fault with externally sourced catalytic converters.

Yet, it proposed dividends worth 10 crowns per share for 2018. Analysts polled had expected an ordinary dividend of 4.97 crowns, although the expectations for a special payout were high given Volvo's strong cash generation over the past year.

Brokerage Kepler Cheuvreux had forecast a special dividend of five crowns in a note on Jan 10. REUTERS