Volvo second-quarter profit jumps on Europe deliveries, Krona

[MUNICH] Volvo AB's second-quarter operating profit surged 82 per cent as the truckmaker delivered more vehicles in Europe and North America and benefited from a decline in Sweden's currency.

Earnings excluding interest, taxes, reorganization costs and a gain from a venture stake disposal jumped to 5.98 billion kronor (S$956.6 million) from 3.28 billion kronor a year earlier, Gothenburg, Sweden-based Volvo said in a statement. Sales rose 17 per cent to 84.8 billion kronor, and the operating margin widened to 7.1 per cent of revenue from 4.5 per cent.

Volvo is restructuring following a push by investor Cevian Capital AB to streamline operations and improve profitability. The truckmaker ousted Olof Persson as chief executive officer in April and named Martin Lundstedt, head of competitor Scania AB, to replace him as of October. The manufacturer has pulled out of a truckmaking venture in India with Eicher Motors Ltd. while setting one up in China with Dongfeng Motor Group Co.

"From here on in, the picture for Volvo will probably be less rosy," Hans-Peter Wodniok, a Frankfurt-based analyst at Fairesearch GmbH & Co KG, said before the Swedish company released figures.

"There's a boom in the US truck market and Europe is doing OK, but China is weak and South America is a disaster."

AMERICAN GROWTH

Truck deliveries rose 4 per cent, with demand jumping 19 per cent in both Europe and North America, Volvo said. Orders fell 6 per cent. The company cut full-year forecasts for the Chinese and Brazilian truck markets. It now expects industrywide deliveries of 620,000 heavy vehicles in China, an 8.8 per cent reduction from its earlier prediction, and 40,000 in Brazil, a cut of 27 per cent.

The operating profit number compares with a 5.8 billion- krona estimate by analysts at UBS, who predicted a 7 per cent operating margin. The figure doesn't include a 2.14 billion- krona gain from the sale of Volvo's remaining stake in Eicher. Earnings were helped by 1.8 billion kronor in currency effects, the truckmaker said.

Volvo is completing a business review by the end of this year. It already outlined plans in April to find a partner for information-technology operations, including that business's external work.

BLOOMBERG