STOCKHOLM (Reuters) - Good demand for Volvo’s (VOLVb.ST) trucks in the face of macroeconomic uncertainty led to record second-quarter operating profit and boosted its shares on Friday.
A soft point was construction equipment, where it downgraded its market outlook due to a slowing Chinese market.
Volvo, the world’s second largest truck maker after Germany’s Daimler AG (DAIGn.DE), was slammed by a sudden demand stop during the global crisis, but has boomed in the pick up.
“During the second quarter, the Volvo Group’s sales continued to grow as an effect of a continued recovery in the group’s mature markets and continued strong demand in emerging markets,” Chief Executive Leif Johansson said on Friday.
Johansson, due in September to leave the company after 14 years at its helm, said group sales were now at the same level as before the financial crisis, with profitability at its highest level so far.
The Swedish group, which makes heavy-duty trucks under the Renault, Mack, UD Trucks and Eicher brands, reported operating profit rose 60 percent to 7.65 billion crowns ($1.20 billion), compared with a forecast 7.67 billion in a Reuters poll.
Its shares opened up about 5 percent.
In contrast, Swedish rival Scania SCVb.ST saw weaker-than-expected margins bite into quarterly earnings on Thursday.
Volvo repeated a forecast for the truck markets in Europe and North America to amount to 230,000-240,000 units each this year.
“This is better than expected,” said Handelsbanken Capital Markets analyst Hampus Engellau, pointing in particular to the operating profit margin in the trucks division of 10 percent, which beat the Reuters poll forecast of 9.5 percent.
“Order intake is a bit better than expected in Europe and North America and a bit worse in Latin America, but overall good,” he added.
He said the confirmed truck forecast was “good when considering the macro factors.”
Volvo expected Japan to recover from a 26 percent fall in the first half after the March earthquake and tsunami, with the full-year market seen down 6 percent.
The group downgraded its outlook for the market of its second-largest division, construction equipment, to growth of 15-25 percent from 20-30 percent.
“The Chinese market has slowed down as a consequence of measures by the government to curtail inflation,” it said, adding it had boosted its position as Chinese market leader.
One analyst, who declined to be named, played down the impact of the construction equipment downgrade.
“It was pretty well known that China was not going as well people believed a quarter ago,” the analyst said.
($1=6.391 Swedish crowns)
Additional reporting by Simon Johnson, Mattias Lvkvist, Sofie Brange; Editing by Dan Lalor