STOCKHOLM--Swedish commercial vehicle maker Volvo AB (VOLV-B.SK)
said Friday it will cut costs further while it reported an increase
in third-quarter net profit as good momentum in North America and
Japan offset slow development in the emerging markets in South
America and Asia.
Volvo said the North American market for heavy-duty trucks is
expected to increase to about 270,000 trucks in 2014, up from a
previous forecast 260,000 trucks. For 2015, the market is expected
to show continued growth to a level of about 280,000 heavy-duty
trucks.
The world's second largest truck maker reported a net profit of
1.55 billion Swedish kronor for the July to September period, up
from 1.42 billion a year ago. Sales rose to SEK67.22 billion kronor
from SEK64.88 billion and operating income was SEK2.91 billion
kronor, up from SEK2.50 billion a year ago, with an operating
margin of 4.3%, up from 3.9%.
"The group's profitability is not on a satisfactory level and it
is clear that we still have a lot of hard work ahead of us," Chief
Executive Olof Persson said in a statement.
Despite being a market leader Volvo has trailed behind
competitors, like Volkswagen (VOW.XE) owned Swedish peer Scania,
with regard to profitability and the company is now in its second
year of overhaul to improve margins. Volvo is targeting a net
improvement in the group earnings before interest and tax margin of
3 percentage points by the end of 2015, but job cuts and a
reshuffling of operations have so far yielded little result. For
the third quarter, Volvo reported an operating margin in its truck
business of 4.9%, compared with Scania's 9.6% in the same
period.
Volvo is now implementing further cost-reduction activities in
its construction equipment business, truck sales and
information-technology operations. Cost reductions are expected to
result in full-year savings of SEK10 billion in 2016 compared with
the full year 2012.
Volvo generates about two thirds of its revenue from its truck
business where it sells vehicles under the Volvo, Renault, Mack and
UD brands, the rest springs from the company's bus, marine engine,
construction equipment and financial operations. Volvo's
construction equipment business was hit this quarter by a weakening
construction market in China.
The group, which generates 39% of its sales in Europe, 23% in
North America, 20% in Asia and 11% in South America, said that for
2015 it forecasts that the market for heavy-duty trucks will be on
the same level as in 2014 in Europe, Japan and China, on a higher
level in North America and India, and on a lower level in
Brazil.
For construction equipment, it forecasts the Chinese market will
continue to remain down through the rest of the year and in 2015.
The European market is expected to be on the same level and for
North America we forecast a higher level.
Shares closed at SEK77.90 Thursday.
Write to Christina Zander at christina.zander@wsj.com
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