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Scania sees profits rise while orders sag

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12:02 CEST+02:00
Swedish truckmaker Scania, which is in the process of being acquired by Volkswagen, on Monday posted strong first quarter results and increased sales while flagging a sharp fall in new orders ahead.

For the January-March period, the truckmaker reported a net profit of 2.5 billion kronor ($418 million), up 21 percent from a year earlier.

"Scania is continuing to grow with strong profitability, primarily driven by higher vehicle and service volume and increased prices," Scania chief executive Leif Östling said in an earnings statement.

Sales for the quarter grew 15 percent to 22 billion kronor, while operating income jumped 19 percent to 3.6 billion kronor and the operating margin rose to 16.4 percent from 15.9 percent in the same quarter last year.

Scania said sales grew 9.0 percent in its main market, Western Europe, 26 percent in the rest of Europe, 34 percent in Latin America and 33 percent in Asia. However, sales had slipped 12 percent in the remaining markets.

Order bookings in the first three months of this year were down 27 percent to 20,226 vehicles compared to the "exceptionally strong" year-ago quarter, the company said.

The truckmaker meanwhile said its truck bookings in Western Europe had taken a 40 percent nose-dive "due to a general downturn (and) the weakening of the construction market in southern Europe."

Despite the slowdown in new bookings, Scania said it was having trouble keeping up, with delivery times tripling to between nine and 12 months from the normal time lapse of between three and four months.

"This, in combination with uncertainty about economic developments, is causing customers in Europe to hold off on submitting orders," the company acknowledged.

Nevertheless, Scania said it still planned to increase its annual production to 90,000 vehicles by the end of this year and to 100,000 trucks by the end of 2009.

"Our flexibility in production is increasing and we are well prepared for a continued volume upturn but also for possible lower demand," Östling said.

The financial outlook for the next two years remained unchanged, Scania said, reiterating that it anticipates annual sales to grow on average by more than 10 percent through the end of 2009, and operating margins to tick in at between 12 and 15 percent.

At the beginning of March, German carmaker Volkswagen announced it had gained control of 68.60 percent of the voting rights and 37.73 percent of the capital in Scania after buying shares from the Wallenberg family for €2.9 billion ($4.4 billion).

At the end of March, Scania counted 35,565 employees, up from 33,697 on its payroll a year earlier.

Following Monday's report, the Swedish truckmaker saw its stock price slip 2.55 percent to 124 kronor a share on the Stockholm stock exchange which was up 0.63 percent.

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