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Losses at Volvo as demand hits the skids

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10:10 CEST+02:00
Swedish truck maker AB Volvo reported mounting losses for the first quarter on Friday as demand collapsed in the wake of the financial crisis.

The Gothenburg-based company, the world's second-largest truck maker by sales, posted a net loss of 4.23 billion Swedish kronor ($514 million) for the three months ending March 31st, down from a profit of 4.20 billion kronor in the corresponding period of last year.

The loss was almost double the amount forecast by analysts in a poll conducted by Dow Jones Newswires/FactSet and shares in the group fell 9.3 percent to 49.90 kronor at the start of trading.

"Demand weakened sharply in all markets during the first quarter," chief executive Leif Johansson said in a statement, adding that the company was slashing costs in response to a fall in demand.

Volvo announced 1,500 job cuts on Wednesday.

Revenue fell 27 percent to 56 billion kronor from 76.56 billion in the same period last year. The group swung to an operating loss of 4.53 billion kronor, from a 6.49 billion kronor profit last year.

Order intake for trucks "continued to be very weak" in the quarter, Volvo said. It said the net order intake, which takes into account cancellations, plunged 65 percent compared to the first quarter of 2008.

In Europe, Volvo's biggest truck market, net orders for trucks dropped 71 percent to 7,494 vehicles. In Asia, the second-biggest market, net orders fell 70 percent to 5,712 trucks, and in North America they fell 49 percent to 2,869.

Johansson said that the company would cut production in the second quarter as a result.

"To further reduce inventories and protect prices on our products, which is key for our long-term profitability, we will further reduce production rates in most plants during the second quarter," he said.

The chief executive said moves taken by governments and central banks to stimulate the world economy could help boost demand for Volvo's products.

"Substantial economic stimulus measures put in place combined with interest rate cuts by central banks around the world, will over time contribute to drive demand for our products," he said.

Volvo Group's main area of business is building heavy goods vehicles and buses, but it also develops engines and construction equipment.

The company's truck division includes several brands: Volvo Trucks, Renault Trucks, Nissan Diesel and Mack.

It is separate from Volvo Cars, which is owned by the US automaker Ford.

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