Losses at Volvo as demand hits the skids

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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US and Japan fuel surge for Volvo trucks

Sweden's Volvo, the world's second-largest maker of trucks, said Friday it saw a spike in profits in the third quarter, boosted by thriving sales in the US and Japanese markets.

US and Japan fuel surge for Volvo trucks
Ed Carbaugh prepares to install parts on a truck engine on an assembly line at Volvo Trucks' powertrain manufacturing facility in Hagerstown, Maryland, March 2014. Photo: Patrick Semansky/AP

Net profit increased eight percent to 1.5 billion kronor ($206 million), while sales rose 3.6 percent to 67.2 billion kronor, above expectations by analysts who had forecast 63.8 billion kronor.

"The market development in the third quarter followed the overall direction from the second quarter with good momentum in North America and Japan," chief executive Olof Persson said in a statement.

At the same, there was "continued slow development in the emerging markets in South America and Asia," he said.

In Europe, the company had seen increased uncertainty in many markets based on the political and economic situation, which has led to the positive momentum from the first half of the year leveling off, the company said.

One year ago, the then struggling Volvo Group announced the elimination of 2,000 jobs of managers and consultants.

For 2015, the company predicted the market for heavy-duty trucks would be at the same level as in 2014 in Europe, Japan and China, while higher in North America and India.