Record losses for Sweden’s Volvo Group

Swedish truck maker Volvo Group on Tuesday reported its largest-ever quarterly loss amid as massive write-offs and weak demand took their toll on profits.

Record losses for Sweden's Volvo Group

The world’s second-biggest truck maker said it made a net loss of 5.57 billion kronor ($722 million) in the period from April to June, down from a net profit of 5.15 billion kronor the same time a year ago.

Credit losses, personnel cutbacks and the costs of a deal struck with the United Auto Workers Union over healthcare, deepened its losses by 3.2 billion kronor, Volvo said in a statement.

The agreement with the US union representing auto workers absolves Volvo’s Mack brand of responsibility for healthcare benefits for retired employees.

Volvo chief executive Leif Johansson said the company was also hit by weakening demand for its heavy goods and buses.

“The second quarter of 2009 remained difficult in terms of earnings in the wake of the exceptionally rapid decline in demand that followed the crisis in the financial system,” Johansson said in the earnings statement.

He said that the truck market “remains weak” in Volvo’s key markets of Europe, North America and Japan and reiterated the company’s industry forecast for the rest of the year.

“We maintain our assessment that the total European market for heavy trucks will be at least halved in 2009 compared with 2008 and that the North American will decline by 30 percent to 40 percent,” he said in the statement.

Volvo’s net sales fell by a third in the second quarter compared with the same period a year earlier.

The Swedish group’s net sales fell by 32.7 percent to 53.9 million kronor in the April to June period.

Adjusted for currency changes and other factors, the decline was 45 percent.

Evli Bank analyst Michael Andersson told Dow Jones Newswires that there were some positives in Volvo Group’s second-quarter performance, pointing to an increased cash flow in the company’s industrial operations, which includes its truck and bus divisions.

“The worst bleeding has been stopped, that’s clear. I wouldn’t be surprised if the market reacts positively,” Andersson was quoted as saying.

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.

In morning trading on the Stockholm exchange, shares in Volvo Group were up 1.89 percent to 53.75 kronor in an overall market up by 3.74 percent.

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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.