Volvo raises forecasts for US and Europe

Volvo has raised its forecasts for the European and North American truck markets this year in a sign of confidence that economic recovery is picking up.

The Swedish truckmaker said the rebound in western markets had combined with surging growth in developing countries to increase orders 40 per cent in the first quarter, with operating profits and margins hitting record levels.

“Demand for trucks continued to improve across the board,” said Leif Johansson, chief executive. “Our mature markets are recovering, with sharp sales increase and favourable profitability in our operations in the emerging markets of Brazil, China and India.”

Volvo, the world’s number two truckmaker by sales after Daimler of Germany, suffered the worst downturn in its history after the global financial crisis but has bounced back strongly over the past year, helped by emerging market growth.

Recovery in Europe and North America, the company’s two biggest markets, has been slow and uneven but the pace has picked up this year, with European orders up 46 per cent year-on-year in the first quarter, while North American orders more than tripled.

Volvo said it expected 230,000-240,000 heavy trucks to be sold in both the European and North American markets this year, up from its previous estimate for 220,000.

Scania, Sweden’s other big truckmaker, also reported a sharp increase in first-quarter net profits to SKr2.51bn ($412m), up by nearly three-quarters from SKr1.42bn last year. However, the 19 per cent increase in its order intake was more subdued than Volvo’s and the company, majority-owned by Volkswagen of Germany, struck a more cautious tone on the European outlook.

There was no update given on the talks to merge Scania with MAN, the German truck and engine maker 29.9 per cent-owned by Volkswagen.

Mr Johansson said the impact of the Japanese earthquake on Volvo would be “relatively limited, but uncertainty remains high”. The company’s Japanese unit, UD Trucks, was shut down for more than two weeks after the March disaster.

First-quarter net profits were SKr4.18bn, more than double last year’s SKr1.72bn, on sales of SKr71.58bn, up 22 per cent from SKr58.62bn.

The stock rose 2.46 per cent to SKr116.40 after Wednesday’s results.

Volvo last month named Olof Persson, head of the company’s construction equipment business, to become its next chief executive when Mr Johansson retires this summer after 14 years in charge. Mr Johansson is to become chairman of Ericsson, the Swedish network equipment maker.