Volvo makes record third-quarter profit

STOCKHOLM - Volvo, the world's second biggest truck maker, reported a third-quarter profit ahead of market expectations on Tuesday and increased its market demand outlook for key regions this year, but said markets in 2006 would be flat.

It made a pretax profit of 4.02 billion Swedish crowns ($NZ724.99 million), up from 1.52 billion crowns in the same period last year and beating the average forecast of 3.85 billion crowns given in a Reuters poll of 17 analysts. Last year's result was hit by a 1.31-billion-crown writedown of bus assets.

"The single most important aspect is that the market looks stronger this year, which is positive, but at the same time they see a flat market in the United States next year, and that is a little bit of a disappointment," West LB analyst Fredrik Westin said.

"The share (price) will probably not move very much, mainly due to the US outlook dampening enthusiasm."

The Swedish firm increased its demand outlook for its biggest markets, saying it now expected around 5 percent growth in the European market and about 25 percent growth in North America this year. It had previously expected market growth of zero to 5 percent and around 20 percent respectively.

"It looks a bit better than expected overall, and they are cranking up the outlook somewhat," an analyst said, asking not to be named.

"The share (price) should rise somewhat as trade opens."

In an otherwise subdued auto market, truck makers have profited from strong demand in North America, Asia and Europe in recent quarters, propelling Volvo to its highest ever full-year profit last year and its best third quarter.

Sales rose to 52.53 billion crowns from 46.02 billion a year ago to come in slightly above the average forecast of 51.59 billion given by analysts.

But prospects have dimmed somewhat for truck makers in recent months amid some signs of a slow-down in demand, and Volvo said orders of trucks fell 1 percent in the third quarter after a 10 percent drop in the previous quarter.

"To date, our customers have succeeded in transferring the increased oil prices to their customers, but rising transport costs increase the uncertainty about market development," the company said in a statement.

"Our best estimate today is that the total market in 2006 in both North America and Europe will be on the same level as 2005," it added.

Volvo, which besides trucks also makes construction equipment, buses and engines, repeated its outlook for the market for construction growing by 5 to 10 percent in North America and by around 5 percent in Europe this year.

- REUTERS