Volvo Group has reported strong third quarter financial results on the back of the continuing strong performance from its heavy truck division.
The company’s net sales increased by 15% to SEK73,321m during the third quarter of 2011 and operating income was up 17% to SEK5,774m.
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Income for the period was put at SEK3,895m, 36% ahead of last year.
Currency-adjusted sales in the company’s trucks operations rose 22% to SEK47.7bn. Operating income in the trucks unit increased to SEK3,962m and the operating margin improved to 8.3% (6.6% last year). The delivery rate remained high, as did capacity utilisation, Volvo said.
Volvo said that its order intake of 60,000 trucks and deliveries of 55,000, meant that it continued to build its order book. On average, delivery schedules are approximately ten weeks in Europe and longer in North America, which ‘means that we are basically fully booked in Europe for the current year and are now booking orders in North America for the beginning of 2012’.
Reducing output in Europe
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By GlobalDataHowever, the company said that in Europe it has noted ‘a slight slowdown recently’. Production rates, which were slightly increased in August, are currently somewhat higher than the order-intake rate, ‘which is why we are preparing to reduce manufacturing rates in the European production system in the beginning of next year’. Southern Europe and parts of Eastern Europe are weaker than Northern Europe and Russia, Volvo said.
Volvo also warned that the total market for 2012 is ‘difficult to assess due to the uncertain macro-economic situation’ and forecast that the European market for heavy-duty trucks ‘will show a slight decrease in the region of 10% during 2012’.
US market to grow in 2012
The company also reduced its total market forecast in North America for this year to about 210,000 heavy-duty trucks (earlier 230,000-240,000); however it said it anticipates an increase in demand next year.
“Our positive view of demand in 2012 is based primarily on the fact that it is becoming uneconomical to keep parts of the old truck fleet in operation compared with the new trucks we launched in 2010 which have significantly lower fuel consumption. We believe that the total market for heavy-duty trucks in North America will grow in the range of 20% in 2012,” said Olof Persson
President and CEO of AB Volvo.
Reconstruction boost in Japan
The company also noted that in Japan, signals of higher demand are also becoming increasingly more visible as reconstruction work begins, following the earthquake and the tsunami earlier this year. For the full year the market is expected to amount to about 25,000 heavy-duty trucks. For 2012, the total market for heavy-duty trucks is expected to increase by about 20% after a few very weak years.
“I am pleased to see that the introduction of UD’s new medium-duty truck Condor has so far been very successful and with the new models we now have a market share of slightly less than 20%, about 10 percentage points more than we had with the old medium-duty models,” Persson said.
Positive outlook for Brazil
In Brazil, Volvo has launched a Volvo VM, which it said will contribute to ‘strengthening our position in the important distribution segment’. Volvo was upbeat on prospects for Brazil. Tougher emissions rules are expected to weaken the market early on in 2012, but Volvo believes that ‘it will subsequently recover assisted by the continued favourable economic trend in the country. We expect a total market of about 120,000 heavy-duty trucks for this year and a slight decline of about 10% for the full year 2012’.
Ready to flex
Volvo noted that the development in the world economy is ‘difficult to assess’ and that a deterioration ‘may change our expectations for next year’. But it said that with 17% of its workforce on short-term contracts, ‘we are prepared to quickly implement the measures required to adapt to potential changes in demand’.
