Global truck maker Volvo's Q3 core profit tops forecast

STOCKHOLM: STOCKHOLM: Sweden's Volvo forecast another year of growth in the European heavy-duty truck market but slowing or flat sales in most other major markets next year, while sweeping cost cuts drove a bigger than expected rise in third-quarter core profit.

Volvo, a rival of German Daimler and Volkswagen's truck brands, said the European market was seen growing to 275,000 trucks in 2016 from an expected 265,000 this year, the highest level since before the 2008 FINANCIAL crisis.

Sweden's biggest company by sales and top private sector employer said adjusted operating profit rose to 5.1 billion crowns ($603.9 million) from a year-ago 2.9 billion, beating a mean forecast of 4.6 billion in Reuters poll of analysts.

"The work on the efficiency program is running according to plan measured in local CURRENCIES," the company said.

Chief Executive Martin Lundstedt, in his second day on the job in the wake of the April sacking of Olof Person amid impatience over progress on a 10 billion crown cost cutting scheme, faces several challenges even as Europe improves.

The group's construction equipment business, which accounts for a fifth of group sales, is suffering from a deep slump in a Chinese demand as economic growth slows while truck sales in Latin America's biggest economy, Brazil, have also tumbled.

Volvo, which sells trucks under the Mack, Renault and UD brands as well as its own name, said order intake of its trucks fell 15 percent in the quarter to come in below the mean analyst forecast for a 12 percent decline.

Lundstedt also needs to reduce complexity across a sprawling group, stemming from two decades of empire building, that has weighed on its share price and held back profitability versus nimbler rivals such as VW's Scania, which he left to join Volvo.

Volvo has sold its aero engine unit and only this week inked a deal to sell its external IT business to placate investors, but eyes have now turned to its construction gear arm though its Chinese woes may hamper any divestment in the short term.

The predicament was underscored as Volvo cut its outlook for the Chinese market for construction equipment to a decline of between 45-55 percent this year and forecast a continued slide in 2016. ($1 = 8.4455 Swedish crowns)

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