Volvo 4Q profit rises 9,8%

By Anastasia Tomazhenkova: Volvo AB, Swedish truckmaker, announced its fourth quarter net income rose 9.8%, helped by continued strong growth in Asia and Europe.

Photo: Volvo 4Q profit rises 9,8%

The Goteborg-based company claimed that almost all its markets were growing except for North America and Japan.

Leif Johansson, Volvo Chief Executive, reported his company had entered 2008 with an overall good demand in its main markets "outside North America."

"We have good stability and high profitability in Europe," he said, adding that the company is expanding its production capacity, "particularly against the background of very high demand in Eastern Europe."

Since the company's acquisition of Nissan Diesel, Asia has also grown to become the company's second largest truck market, Johansson said.

But demand was weaker in North America, he said, where many companies invested in new trucks before new emission regulations came into effect and do not yet need to renew their fleets.

Volvo posted a fourth-quarter net profit of 4.06 billion kronor (633 million dollars), up from 3.7 billion kronor in the year-ago period.

For the whole of 2007, however, net profit fell to 14.9 billion kronor (2.3 billion dollars), from 16.27 billion kronor in 2006.

Sales for the quarter surged to 84.56 billion kronor (13 billion dollars), compared with 67.63 billion kronor in the same three months the year before.

The operating margin dropped to 6.8 percent in the quarter, from 7.6 percent in the year-ago period, which it blamed on integration expenses from acquired companies, the market development in North America as well as a 370 million kronor (57.28 million dollars) provision for engine-related warranty expenses - also in North America.

Despite the bottom-line increase, the result still missed market expectations, and the share fell almost 4 percent to 82.75 kronor (12.93 dollars) in Stockholm.

Anders Trapp, an analyst at Enskilda Securities, said shrinking margins were largely to blame for the market reaction as well as declining truck order bookings in Europe.

"All other areas were pretty much better than expected, so it's Europe that is scaring people," he said.

In its outlook for the year, Volvo said it expects the European truck market to grow by 5 percent to 10 percent compared with 2007.

The North American truck market is harder to assess, it said, and is expected to "be on about the same level as in 2007."

Volvo has more than 100,000 employees. It sold its car division to U.S.-based Ford Motor Co. in 1999.