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Volvo sees Q2 profits fall on lower EU, Brazil sales

North American truck sales were boosted by an "ongoing need to replace the aging commercial vehicle population," Volvo said.

By LOUISE NORDSTROM
The Associated Press

7/25/2012

STOCKHOLM — Swedish truckmaker AB Volvo on Tuesday saw its second-quarter net profits fall by nearly 5 percent, mainly on the back of lower truck sales in Brazil and Europe and higher investment costs related to future products.

Net profit in the three-month period came to 4.86 billion kronor ($697 million), down from the 5.12 billion kronor recorded in the same three months a year ago.

The Goteborg-based group noted its strongest-ever sales in the quarter however, reaching 83.9 billion kronor from 78.96 billion kronor, but the trend was not able to offset neither the rising costs or the tighter operating margin, which fell to 8.7 percent from 9.7 percent due to a change in its market mix.

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Volvo CEO Olof Persson said the company's biggest unit, the truck operations, was particularly affected by this, with a higher proportion of its sales going to the North American market in the quarter, and less to the Brazilian and European markets.

While demand in Europe, particularly in the southern part of the continent, has been hit by the financial turmoil, Brazil was hurt by a transition to new emission rules and a slowdown in the country's economy. North America on the other hand was boosted by an "ongoing need to replace the aging commercial vehicle population." In Japan, the need for trucks for the reconstruction work linked to last year's earthquake in Fukushima boosted demand.

To adjust to the situation, Volvo downgraded its 2012 market forecast for heavy-duty trucks in Brazil to 90,000 from105,000. However, it reiterated its outlook for Europe, North America and Japan.

Persson, whose company sold its Volvo Aero unit in the quarter, said the move will allow Volvo to focus more on its main operations, adding it is likely to lead to expansion in some areas.

"We will free up capital that can be utilized to expand our core operations, notably in growth markets such as Asia," he said.

Kevin Jones of The Trucker staff can be reached for comment at kevinj@thetrucker.com.

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