STOCKHOLM — Swedish truck maker AB Volvo on Friday posted a near $236 million net profit for the first quarter, significantly beating analyst forecasts through cost reductions and improved productivity in key units.
The result compared with a loss of $334 million in the same three months a year ago and was the first time in more than a year it posted a profit.
The news sent shares soaring more than 10 percent to $12.52 in early market trading on the Stockholm stock exchange.
Volvo CEO Leif Johansson said his company now has "every reason to be optimistic about the future," noting all of the business units were profitable in the period.
He said cost cuts as well as improved capacity utilization were the main drivers, but noted that the services and aftermarket business "shows signs of recovery" and that Volvo has also been able to keep the prices on its products at good levels.
"Looking ahead, we will focus on utilizing the rising sales volume to increase productivity in all of the group's operations while maintaining a strict focus on costs," he said.
For its key truck unit, Volvo reiterated its market forecast, predicting it to grow 10 percent in Europe and 20-30 percent in North America for the full year 2010.
North American truck sales rose to 6,040 units from a year ago, the company said.
"Overall, truck demand continues to improve and order intake increased by 15 percent compared to the fourth quarter," Johansson said.
The European market is showing signs of improvement, with a higher order intake for new trucks and stronger demand for used trucks. The gradual improvement is expected to continue, it said.
The demand for new trucks in the North American market stayed low in the quarter, but is expected to improve in the second half of 2010. Demand for used trucks in that market has increased, it said.
"They're surprising the market by this big leap forward in margins," Sydbank analyst Morten Imsgard remarked. "Volvo has really pulled it off this time," he said, adding the report was significantly better-than-expected. The positive trend is yet to be reinforced by strong performance also in the coming few quarters though, he said.
Kevin Jones of The Trucker staff can be reached at email@example.com.