Volvo Profit Beats Expectations Amid Surging Truck and Construction Orders

By Dominic Chopping Features Dow Jones Newswires

Swedish truck maker Volvo AB (VOLV-B.SK) on Friday reported a forecast-beating increase in third-quarter net profit, boosted by rising truck orders and a continued rebound in its construction-equipment unit.

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Overall demand was stellar during the quarter, with truck orders up 32% on the year and construction equipment orders up by 45%.

Truck demand received a boost from continued renewal and fleet expansion and the company expects demand to continue at a high level in 2018, forecasting a total European market of 300,000 heavy-duty trucks.

In North America, both the long-haul and regional-haul markets showed positive signs amid healthy economic conditions and increasing freight rates. For 2018, the company sees the heavy-duty truck market in the region hitting 260,000 units.

The hard-hit Brazilian truck market appears to be bottoming out while the effects of new emission regulations in India in the previous quarter saw demand improve in the country. Higher construction activity and freight rates helped demand in China, it added.

A recovering mining industry in Asia and higher demand across Europe and North America after years of difficult market conditions supported demand for Volvo's construction equipment.

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"Volvo Construction Equipment has successfully managed to respond to the growing market demand with a volume increase of 48% while at the same time taking a significant step up in profitability," group Chief Executive Martin Lundstedt said.

"We also continue to gain market shares within our strongholds in the construction equipment market," he added.

Volvo said net profit for the three months ended Sept. 30 was 5.47 billion Swedish kronor ($673 million), up from SEK2.59 billion in the same period a year earlier, beating analysts' expectations of SEK4.47 billion, according to a FactSet poll.

Sales in the period rose 12% to SEK77.23 billion, compared with SEK68.76 billion in the third quarter of 2016. Analysts had expected SEK74.75 billion.

The operating margin rose to 9.6% from 6.8%.

Write to Dominic Chopping at dominic.chopping@wsj.com; Twitter: @domchopping @WSJNordics

(END) Dow Jones Newswires

October 20, 2017 03:20 ET (07:20 GMT)