Rise in Volvo orders lifts hopes of trucks recovery

Volvo , the world's No. 2 truck maker, posted a surprise rise in first-quarter orders and said it would step up production, adding to signs a protracted slump in key markets like Europe may be coming to an end.

The Swedish group, which makes heavy-duty trucks under the Renault, Mack, UD Trucks and Eicher brands as well as its own name, said on Thursday orders rose 11 percent year-on-year compared with a 15 percent fall forecast by analysts.

"We saw this big uptick in the order intake come in at the end of the quarter," Chief Executive Olof Persson told a news conference.

"The uncertainty we had in the market during the second half of last year and in the beginning of this year has been replaced with more stability and our customers had more confidence to actually place orders."

Volvo's comments come after domestic rival Scania reported a 28 percent rise in orders earlier this week, and world No. 1 Daimler Trucks forecast a slight rise in 2013 sales.

Persson said Volvo and its suppliers would raise production during the second quarter - a challenge as output of a slew of new vehicles such as the new flagship FH series is ramped up.

The Gothenburg-based company would add around 400 staff in its European production system in the second quarter, but only on a temporary basis as it continued to treat evidence of improving markets warily.

Volvo's caution was also reflected in its decision to leave unchanged a 2013 outlook for roughly flat European and North American truck markets and a forecast for 20 percent growth in Brazil driven by government subsidies.

"What I can say is the good demand we have seen continued also in the first weeks of the second quarter," Persson said.

Volvo shares, which had already racked up gains earlier in the week, were up 1.9 percent to 92 Swedish crowns by 1010 GMT, while Scania was up 0.1 percent, Daimler 1.3 percent and German rival MAN SE 0.3 percent ahead of results on Friday.

"Many investors were very sceptical ahead of the Q1 earnings, so there should be some short positions to be closed today," Carnegie analyst Kenneth Toll Johansson said in a note.

While a recovery may be just over the horizon, for now the slow order intake at the end of last year is weighing heavily on truck industry earnings.

Volvo, which also makes buses, construction equipment and engines, reported a 92 percent plunge in first-quarter operating earnings to 482 million crowns ($72.7 million), well below the 2.02 billion seen by analysts, as sales fell to their lowest level since the 2008/2009 financial crisis.

The company, which unlike Scania sells into a relatively sluggish U.S. market, last year launched a sweeping efficiency programme running through 2015 to boost its profitability.

"Are we satisfied? Absolutely not. Will we improve? We have to. Will we do it? Absolutely," Persson said. "But I have to remind you this is a 3-year plan, so we have 33 months to go."

($1 = 6.6300 Swedish crowns)

(Additional reporting by Helena Soderpalm; Editing by Mark Potter)