Volvo profits enter reverse gear

Source: Agencies  |   2008-10-25  |     NEWSPAPER EDITION

SWEDISH truck and bus maker Volvo AB yesterday posted a 37-percent plunge in third-quarter net profits, as the global financial crisis caused demand to slump.

Shares plunged 19 percent as the company cut its market outlook for the year.

Net profit fell to 1.98 billion kronor (US$253 million), down sharply from 3.12 billion kronor in the same period last year. Volvo blamed the drop mainly on weaker demand in Europe, North America and Japan, where the financial turmoil caused spending on big ticket items to dive.

A bleak 32,072 trucks were ordered in the quarter -- less than half the 71,572 orders in the same quarter in 2007.

Volvo also lowered its outlook for the year, saying it expects the European truck market to grow between zero and 5 percent in 2008, and the North American truck market to decline by about 10 percent compared with 2007.

The group described it as a "difficult quarter" where customers in Europe are holding off on placing orders, and in some cases canceling them, while costs are high.

Volvo shares fell 19 percent to 35.30 kronor in early Stockholm trading yesterday.

"We are in a situation in which demand is declining in an increasing number of our markets -- in times of recession, we face increasingly tougher demands," Chief Executive Leif Johansson said.

Sales in the three-month period, however, rose to 69.6 billion kronor from 68.4 billion kronor in the 2007 quarter.