Swedish truckmaker Volvo beats profit forecast

  • Adjusted operating profit for the third quarter jumped to 10.25 billion Swedish crowns ($1.13 billion) from 6.95 billion and topped the 9.59 billion forecast in a Reuters poll of analysts.
  • Adjusted margins at Volvo, which has been bolstered by the completion of a 10 billion crown cost-cutting scheme, rose to 11.1 percent over the quarter, surpassing its 10-percent target helped by lower R&D costs and higher sales.

Harold Cunningham | Getty Images

Truckmaker Volvo's beat quarterly profit expectations on Friday buoyed by bullish demand for trucks and construction equipment and forecast high levels of demand in its main markets Europe and North America in 2019.

Adjusted operating profit for the third quarter jumped to 10.25 billion Swedish crowns ($1.13 billion) from 6.95 billion and topped the 9.59 billion forecast in a Reuters poll of analysts.

The company, which makes trucks, construction equipment, buses and engines, hiked its demand forecast for the European truck market for the current year and forecast higher demand in the North America truck market next year.

Strong demand has also helped peers Daimler and Volkswagen. But the surge has caused some bottlenecks, inflating costs for raw materials and labour.

"This is an extremely strong report," said Handelsbanken Capital Markets analyst Hampus Engellau.

Volvo has said that Europe's supply shortages have been largely resolved, but cautioned on Friday that the issue was expected to persist in North America, where it also faces labour shortages and higher raw material costs due to the trade war.

Adjusted margins at Volvo, which has been bolstered by the completion of a 10 billion crown cost-cutting scheme, rose to 11.1 percent over the quarter, surpassing its 10-percent target helped by lower R&D costs and higher sales.

"Although this is the best third quarter ever for the group, it does not mean that we have reached our full potential. There is more to do to improve profitability and drive cash flow," CEO Martin Lundstedt said in a statement.