* Says low capacity use, high costs to weigh
* Q4 operating profit 1.1 bln SEK vs forecast 2.2 bln
* Sees flat Europe and North America markets in 2013
* Order intake slips slightly less than forecast
By Niklas Pollard and Helena Soderpalm
STOCKHOLM, Feb 6 Swedish truck maker Volvo
warned of a rough start to 2013 after weak demand in
its main markets left factories running at half speed and pushed
it into a heavier than expected quarterly earnings fall.
Volvo, which only weeks ago laid claim to have dethroned
Germany's Daimler as the world's biggest manufacturer
of heavy trucks on the back of a joint venture in China, said
that weak orders at the end of 2012 meant the first quarter
would be difficult.
"Profitability will be affected by low capacity utilisation,
high spend levels in research and development and costs
associated with the launch of new products," Chief Executive
Olof Persson said in a statement.
"However, we expect market conditions to gradually improve
during the course of 2013 when economic growth across the
world gains momentum."
Heavy-duty truck makers have run into tougher times in
recent quarters as the deep economic downturn in Europe and
sluggish activity in North America have weighed heavily on the
highly cyclical demand for commercial vehicles.
Volvo's fourth-quarter operating earnings tumbled to 1.12
billion Swedish crowns ($176.52 million) from the previous
year's 6.96 billion, well below a mean forecast for 2.19 billion
seen in a Reuters poll of analysts.
Earnings were hit by weak use of capacity at many of its
plants and restructuring charges totalling 990 million crowns,
against the 565 million crown hit expected by analysts, one of
whom said that the market might still take some solace from the
Volvo, which makes trucks under the Renault, Mack, UD Trucks
and Eicher brands as well as its own name, has been cutting
shifts and inventories because of weaker demand but stood by a
forecast for flat 2013 markets in Europe and North America.
It also raised its forecast for the Brazilian market, where
government incentives have boosted demand, by 10,000 trucks to
about 105,000 this year.
ORDERS SLIDE SLOWS
Truck orders at the Gothenburg-based company fell 10 percent
year on year in the final quarter of last year, compared with a
13 percent fall forecast by analysts and a 25 percent plunge in
the preceding quarter.
"The important thing here is that order intake is better
than expected and that they maintain the outlook for Europe and
North America, which is positive," Handelsbanken Capital Markets
analyst Hampus Engellau said.
Last week, Volvo's smaller rival Scania unveiled a
surprisingly strong rise in order bookings for the final months
of last year, but only thanks to the surge in demand from
Daimler and MAN SE, which like Scania is
controlled by Volkswagen, both release their reports
later this week.
Amid the market doldrums, truck makers, have been emulating
the car industry's increasing efforts to forge tie-ups that can
help them to cope with the growing costs of developing new
vehicles, not least to meet tougher environmental rules.
One such deal is Volvo's joint venture with China's Dongfeng
Motor Group Co., announced last month. The deal, if
approved by Chinese authorities, would allow the group finally
to secure a strong position in China, where it had a failed
attempt to link up with another domestic player a decade ago.
The past year has been a pivotal one for Volvo which,
besides its move into China, saw the exit of its main owner
French car maker Renault and the launch of the new
Volvo-branded FH-series truck, the group's biggest ever