* Q1 core EBIT 2.6 bln SEK vs forecast 2.5 bln
* Sees 2014 N.America market of 260,000 heavy trucks
* Lowers guidance for Brazil due to economic slowdown
* Shares up 0.8 pct, hit highest in nearly 3 years
(Adds CEO comment, detail, share price)
By Niklas Pollard and Johannes Hellstrom
STOCKHOLM, April 25 World number two truck maker
Volvo AB raised its outlook for the North American
market and reported the first savings from a drive to cut costs
across the sprawling group, sending its shares to their highest
in nearly three years.
Truck makers are heading into 2014 with U.S. demand gaining
pace, while an anticipated hangover in Europe following a buying
spree of older but cheaper trucks ahead of new emission rules is
offset by a firmer economy and a growing need to replace ageing
Volvo, vying for market leadership with Germany's Daimler AG
, said demand was improving in mature economies on
both sides of the North Atlantic and in Japan, though emerging
markets in South America and Asia were slowing somewhat.
"We see a gradual improvement in sentiment on the European
market ... we have adapted our capacity accordingly and we start
to see the effects from the efficiency program now coming into
our results," Chief Executive Olof Persson said.
While keeping its outlook for the European market unchanged
at 230,000 heavy trucks, Volvo said it now expected the North
American market to expand roughly 8 percent to 260,000 units
this year, compared with previous guidance of 250,000.
"We are also planning for a slight increase in the
production level towards summer," it said, referring to its
operations in North America, its second-biggest market after
Europe and accounting for over a quarter of its truck sales.
Volvo, Sweden's biggest company by sales and its top private
sector employer, however lowered its guidance slightly for
Brazil - a major market for truck makers in recent years due to
lavish government subsidies of truck purchases - due to a
slowdown in South America's biggest economy.
For Volvo, 2014 is the year in which it must show evidence
its sweeping efficiency measures are feeding through to the
bottom line, with growing pressure to deliver from the likes of
activist fund Cevian, its second-biggest owner by votes.
Volvo, whose profitability has traditionally lagged rivals
such as Scania AB, reached an operating margin of 3.9
percent, in line with analyst forecasts and far better than a
year ago, but still a far cry from the 10.7 percent reported by
its smaller Swedish rival.
Volvo in 2012 embarked on a scheme including the cutting of
thousands of jobs aimed at raising its operating margin by 3
percentage points by the end of 2015. At the time, its margin
stood at nearly 9 percent.
"I see this first quarter as the first stepping stone in the
right direction, but we have a lot of work still to be done and
we are going to keep the focus," Persson, who has championed the
efficiency measures, told a news conference.
The Gothenburg-based truck maker said cost cuts in areas
such as research and development and marketing helped reduce
spending by 400 million crowns in the quarter, while it had shed
900 of 4,400 white-collar jobs it plans to cull.
The company's first-quarter operating earnings excluding
restructuring charges rose to 2.59 billion crowns ($393.8
million) from a year-ago 496 million, roughly on par with a mean
forecast 2.52 billion in a Reuters poll of analysts.
Volvo, which makes trucks under the Renault, Mack and UD
brands as well as its own name, also said order intake of its
trucks fell 10 percent year-on-year in the first quarter,
lagging the 7 percent decline seen by analysts.
The fall in order intake was mainly due to a short-term
slump following the introduction of the European emission rules
at the turn of the year and Volvo said it expected demand to
pick up through the course of the year.
Volvo shares were up 0.8 percent at 104.1 crowns by 0917
GMT, having risen as high as 105.7 crowns, their highest since
($1 = 6.5777 Swedish Crowns)
(Editing by Alistair Scrutton and David Holmes)