Volvo shares at three-year high as U.S. sales accelerate and cost cuts kick in
By Niklas Pollard and Johannes Hellstrom
STOCKHOLM (Reuters) - World number two truck maker Volvo AB (VOLVb.ST: Cotización) 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 fleets.
Volvo, vying for market leadership with Germany's Daimler AG (DAIGn.DE: Cotización), 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. Continuación...