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Volvo says truck orders fell 10%, shares down 7%

Volvo AB, Europe's largest truckmaker, said orders fell 10 percent in the second quarter after months of surging sales stretched capacity. The stock posted its steepest decline in more than two years.

"If trucks are sliding downhill, then I guess that is not going to be rewarded by the market," said Michael Raab, an analyst with Sal Oppenheim in Frankfurt with a "neutral" rating on the stock.

"When order bookings are down today, then deliveries will be down tomorrow," he said.

Second-quarter net income rose 40 percent to 3.93 billion kronor (US$502 million), or 9.67 kronor a share, from a restated 2.81 billion kronor, or 6.65 kronor, a year earlier, Gothenburg, Sweden-based Volvo said today in a statement. Sales rose 15 percent to 61.1 billion kronor from 53.3 billion kronor.

North American order bookings were weaker in the second quarter because Volvo's production for this year has already been booked as the company has not been able to keep up with demand. Volvo and competitors such as DaimlerChrysler AG, the biggest truckmaker worldwide, are selling more commercial vehicles in the US as economic growth spurs freight transport.

Volvo is reluctant to increase North American truck production capacity, which led to excessive costs and lower prices during the last slowdown in sales, Chief Executive Leif Johansson has said.

Volvo earlier this year raised US prices to pay for higher material costs and new models.

The shares fell as much as 25 kronor, or 7.1 percent, to 329 kronor, and were down 6.1 percent at of 10:02am in Stockholm.

The stock traded at 354 kronor on Friday, its highest level since at least 1990.

"The expectations of the market have caught up with their results," said Anders Berg, an analyst at Evli Bank in Stockholm who has an "accumulate" rating on the stock. "It remains to be seen if the peak has been reached in terms of volume or profit." Shares of competitor Scania AB, Europe's fourth-largest truckmaker, fell as much as 16 kronor or 5.4 percent to 282.50 kronor and were down 4.2 percent. MAN AG, Europe's third-largest truckmaker, stock fell as much as 2.6 percent to 37.76 euros.

Shares of DaimlerChrysler, the world's fifth-largest carmaker, were little changed.

Profit beat the median 3.85 billion kronor net-income estimate of seven analysts surveyed by Bloomberg News. "The second quarter was our strongest ever, with high deliveries and high capacity utilization across most parts of the group," Johansson said in the statement.

North American heavy-truck sales growth will be around 20 percent this year, Volvo said today in the statement, raising an earlier forecast of 15 percent to 20 percent growth.

Sales increases in Europe have been tempered as economic growth has cooled. Deliveries will rise at the low end of a 0 percent to 5 percent range, Johansson said, reiterating earlier forecasts.
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