Volvo Q3 sales, profit to jump but outlook cloudy

STOCKHOLM, Oct 23, 2002; Peter Andersson writing for Reuters reported that Sweden's AB Volvo, the world's second-biggest truck maker, is likely to announce on Thursday it swung to a third-quarter profit thanks to a jump in North American sales.

But investors might not be cheering. The increase reflects purchases made before the introduction of strict new U.S. environmental rules governing diesel engines and is likely to herald a sharp fall in the next few months, analysts said.

"It would surprise me if the share benefits from a huge number of trucks sold, since that will mean fewer trucks sold during the coming quarters," said Nordea analyst Patrik Sjoblom.

Volvo is expected to post pre-tax profit of 508 million crowns ($54.4 million), rebounding from a 1.9 billion-crown loss a year earlier when it was still digesting the acquisition in January 2001 of French-U.S. truckmaker Renault VI/Mack, according to a Reuters poll.

Sales are expected to have risen to 44 billion crowns from 41 billion.

The U.S. diesel engine legislation came into force on October 1 and pushed prices higher, boosting demand for trucks before the end of the third quarter.

North American truck deliveries in July were 60 percent higher than a year earlier and 38 percent higher in August.

MERGER SYNERGIES

Investors said they were keen to hear what Chief Executive Leif Johansson has to say about the progress of last year's Renault VI/Mack takeover.

Volvo has said that synergies from the merger should yield yearly cost savings of 3.5 billion crowns from 2003. When the company announced its half-year results in July, it forecast savings of 2.1 billion crowns for this year.

Johansson will once again face questions about Volvo's 45.5 percent stake in its Swedish competitor Scania AB, which carries 30.6 percent of the voting rights, left over from a merger plan in 2000 vetoed by the European Commission.

Volvo has until April 2004 to divest the stake, in which it cannot use the voting rights under the Commission veto.

One option would be to sell the stake to Europe's biggest carmaker, Volkswagen AG. The German automaker, which does not have heavy truck production of its own, already has an 18.7-percent stake in Scania with 34 percent of the votes.

VW's new chief executive, Bernd Pischetsrieder, has said he could envisage increasing the stake, but does not rule out getting rid of it altogether.

Other interested parties could be Germany's MAN or Italian truckmaker Iveco. Hino Motors Ltd, Japan's biggest truckmaker in terms of domestic market share and 50 percent owned by Toyota Motor Corp, said in March it was in talks with Scania on cooperation and a possible tie-up.

Johansson has said that Volvo could distribute the Scania shares to its own shareholders if it does not find a better solution.

The last time he presented Volvo results, Johansson said only that the company was "in no hurry to find a solution" for the Scania stake.