Swedish truck maker Volvo AB said Friday its third-quarter profit dropped 37 percent and lowered its outlook as the global financial crisis sapped demand for heavy vehicles in Europe, North America and Japan. Company shares plunged.Net profit in the quarter fell to 1.98 billion kronor (US$253 million), down from 3.12 billion kronor in the same period last year.
Sales in the three-month period rose slightly, to 69.6 billion kronor (US$8.92 billion) from 68.4 billion kronor in the year-ago quarter.
The results came in below expectations, sending shares down 19 percent to 35.30 kronor (US$4.52) in Stockholm.
Europe was especially hard hit as previously placed truck orders were canceled. After Volvo cleaned out those orders from its books, the net order intake in the third quarter was a mere 115 trucks, compared to nearly 42,000 trucks in the same period last year.
"Due to this situation, it has become necessary for us to adapt our production rates and costs to the lower demand trends prevailing in our markets," Johansson said.
With the net order intake in Europe at a virtual standstill, Volvo downgraded its yearly forecast for the region, and also lowered its estimate for the North American market.
Chief Executive Leif Johansson warned that tough conditions lie ahead for the industry as major markets plunge into recession.
"We are in a situation in which demand is declining in an increasing number of our markets. In times of recession, we face increasingly tougher demands," Johansson said.
Goteborg-based Volvo, which sold its car division to Ford Motor Co.in 1999, also makes buses, engines and construction equipment. It has more than 100,000 employees worldwide, including its subsidiaries Renault Trucks, Mack Trucks and Nissan Diesel.
Volvo reported growth in South America but said demand fell in Japan as well as its major markets _ Western Europe and North America.
Volvo has previously announced layoffs of 1,400 workers at truck plants in Belgium and Sweden and 1,350 workers at its construction unit.
The company said it expected the European truck market to grow between zero and 5 percent in 2008, down from an earlier estimate of 10 percent. The North American truck market would decline by 10 percent this year, Volvo said, downgrading its earlier forecast of a flat market.
Danske Bank analyst Carl Holmquist said the results were significantly below what the market had expected, especially the slowdown in the order intake.
"Volvo has driven into the recession a little bit too fast," he said.
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