STOCKHOLM -- Volvo Truck Corp. reported a sharp rise in underlying third-quarter profits on Friday and raised its sales forecasts, sending its share price higher despite a hefty writedown.
Trucks have been a bright spot in an otherwise lackluster autos sector as companies have enjoyed rising demand during the global economic upturn and have so far been able to pass on rising raw material costs in their prices.
Volvo said it made a pretax profit in the three months of $194.6 million after a write-off of $180 million related to the restructuring of British bus group Henlys which was signaled last week.
But operating profits rose to $387 million from $225 million. Sales rose to $6.36 billion from $5.61 billion, and compared with the average of market forecasts of $6.45 billion.
Analysts had expected a pretax profit before the writedown of $362 million compared with $180 million made in the same period in 2003.
"We have raised the forecast for the heavy-truck market in North America to about 240,000 trucks in 2004 and another 15 to 20 percent in 2005," Volvo said in a statement.
"In Europe we are making a slight upward adjustment to 254,000 trucks, and in 2005 we expect Europe (sales) to increase by another 5 percent," it added.
Analysts were positive about the figures.
"Underlying earnings are slightly better than we had expected," said Swedbank analyst Anders Bruzelius.
"Trucks (division) looks amazingly strong, but what may be the most positive is that they finally dare to raise estimates for this year and the next in the United States," added Patrik Sjoblom at CAI Cheuvreux.
The group noted that raw material costs had been rising but did not quantify the impact. It said an increased oil price mainly affected its truck and aviation division, while steel costs affected its construction equipment division.
Volvo had forecast a sales rise in Europe this year to 250,000 trucks from 230,000 and gains in North America of 30 percent. For 2005, it had forecast unchanged sales in North America and a 5 percent to 10 percent rise in the 25 nations of the European Union.
Rival DaimlerChrysler AG also said this week that market conditions remain good with burgeoning demand in Europe and particularly strong business in the North American Free Trade Agreement area.
Smaller rivals MAN and Scania have also benefited from the global upturn.
The writedown was part of the restructuring of Henlys, which has delisted from the stock market amid financial difficulties.
Volvo has already decided to write off its 10 percent stake in the company and last week agreed to convert part of $240 million owed to it by Henlys into shares in a new U.S. holding company that will own bus maker Blue Bird, at the core of Henlys' business.
Volvo also bought out U.S. bus maker Prevost, which it owned jointly with Henlys.