STOCKHOLM -- Scania, Europe's number four truck maker, blamed higher costs for an unexpected fall in third-quarter pretax earnings but said on Tuesday that order bookings would stay strong through the first half of 2006.
Higher costs for raw materials, development and staff cuts pushed pretax earnings down 11 percent year-on-year to 1.16 billion crowns ($146.2 million), well short of the average forecast of 1.41 billion and below the lowest estimate of 1.21 billion in a Reuters poll of 15 analysts.
Scania said it expected full-year 2005 earnings to be "somewhat higher" than last year given healthy order bookings. It repeated that lower steel prices would begin feeding into its results during the first half of next year.
The firm, which has banked on its new R-series range of trucks to boost earnings, said sales amounted to 14.61 billion crowns versus 13.32 billion in the corresponding period last year and the 14.49 billion expected by analysts.
"The volumes are lower than I and the market had expected, while sales are in line. In other words their new R-series is a very good truck for which they are keeping prices up, but the lower volumes can't support the fixed costs," an analyst said.
Scania's third quarter earnings break the mould of truck makers routinely churning out record profits in recent quarters on the back of strong demand on both sides of the Atlantic.
Late last month, Scania's domestic rival and world number two Volvo beat expectations with a 42 percent rise in underlying pretax earnings and market leader DaimlerChrysler AG's trucks division tripled its operating profit.
But in recent months signs of a demand slowdown have accumulated, causing concern that cyclical demand may have peaked, and in connection with its report Volvo said it expected markets to be flat in 2006 -- an opinion shared by Scania.
"Probably there will be a strong first part of the year but not such a strong second part of the year," Scania's Chief Executive Leif Ostling told a news conference.
"Our guess today is a flat market in Europe."
Amid signs of flagging demand, Scania still achieved a 7 percent rise in order bookings to 12,466 units. Orders in western Europe, its biggest market, rose a hefty 12 percent.
"We expect the first half of next year to also be fairly good," Ostling said.
The firm said high oil prices and continued uncertainty about economic developments in certain countries made it difficult to forecast market demand in the short term.
Visibility into next year was made even more opaque by environmental legislation, set to be introduced on new vehicles during the autumn, which could prompt customers to increase purchases of older, cheaper trucks ahead of the new rules.