Truck maker Volvo AB has reported a 24% increase in fourth-quarter profit though sales growth has stalled at the world’s second biggest truck maker, which missed analysts’ forecasts.
A Forbes.com/Associated Press report said Volvo shares rose nonetheless as the company reported a healthy order book, said it would pay shareholders an extraordinary dividend and raised its forecast for growth in the European truck market.
Goteborg, Sweden-based Volvo reportedly earned 3.7bn kronor ($US533m) in the last quarter of 2006, up from 3bn kronor a year earlier, though sales dipped to 65.1bn kronor ($9.37bn) from 65.3bn kronor in 2005.
The Forbes/AP report said analysts polled by SME Direkt had forecast a profit of 3.89bn kronor ($560m) on sales of 67.5bn kronor ($9.72bn).
Volvo reportedly said order bookings grew 8% and proposed an ordinary dividend of 25 kronor ($3.60) a share and an extraordinary dividend through a 6 to 1 share split where the sixth share will be redeemed by Volvo for another 25 kronor a share.
According to the report, the truck maker now expects European heavy truck demand to reach 300,000 from its previous estimate of 290,000, but has warned that demand in North America is expected to fall sharply in the first half of the year. It added that it is difficult to assess the demand expected in North America in the second half.
Sydbank analyst Jacob Pedersen in Copenhagen was quoted as saying that, although Volvo’s bottom-line figures were lower-than-hoped due in part to unfavourable exchange rates, it was more than compensated for by the “clearly strong” order intake in Europe. He added that “the dividend was very positive news for shareholders.”
Volvo’s 2006 order bookings were particularly strong in Easter Europe, where it recorded a more than a 40% increase in sales. In the fourth quarter, truck order bookings more than doubled there, the company said, according to the report.
For full year 2006, profits rose to 16.31bn kronor ($2.35bn), up from 13.11bn kronor in 2005. Sales came to 248.14bn kronor ($35.73bn) from 231.19bn kronor in 2005.
Chief Executive Leif Johansson reportedly called that Volvo’s “best year in history” and announced the company will reward its staff with a maximum contribution from its profit sharing programme which will total 450m kronor ($65m).