Volvo profits below forecasts, but company upbeat about 2011

Volvo - Back to Profitability

Volvo – Back to Profitability

Swedish vehicle manufacturer Volvo has raised its sales forecast for the US and Europe by 10 percent to 220,000 trucks.

The company faced production problems in the fourth quarter due to rising input costs and shortage of materials, while demands for its products surged, it said.

Full year profit for 2010 was reported at 5.5 billion Crowns (£530 million, $855 million), compared to a loss of 2.32 billion Crowns in 2009.

However, due to weaker Swedish currency and strong demand, the market had expected a profit of 6 billion Crowns.

However, Volvo reasoned that the rising cost of metal and plastics, the two main raw materials, had cost the company an additional 600 million Crowns while the strong domestic currency – which is on a ten year high against the Euro, has cut profits by another 700 million.

However, the company has managed to increase its order book by 63 percent in the last three months of 2010 over 2009, a spectacular rise even though its profits were not so impressive for the year.

Commending the company’s performance in 2010, chief executive Leif Johansson said: “We ended 2010 strongly.

“The gradual improvement in Europe continues and North America is now definitely recovering, at the same time as the emerging economies in countries such as Brazil, China and India continue their strong growth. However, the trend in Japan remains weak”.

The company’s return to profitability was not just due to higher sales, but also “a result of a conscious effort to maintain our costs on a low level”.

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