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Volvo posts $401m profit on cost cuts

STOCKHOLM, October 25, 2014

Global truck maker Volvo has registered a surprise rise in core quarterly profit as deep cost cuts more than made up for lacklustre demand in some major markets.

The group, which vies for market leadership with Germany's Daimler and Volkswagen's Scania and MAN brands, said it would take out more costs to boost profitability that has often lagged its rivals.

"I see this quarter as a small but very solid step in the journey to create a profitability for the Volvo group that is among the best in the industry," said chief executive Olof Persson, who has led efforts to improve performance over the past two years.

Volvo, Sweden's biggest company by sales and top private sector employer, said third-quarter operating profit excluding restructuring charges rose to 2.91 billion crowns ($401 million) from 2.5 billion crowns a year-ago.

That easily beat a mean forecast of 2.07 billion crowns in a Reuters poll of analysts.

The truck maker said its cost cuts had produced savings of 1.6 billion crowns, almost a billion more than in the preceding three months.

It also said that it would review its IT business with thousands of staff to determine what was essential to its operations. There has been speculation that Volvo could sell all or part of the business.

Volvo had been under pressure to prove that a sweeping efficiency drive involving thousands of job losses and closure of some smaller plants was lifting its profit margins.

SEB Equity Research, which rates Volvo stock a buy, said the figures showed cost cuts had begun "biting for real".

Ahead of the report, its stock had slumped more than 25 per cent over the past six months.

The company, based in the southern city of Gothenburg, said it planned to make a further 3.5 billion crowns of structural costs by the end of next year.

That would bring the estimated full year savings to 10bn in 2016 compared with its cost base in 2012.

The company has cut 4,400 white collar jobs from its total workforce of 110,000 while manual jobs have also been shed.-Reuters




Tags: Volvo | Truck |

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