Glimmers Of Hope For Volvo

LONDON -- Volvo may have finally brought a smile to its investors' faces. Shares of the Swedish truck maker rose 6% in Stockholm trading Friday after it posted a narrower-than-expected operating loss of 3.3 billion Swedish kroner ($485 million), against the expected 4 billion Swedish-kronor ($588 million) deficit.The results, analysts said, eased fears that the truck maker would ask for more cash to run its business, but they emphasized that Volvo was still bracing itself for more sales declines in key markets like Europe. Chief Executive Leif Johansson said that although the third quarter remained "challenging in terms of profitability" the group was seeing some signs that the drop in demand had bottomed out and that a "gradual recovery" had started."These signs are the most obvious in [Volvo's] second largest region in terms of sales, Asia, where the economic growth is also reflected in demand for [our] products," he said.Michael Andersson, an analyst with Elvi Bank in Sweden, said the need for a rights issue now looked "distant," but the European truck market was also unlikely to rebound quickly. European markets are particularly under pressure because of the high level of trucks in stock, which companies have yet to use for their operations. A boom in truck sales in recent years has led to a high numbers of new trucks on the road, which tempers the need for buying new models. "We will see Europe stabilizing at a very low level and I don't expect any major growth at least until 2011," Andersson said.Quarter after quarter this year, Volvo's sales and profits have been gradually sliding to historical lows. The company posted its worst-ever quarterly loss last July. (See "Volvo Holds Out For Stability.") ...
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Europe Steady As Britain Shrinks

LONDON -- European equities were riding high on Friday, even as disappointing data on the British economy sent sterling nearly 2 cents lower against the dollar. New figures from the U.K. government showed that the country's economy had shrunk by 0.4% in the last quarter, confounding expectations that Britain would finally emerge from recession with 0.2% growth. It marked the sixth-consecutive quarter of economic contraction for the U.K. The pound slumped following the news, to $1.643, from $1.662. British bonds also took an immediate hit, with the yield on the two-year gilt falling to 0.95% from 0.98%, and 10-year gilts yielding 3.70%, down from 3.76% on Thursday. London's FTSE 100 share index initially slipped, but was still in positive territory at midday, up 1.2% at 5,271.89 points.IHS Global Insight economist Howard Archer called the GDP data "a real shocker" and "desperately disappointing," especially since the euro zone and the U.S. seemed "highly likely to have grown in the third quarter." But he added that he expected the U.K. to return to growth in the fourth quarter. While Britain's economy still appeared to be in the wilderness, further data showed the euro zone was on track for a recovery: the region's services PMI registered at a 20-month high on Friday, while manufacturing also hit an 18-month high. Euro zone industrial orders rose by 2.0%, month-on-month in August, a fourth successive increase and a better-than-expected rate of growth. The news gave a slight boost to the euro, which remained above the $1.50 threshold after breaching that level on Wednesday. It bought $1.504 on Friday afternoon in Europe, up from $1.503 late Thursday in New York. Germany also had relatively positive economic news to offer Friday, with the country's Ifo institute ...
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Volvo: Not As Bad As It Seems

LONDON -- Swedish truckmaker Volvo has been stuck in the mud recently: Sales have dropped almost 60%, order intakes have fallen 50% year-on-year, and it swung to an operating loss on Tuesday thanks to the sharp deterioration in consumer demand. But some are still positive on the stock.Analysts at Nomura said Wednesday that although Volvo's recent results were likely to trigger consensus downgrades, its business would pick up in the long-term. "We estimate that both earnings and cash dynamics will turn more favorable thanks to a sequential improvement in production and realization of cost-cutting payback," Nomura wrote in a note to investors, adding that it was keeping its "buy" recommendation on the stock. Nomura also said that Volvo's liquidity position has been enhanced thanks to undrawn credit lines. "We maintain that Volvo's geographical sales mix offers greatest exposure to those regions where demand should pick up first. Earnings momentum in 2010 and 2011 is likely to be the strongest in the peer group," Nomura said.On Tuesday, the world's second-largest maker of trucks said it saw signs of demand stabilizing, but it stuck to its previous forecast that the market for heavy trucks would drop by 30-40% in its North American market and by at least 50% in Europe. (See "Volvo Holds Out For Stability.") Not everyone is positive on the stock, though. On Wednesday, JPMorgan forecasted a "significant loss" for Volvo in the third quarter, with only limited savings coming through. The bank said in a note to investors that Volvo would see more "pressure on cash flow" as its net debt increased to 65%.Volvo's cash flow is still a negative 2.9 billion Swedish kroner ($380 million) in the quarter but significantly narrower than a negative 15.7 billion Swedish kroner ($2 billion) in...
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