Daimler, Volvo Profits Fall During Lackluster 4th Qtr.

This story appears in the Feb. 11 print edition of Transport Topics.

Daimler AG said its global heavy-truck profit fell 29% in the fourth quarter, and Volvo AB said worldwide earnings in the unit including trucks fell 82%. Both truck makers also offered cautious outlooks for North America and around the globe.

Daimler Trucks’ operating income fell $390 million (300 million euros) and revenue dropped 6% to $10.1 billion, the company announced on Feb. 7.

Volvo, based in Sweden, announced operating income for the trucking unit of $136 million (880 million krona), as sales for the period fell 16% to $7.4 billion.

The results were released just days after Paccar Inc. reported 23% lower earnings in an environment where heavy-truck sales fell nearly 15% during the quarter and truck orders have declined as well. Earnings for the quarter ended Jan. 31 haven’t yet been announced at Navistar International Corp.

“Profitability in the fourth quarter was adversely impacted by difficult market conditions, especially in Europe,” Dieter Zetsche, chairman of Daimler’s board of management, said on a Feb. 7 conference call, citing lower worldwide truck sales.

U.S. sales of the Freightliner brand, however, rose 2.3%, gaining market share and achieving the only year-over-year sales increase for the period.

Daimler Trucks sales fell 8% in the quarter on a worldwide basis, with a sales drop of 14% in Western Europe and 25% in Asia.

“The first quarter of 2013 should be at a low point this year,” Zetsche said. “For the full year, we expect group earnings from the ongoing businesses to reach the magnitude of the prior year based on the expected markets recovery in the second half of this year.”

Daimler’s 2013 trucking forecast hinged on an expected “significant recovery in China, which was responsible for a large proportion of the global drop in demand last year,” the earnings statement said.

Volvo CEO Olof Persson offered a similar view on a conference call.

“On a group level, the first quarter of 2013 will also be difficult, as a result of low order intake in many markets. We expect market conditions to gradually improve during the course of 2013 when economic growth across the world gains momentum,” he said.

“Order intake in the fourth quarter was negatively impacted by continued economic concerns, sluggish job growth and the ‘fiscal cliff’ as customers delayed purchasing decisions,” the company’s statement said referring to North America.

Deliveries of Volvo Trucks in North America declined 17% to 6,725 in the fourth quarter, but stronger results in earlier months led to a 4% increase for the year to 26,222.

Mack Truck deliveries fell 32% in the fourth quarter to 3,575, a sharp drop-off for a year when total Mack deliveries rose 30% to 20,973.

Persson on a conference call said the declines were due to the comparison to “very high activity level” in the 2011 fourth quarter.

Fourth-quarter North American orders including the Volvo and Mack nameplates were 21% lower at 10,024.

Unlike Daimler, Volvo’s European truck orders showed more strength than the United States.

Volvo Truck orders rose 7%, and Renault Trucks fell 18% in Europe during the quarter. The drop at Renault was tied to steps to cut inventories and weak Southern European demand, the company said.

Volvo’s full-year 2013 forecast called for little change in North American production at 250,000 units, and a 4.1% increase above 2012 levels for Europe at 230,000.

“Uncertainty regarding the U.S. economy and the country’s fiscal challenges continue to make customers cautious,” Volvo’s statement said.

On a positive note, Volvo reported a “slight improvement” in demand early in 2013.

The company forecast the first quarter would be difficult, followed by gradual improvement in market conditions as the year develops and global economies improve.

Volvo’s operating income in the trucking business was reduced by $110.7 million from a combination of a charge and a gain outside North America.

On a worldwide basis, Daimler Truck sales increased 9% to 462,000 and 24% in North America for the full year.

Full-year performance at Daimler Trucks showed higher revenue at $40.6 billion, but lower operating income of $2.2 billion.

The profit margin was 5.5%, one percentage point lower than 6.5% in 2011.

Full-year net income at Volvo’s industrial unit that includes trucks was $1.5 billion, a decline of 42%. Revenue for the year was 2.2% lower at $43.7 billion.