Scania Q4 shines amid stabler demand, shares surge

(chinatrucks.com, Feb.04, 2010)Sweden's Scania AB (SCVb.ST) limited the decline in its fourth-quarter pretax profit with the help of cost cuts and a stabilising truck market, lifting its shares and those of rival Volvo AB (VOLVb.ST).

Scania, which like its peers has slashed costs to cope with the worst downturn in decades, saw order bookings rise sequentially in the fourth quarter but the forecast-beating earnings were the main impetus for a surge in its shares.

"It looks really good," Swedbank analyst Niclas Hoglund said. "They continue to adapt to the low demand and it's clear they are also leveraging the adjustments already made and are improving earnings faster than we or the market had anticipated."

Shares in Scania, which is the subject of lingering speculation that it will merge with Germany's MAN and Volkswagen's truck business, were up 9.5 percent at 101.80 crowns by 1431 GMT, outperforming a flat Stockholm bourse all-share index .

Shares in Volvo, which reports on Friday, were up 3.0 percent at 66.8 crowns.

Pretax earnings at Scania, majority-owned by Germany's Volkswagen (VOWG.DE), were 1.24 billion Swedish crowns ($170.5 million) versus 1.71 billion the previous year and above the 795 million seen in a Reuters poll of analysts.

"I think you can summarize this with one word really: impressive," Nordea analyst Johan Trocme said.

"Our expectations were very high compared to consensus, but even our expectations were beaten. If you look at what the market has been like they have performed very, very strongly."

European truck makers have been savaged by the steepest market downturn in decades as the global financial crisis pulled the plug on years of booming demand, sending commercial vehicle sales down more than 30 percent last year.

Economies across the region have limped out of recession on the back of massive stimulus from governments and central banks, injecting some measure of activity in the highly cyclical heavy-duty truck market, though demand remains weak.

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