Scania says global slowdown will hit profits
Scania, the Swedish truckmaker, on Friday warned that profits would fall sharply this year amid declining European truck sales and economic turmoil in South America.
The manufacturer, in which Volkswagen holds a 34 per cent stake, claimed it was the victim of “a global cyclical slowdown” and slowing investment by transport companies.
Leif Ostling, chief executive, said the company had also been hit by an unfavourable sales mix, currency volatility and rising product costs in the first half of the year.
“Due to continuing weakening of demand in Western Europe and greater uncertainty in Latin America, we expect clearly lower operating income this year,” he added.
The European market, he warned, would continue to decline in 2002 and might fall by 40 per cent from its peak last year.
Mr Ostling was speaking after Scania announced a 34 per cent fall in net income to SKr838m ($77m) in the six months to June 30, even though sales rose modestly from SKr25.3bn to SKr26.2bn.
Earnings per share fell from SKr6.39 to SKr4.19 in the same period and from SKr3.08 to SKr1.33 in the second quarter.
Mr Ostling reaffirmed plans to shed 1,200 jobs at Scania as part of a European reorganisation in production, sales and marketing.
A further 400-500 jobs are expected to be cut next year as the truckmaker overhauls its manufacturing operations in the Netherlands.
The restructuring was prompted by falling market share in Europe – down from 15.8 per cent to 14 per cent – and a combination of falling Argentine demand and adverse exchange rates in Brazil.
As a result, first-half operating income fell to SKr1.6bn from SKr2.16bn and margins shrank to 6.1 per cent, compared with 8.5 per cent last time. Mr Ostling said the margin weakness had been exacerbated by currency issues linked to the declining Swedish Krona.
Profits fell 22 per cent in Europe to SKr1.66bn, while losses in Latin America widened from SKr183m to SKr265m.
On Friday, Scania’s most-commonly traded B shares fell SKr2 to SKr169.50.
Financial Times
