Database

* Scania CEO says market still at low level
* Says destocking phase largely over, inventories normalised
* Expects real level of demand to become clear during autumn

SODERTALJE, Sweden, Sept 17 (Reuters) – Truck maker Scania’s top executive said on Thursday that economic gloom still dominated heavy truck markets and while demand is not falling any longer, there was no real sign it is improving. “The bright point is that it (the market) has not continued even further down. It looks to have bottomed out,” Scania Chief Executive Leif Ostling told Reuters on the sidelines of a capital market day.  Ostling said he expected the underlying demand picture to become clearer during the autumn.

“What happens next year will largely depend on what position the banks will be in,” he said. The Swedish heavy-duty truck and bus maker just barely stayed profitable in the second quarter, pummelled by the steepest fall in demand in decades as the global financial crisis cut years of easy credit. Still, signs of some stabilisation in the highly-cyclical market for commercial vehicles have emerged in recent months though clear evidence of any recovery remains distant.

Earlier this week, Scania’s larger domestic rival Volvo said its truck shipments, while still dismal, fell slightly less year-on-year in August than in the preceding month. Ostling said the phase of scaling back inventories that has worsened the slump in truck markets was largely over, leaving the company able to raise its production level despite the continued weak demand. “I don’t think we should be too bullish over these signals and say that now it’s over again and steaming up,” Ostling told analysts at Scania’s headquarters, south of Stockholm.

“I think we have to be cautious also next year because the financial system is still in such a bad shape.” Scania shares were up 0.9 percent to 88 crowns by 0836 GMT, narrowly outperforming a 0.4 percent gain in the Stockholm bourse’s blue chip index. Inventory levels had normalised in most regions while the second-hand truck market, which has seen a glut of modern vehicles as operators cut their fleets due to the downturn, had also stabilised, Ostling said.

The financial crisis has seen credit dry up for many small- and mid-size transport firms, leaving them unable to finance purchases of new commercial vehicles and exacerbating the impact of the economic downturn. “Balance sheets of some banks are in a pretty bad shape. The size of the impairments that banks will have to do will decide how much liquidity will be available for us in the industry,” Ostling said. This will determine the timing of a recovery in demand in truck markets, he added. “If this is a slow process it will be more like a 1980s scenario, and if they have low impairments it may be more like the 1990s with a faster recovery.”

Total deliveries from the Volvo Group’s truck operations in August amounted to 7,109 vehicles. This was a decrease of 52% compared with the year-earlier period. In addition to continued low demand, deliveries for August were also affected by a prolonged vacation period.

Volvo Group

Total deliveries by market for the Volvo Group’s truck operations (Volvo Trucks, Mack, Renault Trucks, Nissan Diesel and Eicher).

(1) VE Commercial Vehicles Limited was consolidated (50%) into the Volvo Group 1 August 2008.

via Truck deliveries in August 2009 – Press releases : Volvo Group – Global.

* Q1 pretax profit 164 million SEK vs 3.52 billion y/y

* Low market activity in nearly all markets

* No recovery seen in coming quarters

* Says negotiating 4-day working week with Swedish unions (Adds CEO comments, updates share price)

By Niklas Pollard and Victoria Klesty

STOCKHOLM, April 27 (Reuters) – Truck maker Scania (SCVb.ST) posted a bigger-than-expected fall in first-quarter pretax earnings on Monday, hit by plunging vehicles markets, and said it expected demand to remain weak in the coming quarters.

The Swedish company reported a pretax profit of 164 million Swedish crowns ($19.96 million) versus year-ago earnings of 3.52 billion and the mean forecast for a 437 million profit seen in a Reuters poll of 16 analysts.

The company said that in addition to recent job cuts it planned to reduce capacity further by shortening the working week at its plants in Sweden.

Demand for trucks has collapsed under the weight of the global financial crisis and ensuing economic downturn, leaving European makers of commercial vehicles scrambling to slash costs and capacity built up during years of booming sales.

Shares in Scania turned positive in the afternoon after an initial fall, trading 0.9 percent higher by 1235 GMT, outperforming the broader market .

“The results were a little bit worse than expected, but order intake was actually a shade stronger than I had expected,” said an analyst who asked not to be identified.

Scania’s arch-rival Volvo (VOLVb.ST) last week reported a 4.5 billion crown operating loss and cut its market forecasts. [ID:nLO690029]

Volvo also reported a negative cash flow of more than 15 billion crowns, while Scania’s stayed positive at 874 million crowns compared with 1.69 billion a year earlier.

“Falling vehicle deliveries and substantially lower capacity utilisation pulled down earnings,” Scania said.

“Practically all markets where Scania has operations are characterised by low economic activity due to the turbulence in the financial markets and its impact on the real economy.”

Scania Chief Executive Leif Ostling said he thought Volvo’s forecast that the European truck market will more than halve this year compared to 2008 was a reasonable estimate.

“It will probably be in that ball park”, Ostling told Reuters on the sidelines of a news conference. “Whatever the case, it will be dramatic.”

He added he saw demand in Eastern Europe, including Russia and Ukraine, falling by 70 to 75 percent this year.

ORDER DROUGHT

Scania, which only last year reported its best annual operating earnings ever, said order bookings of trucks and bus chassis fell 70 percent year-on-year in the quarter. In its key West European market alone, orders of trucks plunged 78 percent.

“At present, Scania foresees no change in the demand for vehicles in the coming quarters,” the company said.

Scania, majority-controlled by Germany’s Volkswagen (VOWG.DE) after a $4 billion deal last year, said sales fell to 15.9 billion crowns from a year-earlier 22.0 billion to come in above the 15.5 billion seen by analysts.

“If one wants to look for positives, the total order intake came in better than expected,” Handelsbanken analyst Hampus Engellau said.

Like its bigger peers, Scania has had to slam on the brakes at its truck plants but has so far only shed staff on temporary contracts.

“Most of the 2,000 production employees with fixed term temporary contracts have left the company, a reduction to 10,000 employees in the production units and working hours have been reduced to mainly daytime shifts,” Scania said.

“Scania has postponed various investments, mainly in production, and has carried out a reduction in the number of outside consultants.”

Scania said it had plans for further capacity reductions, and was negotiating a new cost-saving scheme with Swedish unions.

“What we now has put on the table is to go for a four-day working week,” Ostling told a news conference. “Provided we reach an agreement with the unions, we get an immediate effect.”

He added the four-day working week was likely to be in effect for 6-12 months and that the capacity reduction would be equal to that generated by more than 1,000 people leaving the company. (Additional reporting by Johannes Hellstrom, Oskar von bahr and Love Liman; Editing by Rupert Winchester)

via UPDATE 3-Scania Q1 demand collapses, pretax plunges 95 pct | Reuters.