--Volvo 2Q net profit rose 21% on year, ahead of analysts' forecasts

--Guidance lifted for key North American and European truck markets

--Strategic alliance with Samsung SDI announced for electric-truck battery-pack development

By Dominic Chopping

STOCKHOLM--Volvo AB (VOLV-B.SK) on Thursday reported bumper earnings in its second quarter as sales of vehicles and services rose, but a sharp drop in orders for new trucks will lead to production cuts during the second half.

The Swedish truck maker said net profit for the period ended June 30 was 11.13 billion Swedish kronor ($1.19 billion) compared with SEK9.22 billion a year earlier, beating analysts' forecasts of SEK9.5 billion, according to a FactSet poll.

Sales rose 16% to SEK120.69 billion, beating analysts' forecasts of SEK111.73 billion, while the group's adjusted operating margin grew to 12.5% from 11.1%.

Truck volumes grew by 10% in the quarter, but order intake fell 21%, it said.

In Europe, even though transport activity has remained solid, customers have become more cautious to invest in new trucks, while in North America, the decline is related to the exceptionally strong order activity in 2018 and the fact that customers have ordered what they need for 2019.

Customers are awaiting more visibility on economic development in 2020 before placing new orders, Volvo said.

The company lifted guidance for North American retail sales to 325,000 in 2019 from a previous estimate of 310,000 and increased guidance for the European market to 320,000 from 300,000. Chinese demand for heavy- and medium-duty trucks in 2019 is still projected at 1.15 million vehicles.

In a separate announcement, Volvo said it has entered a strategic alliance with Samsung SDI to develop battery packs for Volvo's electric trucks.

The alliance will cover joint development of battery packs specifically developed for Volvo Group's truck applications.

Volvo didn't give any specific figures on production cuts in the second half.

Write to Dominic Chopping at dominic.chopping@wsj.com; @domchopping @WSJNordics

(END) Dow Jones Newswires

July 18, 2019 05:23 ET (09:23 GMT)

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