Global truck maker Volvo forecast a steeper slowdown in the North American heavy-duty truck market this year and said it would cut production there after posting a slightly smaller than expected rise in fourth quarter earnings.
Volvo, a rival of German Daimler and Volkswagen's truck brands, is contending with falling demand for commercial vehicles in the United States and Brazil and a steep plunge in purchases of its construction equipment in China.
While European truck sales are growing, the group's ability to parry downturns elsewhere is an acid test for the leaner and meaner Volvo it has sought to create through years of cost cuts, targeted to reach 10 billion crowns ($1.17 billion) this year.
Sweden's biggest company by revenues said adjusted operating profit rose to 4.57 billion Swedish crowns ($543.76 million) from a year-ago 3.02 billion, just lagging a mean forecast of 4.72 billion in Reuters poll of analysts.
A slowing US economy, weak freight data and destocking has hit truck orders in recent months though Volvo's sales, working of a hefty backlog, have so far held up well. In Europe, a recent bright spot for many manufacturers, orders remain robust.
Volvo, which sells trucks under the Mack, Renault and UD brands as well as its own name, raised its European truck market outlook but scaled back expectations regarding both Brazil and North America, where it now forecast a 14 percent fall.
"During the first quarter we will adjust production to the new lower level of demand in North America and Brazil," said new Volvo CEO Martin Lundstedt, appointed last year after the sacking of predecessor Olof Persson amid impatience over progress on the vast cost cutting scheme.
Volvo said orders intake of its trucks fell 20 percent in the quarter versus the 16 percent decline seen by analysts.
At its other major arm, its construction equipment business which accounts for a fifth of group sales, Volvo slumped to a loss versus an expected slim profit and retained a forecast for a continued slump of 10-20 percent in the Chinese market.
The company proposed an unchanged dividend 3.0 crowns per share, below a forecast 3.18 crowns.