Capital gains help Volvo rocket to pounds 770m profit: Return to black at car division and improved performance by trucks make for best quarter in history

STOCKHOLM (AFP) - Volvo has reported a surge in interim profits - helped by one-off capital gains - a return to the black at the car division and a much improved performance at Volvo trucks.

Group pre-tax profit rocketed to Skr9.02bn ( pounds 770m) in the first half of the year, against Skr380m last time, after the most profitable quarter in the group's history.

Capital gains from sales of shares and other assets amounted to Skr4.08bn against Skr94m in the same period last year.

Group operating profit surged to Skr4.47bn (Skr166m). Sales also accelerated to Skr75.68bn from Skr48.80bn.

The car division came out of the red with an operating profit of Skr1.48bn against a loss of Skr70m last time. Volvo Trucks, which includes trucks and buses, made an operating profit of Skr1.77bn (Skr61m).

Car sales rose by 20 per cent to 189,000 cars and the truck division delivered 32,400 vehicles, an increase of 37 per cent. But bus deliveries were down by 6 per cent.

Soeren Gyll, group managing director, said that production capacity at Volvo Cars was running at 350,000 units a year in the first half, but would rise to 380,000 a year at the end of this year and could reach 425,000 next year.

Volvo was gaining ground in its main markets. The success was partly explained by rationalisation programmes and a weakened krona.

Volvo Penta, which makes industrial motors and boats, made first-half sales of Skr1.85bn, up 28 per cent year-on-year.

Volvo Aero Group (aviation) reported sales of Skr1.66bn, up 3 per cent.

The improvement in the car group was helped by larger volumes of sales, more favourable effective exchange rates, improved profit margins and higher utilisation of capacity.

Slightly offsetting these effects was a rise in selling and administrative costs, which the company said was due to the larger volumes and increased investments in marketing.

For the truck group, the strongest increase in deliveries was in Europe and Brazil, where sales rose by more than 50 per cent. The backlog of truck orders at 30 June was up 67 per cent.

Car sales rose in Germany and Japan by 32 and 40 per cent respectively, despite shrinking markets.

Of its total car sales, 52,000 (43,600) were medium-sized models while 137,000 (112,800) were large cars.