Volvo surprises with first-half profit

VOLVO cut through the gloom in the European car sector by announcing a surprise profit for the first half of the year. However, Renault, with which it is due to merge, followed the recent trend with plunging profit figures.

Volvo's 'B' shares jumped Skr10 to Skr452 after the Swedish company announced a Skr380m ( pounds 31.8m) pre-tax profit, compared with the Skr305m loss expected by the market. Operating profit was Skr166m, compared with an Skr835m loss in the first half of 1992, all of which was made in the second three months.

The improvement was the result of heavy cost-cutting and better-than-expected sales figures. 'Everything was marginally better so the overall result was much better,' said Philip Ayton, an analyst with BZW.

Since Volvo fell into loss three years ago, it has closed two factories. This year alone its workforce has fallen by 3,700. Overall car sales were down by 2.3 per cent, at 156,400, but Volvo countered the effect of tumbling European sales by doubling sales in Thailand to 3,400 and lifting sales in Japan by a third to 5,600. Its commercial vehicle division benefited from the sharp recovery in the US heavy truck market.

Sales were down slightly in the UK, the only European market where overall sales have risen this year. A spokesman said this was because it was waiting for the new 850 estate to be launched.

In contrast, Renault's first-half pre-tax profit was 87 per cent down on the corresponding period last year, falling from Fr5.44bn (pounds 615.2m) to Fr730m. Operating profit was down by almost as much, from Fr5.5bn to Fr863m, on sales down 8.4 per cent at Fr87.1bn.

The company blamed the fall on the weaker European car market, which contracted by 17.2 per cent in the first half.

Renault said it would intensify efforts to cut costs, and analysts expect it to stay in profit during the year.