In the fast lane

Stockholm, April 25 (Reuters): Rising demand helped world number-two truck maker Volvo shrug off high raw material prices with a forecast-beating 53-per cent rise in first-quarter pretax earnings on Monday.

Volvo reported pretax profit of 4.6 billion Swedish crowns ($655.7 million), up from 3.0 billion a year earlier. It had been expected to earn 3.7 billion, according to the average estimate in a Reuters poll of 13 analysts.

Their forecasts ranged from 3.0 billion to 4.5 billion crowns.

?It is a great report. The main point is certainly that the trucks beat all expectations,? said an analyst who asked not to be named. ?It is hard to make estimates of the cost savings, but slightly better volumes explain at least a good part of the earnings increase.?

Volvo shares traded up 0.2 per cent at 308.5 crowns by 0733 GMT, outperforming the DJ Stoxx European auto sector index, which was down 0.3 per cent.

?The headline profit figures are very strong and the margins are better than we were looking for, particularly on trucks,? a dealer said.

The overall operating margin ? operating profit as a percentage of sales ? rose to 8.7 per cent versus an adjusted 5.1 per cent in the year-earlier quarter, well above its long-term target of 5 to 7 per cent.

Trucks have been the bright spot in an otherwise lacklustre vehicles market over the past year, with heavy-duty truck makers profiting from strong demand in North America, Europe and Asia.

?Demand increased further in North America, where order bookings were high for Mack Trucks as well as Volvo Trucks,? chief executive Leif Johansson said in a statement.

Earnings at its core trucks unit ? Volvo also makes construction equipment, buses and engines ? doubled to 3.1 billion crowns versus an expected 2.7 billion on the back of firm demand for new models launched over the past two years.

?It is obviously yet another quarter where the market has not been aggressive enough in its estimates,? another analyst said.