World number two truck maker Volvo AB delivered forecast-beating second-quarter earnings, due to a pick up in truck demand, cost cuts and growth in its construction division.

Truck makers saw sales plunge during the global downturn as demand dried up, but companies have been getting more optimistic during the recovery. Market leader Daimler AG last week also reported a surprisingly robust second quarter for its trucks unit.

During the second quarter, the Volvo group's sales continued to increase as a result of the gradual recovery in demand in most of the group's markets, Chief Executive Leif Johansson said in a statement on Thursday.

Johansson said the sales trend had been particularly strong in Asia and South America. But he also noted that, from a historical perspective, sales were still low and the earnings recovery was driven by cost cuts, which had reduced the group's breakeven level.

The company reported a second-quarter pretax profit of 4.5 billion crowns ($607.5 million), well ahead of the mean forecast in a Reuters poll of 3.4 billion.

Niclas Hoglund, analyst at Swedbank, said the good result was driven by a better performance in the construction equipment division, with trucks order intake, up 82 percent year-on-year in the quarter, also being a positive.

The only weakness in the report is that the trucks side 'only' meets market expectations. It could be possible that the whispering consensus was a bit higher, he said.

Truck sales rose 24 percent year-on-year to 41.6 billion crowns, while the division's operating profit came in at 2.5 billion crowns, in line with the poll forecast.

Its second-largest division, construction equipment, generated sales of 15.3 billion crowns and made a profit of 2.1 billion, beating the forecast 1.4 billion.


Though many in industry and the financial markets have become concerned about the sustainability of the recovery, with U.S. Federal Reserve Chairman Ben Bernanke saying on Thursday the outlook for his country's economy was unusually uncertain , Volvo said it still expected further growth in its markets this year.

In terms of market conditions, we see an increase in activities among our North American customers and that order intake is on the way up, Johansson said.

We anticipate that the demand for new trucks in North America will continue to rise during the second half of this year and that the gradual increase in Europe will also continue.

He said this meant the group was sticking to a forecast for European market growth this year of about 10 percent and for North America to grow abut 20 to 30 percent.

In the second quarter, its truck order intake for Europe rose 112 percent year-on-year, in North America it was up 105 percent and for Asia it gained 70 percent year-on-year.

(Editing by David Holmes) ($1=7.407 Swedish Crown)