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Launch of new trucks stunts Volvo profit, orders in third quarter

Swedish truck maker AB Volvo Chief Executive Olof Persson speaks during the presentation of the company results for the first quarter 2013 in Stockholm, April 25, 2013. REUTERS/SCANPIX/Claudio Bresciani

STOCKHOLM (Reuters) - World number two truck maker Volvo (STO:VOLV B) posted much weaker than expected earnings and orders as costs and refitting of plants due to a launch of a vast range of new trucks took a heavy toll in the third quarter.

Sweden's biggest private sector employer and top company by sales is in the middle of its biggest ever roll-out of new truck models that is bringing large costs for realigning output in tow and putting pressure on its production system.

Against a backdrop of a short-term surge in demand in Europe ahead of the introduction of tougher engine exhaust rules at the turn of the year, Volvo's revamp comes at a bad time.

"The changeover to the new products will take another couple of quarters," Volvo Chief Executive Olof Persson said.

"In the short term, profitability is impacted by an elevated cost level related to all the launches, the change-over to new products and the fact that we currently are producing both the old and the new generation of products."

Volvo, vying for market leadership with Germany's Daimler (GER:DAI), said core operating earnings fell to 2.50 billion crowns (242.3 million pounds) from a year-ago 3.48 billion, well below a forecast 3.34 billion in a Reuters poll of analysts.

The company said currency headwinds had also shaved off more than a billion crowns of earnings in the quarter.

A lumbering European truck market recovery, driven by a need to replace ageing fleets, has been turbo-charged in recent months by a buying spree of older and cheaper models before they go out of production due to tougher emission rules at year-end.

While the inklings of an upturn for the crisis-hit European economy has also played a part, the roughly 10,000 euros higher price tag for new so-called Euro 6 trucks lay at heart of Volvo rival Scania's 84 percent surge in order intake this week.

By contrast, Volvo was able to reap much less of a windfall.

Volvo, which makes heavy-duty trucks under the Renault, Mack and UD brands as well as its own name, said order intake of its trucks rose 7 percent year-on-year in the third quarter with a 11 percent gain in Europe alone, its biggest market.

"The available slots for 2013 for Euro 5 trucks from Volvo were sold out during the third quarter, which had a dampening effect on order intake," the company said, adding orders at Renault were also dented by the phase-out of Euro 5 trucks.

(Reporting by Niklas Pollard and Helena Soderpalm; additional reporting by Johannes Hellstrom; editing by Mia Shanley)