Sweden's AB Volvo plans big shareholder payday as profit beats

STOCKHOLM (Reuters) – Swedish truck maker AB Volvo (ST:) reported a smaller-than-expected fall in fourth-quarter earnings in the face of slowing demand and unveiled plans on Thursday for a payout to shareholders that blew past market expectations.

The downturn underway in the volatile truck cycle that will be a test of Volvo’s resilience with CEO Martin Lundstedt having spent his four years at the helm boosting flexibility across the group more in the mold of his former employer, Scania.

Operating profit at the maker of trucks, construction equipment and buses fell to 9.2 billion crowns ($969 million) from a year-ago adjusted 10.6 billion, beating an analysts’ mean forecast of 8.4 billion, according to Refinitiv estimates.

The rival of Germany’s Daimler (DE:) and newly listed Traton (DE:) said it was focused on adapting to lower volumes and that while its production in Europe was well aligned with demand in Europe, further cuts were needed in North America.

“Our increased profitability and strong financial position allow us to invest in our future as well as return cash to our shareholders,” Lundstedt said in a statement.

Strong truck sales ahead of the current slump have helped drive cash generation at Volvo in recent years, allowing it to carry out an extraordinary payout to shareholders a year ago and fuelling analysts expectations for more of the same.

Volvo proposed raising its ordinary dividend to 5.5 crowns per share from a year-ago 5.0 crowns and said it planned an extra dividend of 7.5 crowns per share, up from the 5.0 crown per share bonus payout last year.

Analysts had on average forecast a total payout of 10.36 crowns per share for 2019, Refinitiv estimates showed.

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