Scania second quarter undershoots, shares slide

Swedish truckmaker Scania said higher costs, a strong Swedish crown and a shift in business mix hit second quarter profits which came in below market forecasts.

Operating profit at Scania, majority-owned by German automaker Volkswagen and in merger talks with rival MAN SE , fell to 3.3 billion crowns ($516 million) from a year-ago 3.5bn and compared with a forecast of 3.9 billion in a Reuters poll.

"Higher vehicle and service volume was offset by a significantly stronger Swedish krona, a higher cost level and an altered market mix," Scania CEO Leif Ostling said in a statement.

Shares were down 5.1 per cent at 126.50 crowns at 0756 GMT against a 1.6 per cent fall in the Stockholm blue-chip index .

After seeing the market crumble during the downturn, demand has bounced back with growth spreading from emerging markets in Asia and Latin America to more mature markets on both sides of the Atlantic.

Scania, which does the bulk of its business in Europe, South America and Asia, said net sales were up 12 per cent versus the year-ago period with order bookings up 8 per cent.

It said demand had improved in Europe, particularly in the northern parts, though recovery was slower in the southern area of the continent.

Russia, Asia and the Middle East remained strong, but Scania said Brazil had slowed compared with the very strong start to 2010.

With Brazil making up a smaller part of its business and other emerging markets growing in importance, Scania said it was seeing a negative impact on vehicle margins and a weaker currency mix.

The company's operating margin slipped to 14.4 per cent against a forecast for 16.6 per cent in a Reuters poll and 17 per cent in the year ago quarter.

Scania said nothing about its merger talks with Germany's MAN. Volkswagen has a more than 70 per cent voting stake in Scania and owns around 56 per cent of MAN.