September 17, 2009 / 7:37 AM / 10 years ago

UPDATE 2-Scania CEO sees no real sign of market upturn

* Scania CEO says market still at low level

* Says destocking phase largely over, inventories normalised

* Expects real level of demand to become clear during autumn (Adds quotes, background, share price)

By Niklas Pollard and Johannes Hellstrom

SODERTALJE, Sweden, Sept 17 (Reuters) - Truck maker Scania’s SCVb.ST top executive said on Thursday that economic gloom still dominated heavy truck markets and while demand is not falling any longer, there was no real sign it is improving.

“The bright point is that it (the market) has not continued even further down. It looks to have bottomed out,” Scania Chief Executive Leif Ostling told Reuters on the sidelines of a capital market day.

Ostling said he expected the underlying demand picture to become clearer during the autumn.

“What happens next year will largely depend on what position the banks will be in,” he said.

The Swedish heavy-duty truck and bus maker just barely stayed profitable in the second quarter, pummelled by the steepest fall in demand in decades as the global financial crisis cut years of easy credit. [ID:nLN274307]

Still, signs of some stabilisation in the highly-cyclical market for commercial vehicles have emerged in recent months though clear evidence of any recovery remains distant.

Earlier this week, Scania’s larger domestic rival Volvo (VOLVb.ST) said its truck shipments, while still dismal, fell slightly less year-on-year in August than in the preceding month. [ID:nLF329005]

Ostling said the phase of scaling back inventories that has worsened the slump in truck markets was largely over, leaving the company able to raise its production level despite the continued weak demand.

“I don’t think we should be too bullish over these signals and say that now it’s over again and steaming up,” Ostling told analysts at Scania’s headquarters, south of Stockholm.

“I think we have to be cautious also next year because the financial system is still in such a bad shape.”

Scania shares were up 0.9 percent to 88 crowns by 0836 GMT, narrowly outperforming a 0.4 percent gain in the Stockholm bourse's blue chip index .OMXS30.

Inventory levels had normalised in most regions while the second-hand truck market, which has seen a glut of modern vehicles as operators cut their fleets due to the downturn, had also stabilised, Ostling said.

The financial crisis has seen credit dry up for many small- and mid-size transport firms, leaving them unable to finance purchases of new commercial vehicles and exacerbating the impact of the economic downturn.

“Balance sheets of some banks are in a pretty bad shape. The size of the impairments that banks will have to do will decide how much liquidity will be available for us in the industry,” Ostling said.

This will determine the timing of a recovery in demand in truck markets, he added.

“If this is a slow process it will be more like a 1980s scenario, and if they have low impairments it may be more like the 1990s with a faster recovery.” (Reporting by Niklas Pollard and Johannes Hellstrom; Editing by Mike Nesbit and Rupert Winchester)

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