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Volvo truckmaker's profit rises 24 per cent in fourth quarter

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Volvo AB posted a 24 per cent increase in fourth-quarter profit Friday as sales growth stalled for the world's second-biggest truckmaker, missing analysts' forecasts.

But Volvo shares rose as the company reported strong order bookings, declared it would pay shareholders an extraordinary dividend and raised its forecast for growth in the European truck market.

Goteborg-based Volvo said it earned 3.7 billion kronor (US$533 million) in the last quarter of 2006, up from three billion kronor a year earlier. Sales dipped to 65.1 billion kronor ($9.37 billion) from 65.3 billion kronor in 2005.

Analysts polled by SME Direkt had forecast a profit of 3.89 billion kronor ($560 million) on sales of 67.5 billion kronor ($9.72 billion).

But Volvo said order bookings grew eight per cent.

The company proposed an ordinary dividend of 25 kronor ($3.60) a share and an extraordinary dividend through a 6-to-1 share split, where the sixth share will be redeemed by Volvo for another 25 kronor a share.

It also said it now expects European heavy truck demand to reach 300,000 from its previous estimate of 290,000, but warned that demand in North America is expected to fall sharply in the first half of the year. It added that it is difficult to assess the demand expected in North America in the second half.

Shares in Volvo rose 0.4 per cent to close at 513 kronor ($73.87).

Sydbank analyst Jacob Pedersen in Copenhagen said that although Volvo's bottom-line figures were lower-than-hoped due in part to unfavourable exchange rates, it was more than compensated for by the ``clearly strong'' order intake in Europe. He added that ``the dividend was very positive news for shareholders.''

Volvo's 2006 order bookings were particularly strong in Easter Europe, where it recorded a more than a 40 per cent increase in sales. In the fourth quarter, truck order bookings more than doubled there, the company said.

For the full year 2006, profits climbed to 16.31 billion kronor ($2.35 billion), up from 13.11 billion kronor in 2005. Sales came to 248.14 billion kronor ($35.73 billion) from 231.19 billion kronor in 2005.

CEO Leif Johansson called that Volvo's ``best year in history'' and announced the company will reward its staff with a maximum contribution from its profit sharing program which will total 450 million kronor ($65 million).

``The year 2006 was eventful, with extensive product launches and major changes in the industrial system, particularly toward the end of the year,'' Johansson said in a statement.

Volvo, the world's second-largest truckmaker behind DaimlerChrysler AG, has 83,000 employees. It sold its car division to U.S.-based Ford Motor Co. in 1999.

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Volvo truckmaker's profit rises 24 per cent in fourth quarter
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