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UPDATE 3-Scania sees better 2004 W.European truck market

(Adds CEO news conference comment, analyst comment)

By Patrick McLoughlin

STOCKHOLM, Oct 27 (Reuters) - Scania , Europe's third-biggest truck maker, posted a gain in third-quarter pre-tax profit just below expectations on Monday but said demand in its main Western European market could improve next year.

Scania posted pre-tax profit of 765 million crowns ($99 million), compared with a consensus estimate of 771 million in a Reuters poll of 14 analysts, and with the year-ago figure of 532 million.

Scania shares rose 1.6 percent at 1423 GMT, outperforming a Swedish market, whose benchmark OMX index was up 1.4 percent.

Analysts said Scania chalked up a strong performance in the weak key west European market, helped by cost cutting.

"It is an impressive set of results especially considering they have had no help from the market," said John Lawson at Smith Barney in London.

Sales of 11.6 billion crowns exceeded both expectations at 10.47 billion and the year-ago figure of 10.38 billion.

In the first nine months of the year Scania's orders for heavy trucks in Western Europe declined by 12 percent to 19,843 units from 22,619 a year ago. Western Europe accounts for about two thirds of Scania's sales.

"Economic growth in Scania's main markets in Western Europe was weak but is expected to improve somewhat next year," Chief Executive Leif Ostling said in a statement. "Earnings for the rest of 2003 are expected to remain at a satisfactory level."

In Latin America, truck orders jumped 33 percent and Central and Eastern Europe orders rose eight percent.

"Increased demand from markets outside Western Europe could not offset the downturn in the Western European market," Ostling said.

Analysts have said that demand this year in the Swedish truckmaker's core segment -- trucks at the top end in terms of power and performance -- has remained fairly stable, despite an overall downturn in the truck market in Western Europe.

Scania estimated a total market in western Europe of 210,000 heavy trucks in 2003 and the CEO told Reuters on the sidelines of a press conference later that the market would be unchanged to slightly firmer in 2004.

"If the economic forecasts in the market hold true, we will see a little bit stronger demand next year but the basic scenario is a market continuing at current levels," he said.

The truck industry, which tends to reflect wider economic conditions, has suffered in the last two years from slumping demand on both sides of the Atlantic, with most players hit.

But last week, the world's number-two truckmaker, AB Volvo , beat expectations with its third-quarter profits and raised its forecast for total demand for heavy trucks in Europe.

Additionally, the truck unit of Germany's MAN said it expected significantly stronger profits this year and next and forecast a slight pick-up in European truck demand in 2004.

Analysts said the Scania outlook was slightly more cautious.

"I am a bit surprised at Ostling's caution about the outlook. It isn't exactly bullish," said Patrick Juchemich of Sal Oppenheim in Frankfurt, which has a "neutral" rating on Scania. He noted, however, that Scania traditionally was conservative in giving guidance.

Since the start of the year Scania shares have risen by almost a third, outperforming the DJ Stoxx Auto index by more than 15 percent. (Additional reporting Jennie Dehlen and Niklas Pollard, Stockholm and Madeline Chambers in Frankfurt)