World number two truck maker Volvo stayed mired in losses in the fourth quarter as restructuring costs weighed, and it joined rivals in predicting only a gradual market recovery this year with Europe bringing up the rear.

In contrast to domestic peer Scania, which churned out forecast-beating profits this week, Volvo lagged expectations. But its healthy cash flow cheered the market and the share price rebounded from initial losses.

As the truck sector emerges from its worst slump in decades, Volvo said its operating loss sank to 2.3 billion Swedish crowns ($316 million) from a loss of 999m crowns a year ago. Analysts in a Reuters poll had forecast 519m crowns.

The firm, which has slashed thousands of jobs to bring down costs in the face of the downturn, booked 1.4bn crowns of costs for restructuring, layoffs and inventory writedowns.

Volvo, which makes heavy-duty trucks under the Renault, Mack, UD Trucks and Eicher brands, said it expected only a gradual upturn in fortunes during this year.

"Our current assessment, which is in line with the rest of the industry, is that both the European and US markets for heavy trucks will start off weak and gradually improve during the year," the company said.

Europe would grow about 10 per cent and the North American market around 20-30pc. Volvo's report drew a mixed reaction.

"Operationally, they are just not really sorting out the profitability," Handelsbanken analyst Hampus Engellau said.

"But cash flow was twice as high as I had expected while net debt came down by 9bn (crowns) during the quarter. That's positive since it removes some of the talk concerning high net debt."

Volvo said cash flow was positive to the tune of 8.6bn crowns versus a negative 1.4 billion crowns in the previous quarter.

The global financial crisis slammed the heavy-duty truck markets with full force in late 2008, ending years of easy credit for funding purchases of new vehicles and plunging major economies across the world into a tailspin.