The net profit in the final three months of 2012 was 793 million kronor ($125 million), down from 4.72 billion kronor in the same period a year earlier. Sales fell to 71.8 billion kronor from 86.5 billion kronor in the fourth quarter of 2011.
Europe's debt crisis eroded demand, particularly in financially strapped southern Europe, where Volvo-owned Renault Trucks' order intake dropped by 18 percent. In North America, orders fell by 21 percent as customers delayed purchases due to sluggish job growth and concerns over the fiscal cliff, Volvo said.
"North American customers have remained cautious because of uncertainty about the future economic development," the company said. Still, it maintained its forecast that the market for heavy trucks in 2013 would reach about 250,000 in North America and 230,000 in Europe.
Volvo shares rose 4 percent to 96.55 kronor in Stockholm.
Trucks represent two-thirds of Volvo's sales, but the Goteborg, Sweden-based company also makes buses, construction equipment and boat and aircraft engines. Volvo sold its car division in 1999 to Ford Motor Co., which in turn sold it to China's Geely Holding Group in 2010.