STOCKHOLM (Reuters) - Global truck maker Volvo (>> Volvo AB) posted a surprise rise in core quarterly profit on Friday as deep cost cuts more than made up for lacklustre demand in some major markets, sending its shares up 10 percent.

The group, which vies for market leadership with Germany's Daimler (>> Daimler AG) and Volkswagen's (>> Volkswagen AG) Scania and MAN brands (>> Man SE), said it would take out more costs to boost profitability that has often lagged its rivals.

"I see this quarter as a small but very solid step in the journey to create a profitability for the Volvo group that is among the best in the industry," said CEO Olof Persson, who has led efforts to improve performance over the past two years.

Volvo, Sweden's biggest company by sales and top private sector employer, said third quarter operating profit excluding restructuring charges rose to 2.91 billion crowns (250.06 million pounds) from a year-ago 2.50 billion. That easily beat a mean forecast of 2.07 billion in Reuters poll of analysts.

The truck maker said its cost cuts had produced savings of 1.6 billion crowns, almost a billion more than in the preceding three months.

It also said that it would review its IT business with thousands of staff to determine what was essential to its operations. There has been speculation that Volvo could sell all or part of the business.

Volvo had been under pressure to prove that a sweeping efficiency drive involving thousands of job losses and closure of some smaller plants was lifting its profit margins.

SEB Equity Research, which rates Volvo stock a buy, said the figures showed cost cuts had begun "biting for real".

Volvo share were up 10 percent at 10:00 a.m. BST, the standout performer in an otherwise little changed Stockholm index.

Ahead of the report, its stock had slumped more than 25 percent over the past six months compared with a 16 percent slide in the European autos index <.SXAP> and a nearly flat Stockholm bourse <.OMXS30>.

MORE CUTS

The company, based in the southern city of Gothenburg, said it planned to make a further 3.5 billion crowns of structural costs by the end of next year. That would bring the estimated full year savings to 10 billion in 2016 compared to its cost base in 2012.

The company has cut 4,4000 white collar jobs from its total workforce of 110,000 while manual jobs have also been shed.

Volvo, which also has a large construction equipment business, said its operating margin excluding restructuring charges rose to 4.3 percent in the quarter from a year-ago 3.9, topping the 3.2 percent seen by analysts.

While U.S. truck sales have picked up pace, demand in Europe has been far more patchy, reflecting both the weak state of the underlying economy and the sharp market swings brought on by new green engine rules at the turn of the year.

"For 2015, we forecast that the market for heavy-duty trucks will be on the same level as in 2014 in Europe, Japan and China, on a higher level in North America and India and on a lower level in Brazil," the company said in a statement.

Volvo, which sells trucks under the Mack, Renault and UD brands as well as its own name, raised its forecast for industry sales in North America this year and stood by its outlook for only a moderate decline in Europe.

(Editing by Alistair Scrutton/Keith Weir)

By Niklas Pollard and Johannes Hellstrom

Stocks treated in this article : Man SE, Daimler AG, Volkswagen AG, Volvo AB