In the face of a reduction in the size of the total market for construction equipment, Volvo Construction Equipment (Volvo CE) bucked the trend in the second quarter of 2012, posting a solid set of financial results that saw sales in the three months up 15%, operating income up 35% and an operating margin of 13.3%. The period also saw the company strengthen its market position in wheel loader and excavator sales in China, taking a 14.7% share of this all-important market.
Despite a downturn in the Chinese market, which declined by 38% during the quarter, sales at Volvo CE were positively impacted by strong momentum in most other markets, particularly North America, and a favorable product and geographic mix. Net sales in the second quarter rose by 15%, amounting to SEK 19,715 M (SEK 17,153 M in Q2 2011). Operating income, meanwhile, increased by 35% and amounted to SEK 2,629 M, up from 1,945 M in 2011. This had a positive impact on operating margin, which jumped to 13.3%, up from 11.3% in the same period in 2011. The value of Volvo CE’s order book at the end of the second quarter was also higher, up 14% compared to the same date in 2011.
Commenting on the results, Mr. Pat Olney, the president of Volvo CE said: “Sales growth continued to be robust during the quarter, most notably in North America where sales were up 89% compared to the same period last year. In Asia we managed to offset a sharp decline in the overall market in China by continuing to gain market share, while demand in Southeast Asia remained strong.”
Given the present global macroeconomic situation, the rest of the year is uncertain from a volume and pricing point of view. For the full year 2012 Europe is anticipated to be flat (previous forecast up 10-20%), while expectations regarding North America remain unchanged at growth of 15-20%, South America to grow by 0-10% (unchanged) and Asia excluding China to increase by 0-10% (unchanged). As previously forecast, China is expected to decline by 15-25%.
Important events during the quarter
Construction began in April of a new 20,660m2 facility in Kaluga that will, when completed in 2013, produce six models of excavators for the Russian market. This was followed in May by the ground breaking of a $100 million expansion of Volvo CE’s facility in Shippensburg, US, creating a new Americas headquarters, demonstration center and the ability to localize production of larger machines. The quarter also saw Volvo CE attend the Intermat exhibition, in Paris, France, where it launched its ECR145D/ECR235D reduced radius excavators, heavy duty EC380/480D excavators, DD25 double drum compactor and P7820C ABG asphalt paver.
The company also picked up a number of important honors during the period, not least taking gold in the Intermat Innovation Award for its On Board Weighing System for haulers, and the prestigious Red Dot ‘best of the best’ accolade for the A40F articulated hauler.