‘Reasonable year’ for Volvo

By Sandy Guthrie06 February 2013

Volvo Construction Equipment CEO Pat Olney

Volvo Construction Equipment CEO Pat Olney

Volvo Construction Equipment (Volvo CE) has described 2012 as “a reasonable year” despite a sharp drop in global demand in the last three months of the year.

Announcing its fourth quarter and full year results, Volvo CE said that despite this dramatic fall in demand, it had rounded off a solid 2012 by extending its market leadership of the Chinese wheeled loader and excavator segments, protected profitability via active inventory management – and sold its second highest ever number of machines.

It reported that net sales for 2012 had remained at the same level as the previous year, despite the decrease in global demand in the second half. The company also claimed to have extended its share in 2012 to 15% of the important Chinese wheeled loader and excavator segment.

The company also claimed its second best ever output, selling 78,491 machines during the year.

For the full year 2012, Volvo CE’s sales increased by less than 1% to SEK63.6 billion (€7.4 billion), compared to SEK63.5 billion (€7.39 billion) in 2011. Operating income reduced during the year, which was attributed to lower sales and negative product mix, to SEK5.8 billion (€672 million). This was down from SEK6.8 billion (€793 million) in the preceding year.

Operating margin was also affected, at 9.1% in 2012 compared to 10.7% in 2011, as was the value of the order book, which on 31 December was 36% lower than a year earlier.

Volvo CE said that these full-year figures masked a significant slowdown in demand in the fourth quarter results of 2012. It said a softer world market, in mining especially, saw net sales in the last three months down by almost a quarter (23%) and amounted to SEK12.6 billion (€1.5 billion), compared to SEK16.4 billion (€1.9 billion) in 2011.

When adjusted for changes in the exchange rates, net sales fell by 22%, according to Volvo CE. Operating income was also down, at SEK363 million (€42.3 million), from SEK1.7 billion (€194.9 million) in the same period in the previous year.

The company said that despite this dramatic fall in sales, operating margin remained positive at 2.9%. It said this was thanks to “rapid and significant cuts in production and a consequent reduction in inventories”.

Pat Olney, president of Volvo Construction Equipment, said, “Taken as a whole, 2012 was a reasonable year. We sold over 78,000 machines, recorded the company’s second highest ever revenues and our proactive downturn management helped protect cash flow and profitability.

“We recognised the turn in the industry early, and the work undertaken to reduce pipeline inventories was successful. Stock levels have been reduced by around 30% since late spring and are now in balance with current demand.”

Volvo said the prospects for 2013 were expected to remain subdued, with unit sales in Europe predicted to decline by 5 to 15%, while Asia (excluding China) is forecast to fall by up to 10%. Meanwhile, the China, North America and South America, and Other Markets segments are all forecast by Volvo to operate in the range of -5% to +5%.

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