Volvo’s strongest year ever
By Sandy Guthrie30 January 2019
Volvo Construction Equipment (Volvo CE) has reported that 2018 was its strongest year ever, with sales up 21% in the fourth quarter.
Deliveries in the quarter increased by 24%, and Volvo CE said it ended the year buoyed by good demand from all major regions and all industrial segments.
It said it had not only posted its best set of annual financial results ever, but that this also helped its parent company, the Volvo Group, achieve record results.
Growth in both machine and service businesses, and increased demand from construction, infrastructure and mining in all major markets, were said to have helped Volvo CE deliver strong improvements in sales, operating income and order intake.
In the fourth quarter of 2018, Volvo CE’s net sales increased by 21% to SEK20.32 billion (€1.96 billion), up from SEK16.73 billion (€1.61 billion) for the same period a year earlier. Operating income rose by 19% and amounted to SEK2.16 billion (€208.29 million, which was up from SEK1.82 billion (€175.43 million).
It said that higher sales had a positive impact on earnings, but this was partially offset by higher production costs and selling expenses.
For the full year, net sales increased by 27%, to SEK84.24 billion (€8.12 billion), which represented an increase from the SEK66.31billion (€6.39 billion) reported for the previous year.
Volvo CE said that demand in Europe had improved during the fourth quarter of 2018, and was up 12% by the end of November, helped by strong growth in Russia, and moderate growth in the UK, France, Italy and Germany.
North America was up by 16% over the same period in 2017, helped by greater demand for excavators – compact excavators were up 10%, larger excavators up 23% – while South America saw a gain of 20%, up from low levels in the fourth quarter of 2017, and driven mostly from growth in Brazil.
Excluding China, Asian markets were up 11% compared to last year, boosted by an improving Indian market. The Chinese market itself was up strongly, growing by 35% above 2017, driven by greater demand for excavators – both compact and general purpose – and wheeled loaders.
During the fourth quarter of 2018, Volvo CE saw net order intake increase by 9%, largely driven by strong demand for its SDLG-branded machines in China.
Order intake in Europe increased by 2% compared to the same period in 2017. In North America order intake declined by 24%, as a result of lower orders on medium and large machines after strong demand in the third quarter, and a particularly strong period in the corresponding quarter of 2017 which saw order intake up by 86%.
In Asia, order intake was up by 26%, while in South America it dipped by 5%, and by 22% in Africa and Oceania.
The 24% increase in deliveries was boosted by higher volumes in China on SDLG products, and good growth in all major regions.
Melker Jernberg, president of Volvo CE, said, “In the future, we see further potential to increase volume flexibility in the supply chain, to improve quality and to grow our service business.
“An even stronger service business means that we can provide better support for our customers and also better balance the cyclicality in construction equipment sales.”
During 2018, Volvo CE continued its drive to develop next-generation solutions, looking at electrification, automation and connectivity.
The company demonstrated electric machine prototypes during 2018 and, in a 10-week trial, together with customer Skanska, tested the Electric Site concept. This was based on autonomous, electric and connected Volvo machines running in a quarry. Results showed that Electric Site could deliver significant reductions in carbon emissions as well as operator costs.
In early 2019, Volvo CE announced that it would stop delivering diesel-powered smaller compact equipment in favour of fully-electric machines.