Volvo CE operating income slumps

The downturn in China and falling markets around the world have hit Volvo Construction Equipment’s first quarter results, with operating income slumping 76% year-on-year to SEK500 million (€58 million).

Net sales also slipped 33% compared to the first three months of 2012 to SEK12 billion (€1.4 billion). In total, the manufacturer delivered 15,949 machines during the period, down 29% year-on-year.

Volvo CE said the drop in deliveries reflected the fact that the global mining industry was booming in the first half of 2012, but there was a steep drop in demand during the second half – particularly in Asia – and that the market has remained on a low level thereafter.

“Also, in the first quarter of 2012, there was an inventory build-up in the dealer channel that boosted deliveries. After significant destocking of the pipeline in the second half of 2012, inventories for Volvo CE and its dealers are currently in balance with demand,” the company said.

However, the manufacturer said production in the first quarter was increased from a low level in order to balance inventories and meet spring season demand. Volvo CE also opened new regional headquarters in Shippensburg, Pennsylvania, US, during the first three months of 2013.

Group president and CEO Olof Persson said, “We see that the weak market for construction equipment in China means that the financial situation for some customers and dealerships there remains strained.”

Looking ahead, Volvo CE’s forecasts for the year remain unchanged. It expects that the total construction equipment market in Europe (measured in units) will decline by between 5% and 15% for 2013. North America, South America and China are all expected to be in the range of -5% to +5%. Asia, excluding China is expected to decline in the range of 0% to 10%.