Volvo’s fourth quarter results fall

05 February 2015

Volvo Construction Equipment president Martin Weissburg

Volvo Construction Equipment president Martin Weissburg

Volvo Construction Equipment has released its latest results that have shown a 13% currency adjusted fall in fourth quarter construction revenues, amid challenging market conditions.

Figures for the period stood at SEK12,277 (€1.3 billion), against 13,005 (€1.38 billion) for 2013, with its annual total being SEK52, 855 (€5.59 billion), compared to SEK53,437 (€5.6 billion) recorded in the same period for the previous year.

The company recorded an operating loss of SEK 815 million (€86 million) within its construction equipment operations in the fourth quarter of 2014, compared with SEK 272 million (€28.8 million) for the same period in 2013 – which the company attributed to credit losses in its operations.

CEO Olof Persson explained that despite encouraging results in its truck business, he said Volvo CE had experienced “continued difficulties” as markets in Europe and China decreased further.

The company confirmed it is to discontinue production of its branded backhoe loaders and motor graders, which will result in 1000 job losses and closure of its European facilities at Wroclaw, Poland.

There is also to be a substantial reduction in production at its other locations at Pederneiras, Brazil, and at its Shippensburg facilities in the US. Consequently, operations under the backhoe loader ranges are to be transferred to the SDLG brand in China, which Volvo said had demonstrated growing demand.

According to its latest annual results, the company’s net order intake for the fourth quarter was down 33% against 2013 figures, with unit deliveries also decreasing by a total of 30%.

Volvo said this had been influenced by uncertainty in the Russian and Chinese market. The latter saw a 46% order intake compared with its performance the previous year – which the company said had impacted on both its own Volvo and SDLG brands.

Regional results

By region, the fourth quarter results included a 2% fall in European construction revenues to SEK 4,023 million (€0.4 billion), though stronger performance earlier in 2014 meant the overall annual figure was up 5% to SEK 17,215 (€1.82 billion).

In Asia, fourth quarter sales were down year-on-year by 22% to SEK 3,958 (€0.41 billion) and fell across 2014 as a whole by 16% to SEK 18,456 (€1.95 billion).
Within South America, fourth quarter results were up 1% to SEK 843 million (€89.28 billion), registering an annual decrease of 2% to 3,314 (€0.35 billion). These losses were compensated by a strong performance in North America, where fourth quarter net sales were SEK 2,595 million (€0.27 billion) which was up 23% and SEK 10,784 million (€1.14 billion) for the year (up 30%).

In terms of net orders in North America, fourth quarter figures were 8% lower (to a total of 1,426 machines), which the company said was mainly due to lower demand for additional units into rental fleets. However, the overall 2014 figure (10,784 sales) was 25% higher than the previous year.

In the fourth quarter, net group sales were SEK 77,480 million (€8.2 billion) which represented a 4% decline compare to the previous year.

Volvo’s overall group performance for 2014 saw net sales of SEK 282,948 (€29.96 billion), compared against 272,622 (€28.87 billion) for 2013. Its operating income after financial deductions was SEK 5,089 million (€0.53 billion) last year compared to SEK 4,721 million (€0.5 billion) for the previous year.

CEO Persson explained there had been a weakness in emerging markets, particularly within the mining sector – which resulted in a 30% reduction of machine deliveries.

He said, “In China demand for new equipment dropped significantly as a result of low machine utilisation following the reduced mining and construction activity as well as high inventories of fairly new used equipment in the market. In order not to build inventory, we further reduced the production output, and capacity utilisation was low in most of Volvo CE’s plants during the quarter.

“We will continue to run production on low levels in China during the spring in order to bring down the inventories of machines throughout the distribution channel.”

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