Volvo's fourth quarter sales fall 29%

A 29% drop in sales in the fourth quarter limited Volvo Construction Equipment's sales growth in 2008 to 5%. Europe was its worst hit region in the quarter with revenues falling 43%.

The results underline the severity of the downturn in construction equipment markets worldwide, and Volvo expects further declines this year, forecasting a 30-40% fall in Europe, a 10-20% reduction in North America and a 30% fall in the rest of the world.

Volvo has already made 3400 redundancies and production capacity has been reduced by 19% since last October and the company expects to cut that by a further 20% by the end of March.

Sales for the year were up 5% to SEK56.1 billion (€5.3 billion), with operating profit falling 57% to SEK1.8 billion (€170 million). Sales in the fourth quarter were 29% down at SEK11.0 billion (€1.0 billion) and it made an operating loss of SEK1.25 billion (€119 million) compared to a SEK 1.0 billion (€95 million) profit in the same period in 2007.

Leif Johansson, president and chief executive officer of Volvo Group, said; "Construction Equipment was affected the most by the rapid decline of the global economy, and the business area reported a significant loss during the fourth quarter.

"Sharply declining sales in combination with underutilization in our facilities and substantially higher raw material costs caused the loss. Production has also been halted for Construction Equipment for a great number of days and during the first half of 2009 there will be an adjustment of costs according to diminished demand."

Volvo said, however, that it had outperformed the market, with its fourth quarter fall of 29% less steep than the total 39% decline for the world market. The company said the total market for construction equipment in 2008 had fallen by 11%.