Volvo sales decelerate

Volvo Construction Equipment's latest results show sales growth has decelerated more rapidly than expected during the third quarter of 2008.

Net sales for the company rose by +2% to SEK 13,2 billion (€ 1,3 billion) in the third quarter of this year compared to SEK 12,9 billion (€ 1,29 billion) during the same period in 2007.

Adjusted for changes in the exchange rates and acquired and divested units, net sales rose by +7%.

Operating income has declined to SEK 134 million (€13 million) from SEK 839 million (€ 84 million) and the operating margin was 1,0%, down from 6,5% last year.

Volvo said in a statement that the decline in operating income has been driven by significant cost inflation, primarily on the price of steel, negative currency impact and a restructuring cost of SEK 3 billion (€ 300 million) for the move of the motor grader business from Goderich, Canada to Shippensburg in the US.

The statement added the European construction market is expected to decline by -15 to -20% in 2008 compared to last year, which is a larger decline than the -5 to -10% the company previously forecast.

North America is expected to decline by -20%, which is the same as the forecast in the second quarter.

Markets outside the US and Europe have seen a sales increase in the third quarter, Volvo said. South American sales were up +58%, Asian sales were up +17% and other international markets increased by +43% during the third quarter.

However, the company said there are increasing signs of weakening demand in markets outside Europe and North America.

Overall in 2008, these markets are expected to grow by +15 to +20% compared to the previous estimate of +20%.