Volvo Construction Equipment

Volvo Construction Equipment 2012 Net Sales Remain Constant

Announcing its fourth quarter and full year results, Volvo Construction Equipment (Volvo CE) reported that net sales for 2012 remained at the same level as the previous year, despite a dramatic drop in global demand in the second half. The company also produced its second best ever output, selling 78,491 machines during the year.

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For the full year 2012, Volvo CE’s sales increased by less than 1 percent to SEK 63,558 M, compared to 63,500 M in 2011. Operating income reduced during the year, a result of lower sales and negative product mix, to SEK 5,773 M, down from SEK 6,812 M in the preceding year. Operating margin was also affected, retreating to 9.1 percent in 2012 from 10.7 percent in 2011, as was the value of the order book, which on December 31 was 36 percent lower than a year earlier.

These reasonable full year figures mask a significant slowdown in demand in the fourth quarter results of 2012. A softer world market, in particular mining, saw net sales in the last three months down by almost a quarter (23 percent) and amounted to SEK 12,572 M (SEK 16,354 M in 2011). When adjusted for changes in the exchange rates, net sales fell by 22 percent. Operating income was also down, at SEK 363 M, from SEK 1,674 M in the same period in the previous year. However, despite the dramatic fall in sales operating margin remained positive, at 2.9 percent, thanks to rapid and significant cuts in production and a consequent reduction in inventories.

“Taken as a whole 2012 was a reasonable year,” commented Pat Olney, president of Volvo Construction Equipment. “We sold over 78,000 machines, recorded the company’s second highest ever revenues and our proactive downturn management helped protect cash flow and profitability. Stock levels have been reduced by around 30 percent since late spring and are now in balance with current demand.”

The prospects for 2013 are expected to remain subdued, with unit sales in Europe predicted to decline by 5 to 15 percent, while Asia (excluding China) is forecast to decline by between 0 to 10 percent. Meanwhile, China, North America, South America and other markets are all forecast to operate in the range of minus 5 percent to plus 5 percent.