Improvements in both sales and operating income in the fourth quarter reflect Volvo Construction Equipment’s (Volvo CE) rebound following steep declines in the first half of 2020 due to the COVID-19 pandemic.
After a steep drop in the spring, demand began to recover in the second half of the year. Through November, both the European and North American markets were down 14%, while South America rose 12%, largely a result of an improving Brazilian market. Government stimulus measures fueled a sharp recovery in China (+28%), though Asia as a whole was down by 6%.
Despite this uneven global demand, Volvo CE saw a 6% increase in net sales in the fourth quarter 2020 to SEK 20,810 M.; net sales were up by 15% when adjusted for currency movements. Operating income came in at SEK 2,321 M, corresponding to an operating margin of 11.2%. The company reports earnings were positively impacted by higher machine and service sales.
Volvo CE also saw net order intake jump 31% in Q4, driven by improving activity in most markets and dealer restocking. Order intake in Europe rose by 20%, but fell 18% in North America when compared to the record order intake seen in the same period in 2019. In South America, order intake skyrocketed 182%, though rising from low levels in most markets. Order intake was up 39% in Asia, boosted by government stimulus in China and improvements in other markets.
Overall, deliveries increased by 21% in Q4 2020, boosted by higher volumes in China, other Asian markets and Brazil. Volvo CE also started deliveries of its highly anticipated electric compact wheel loaders and compact excavators.
A positive fourth quarter was not enough to fully offset the overall sales decline experienced by the company in 2020. Full year net sales fell by 8% to SEK 81,453 M, and adjusted operating income fell to SEK 10,071 M, corresponding to a 12.4% operating margin.
Even with the overall decline, Melker Jernberg, president of Volvo Construction Equipment, seems optimistic that the worst is behind the company and its customers.
“In 2020 the global pandemic presented us with challenges that are unprecedented in modern times,” he stated. “But together with business partners and suppliers we were able to support customers through all stages of the crisis. Construction activity is now back on a par with pre-pandemic levels, and this is giving confidence to customers, which is visible in our strong order intake.”
Information provided by Volvo Construction Equipment and edited by Becky Schultz.