Volvo CE operating margin recovers in second quarter despite shrinking market

Reflecting the continued slowdown in the size of the total market for construction equipment, Volvo Construction Equipment (Volvo CE) saw a reduction in its second quarter 2013 results, with sales down 19% during the period. Behind the headline figures there were underlying positives, not least a good order intake and improving trends in China, Europe and the Middle East. And despite the lower sales, thanks to cost and inventory control measures, the company’s operating margin more than doubled compared to the first quarter of 2013.

Net sales in the second quarter decreased by 19%, amounting to SEK 16,019 M (SEK 19,715 M in Q2 2012). Adjusted for currency movements net sales decreased by 14%. Operating income also decreased, to SEK 1,324 M, from 2,742 M in the same period during 2012. Operating margin, at 8.3%, although down compared to the 13.9% achieved in same period last year (due to lower sales in the higher margin mining sector), more than doubled versus the first quarter of 2013. Despite the weaker market conditions, the value of Volvo CE’s order book at the end of the second quarter was nearly at the same level as the year earlier period.

SDLG enters North America

The publication of the second quarter and half year results was also used as an opportunity to announce that the company’s SDLG brand would enter the North American market in 2013, initially launching two models of wheel loader, the 11 tonne LG958 and 17 tonne LG959.

“We’re pleased to announce the launch of SDLG and its high quality value products into North America,” says Pat Olney, president and CEO of Volvo Construction Equipment. “We’re confident that there’s demand for these robust and reliable machines and that SDLG will enjoy a warm reception. Backed at a higher level by the strength of Volvo CE and the wider Volvo Group, SDLG is in a good position to develop long term customer relationships in this segment of the market.”

Outlook for the full year

Measured in units, for the full year 2013 Europe is anticipated to decline by 5-15%, while expectations regarding North America, South America, China and the rest of Asia are all expected to be in the range of minus 5% to plus 5%.

Important events during the quarter

Volvo CE attended the construction equipment industry’s largest exhibition – Bauma – in April with a display that underlined the company’s status as an innovation leader. New products at the Munich-based show were the ECR25D, ECR58D and the ECR88D short radius compact excavators, as well as the P6870C asphalt paver. In May the company opened its new excavator plant in Kaluga, Russia. The 20,660m² factory is initially producing four models of excavators, spanning the 20 to 50 tonne weight classes. The second quarter of 2013 also saw Volvo CE’s remote telematics system CareTrack reach a significant milestone; there are now more than 50,000 machines worldwide installed with the telematics portal.