Weaker Q4 at Volvo CE reflects challenging times for construction equipment industry

In the fourth quarter of 2014 Volvo Construction Equipment (Volvo CE) reported that net sales decreased by 6% to SEK 12,277 M, compared to SEK 13,005 in the same period of the preceding year. These figures were due largely to further declines in China, coupled with strong headwinds in many markets outside of North America. For the full year 2014 Volvo CE saw sales dip by 1%.

Operating income decreased during the final period of the year, to a loss of SEK 155 M, compared to income of SEK 272 M in the same period of the previous year. Operating margin was also affected, at negative 6.6% – down from a positive 2.1% in Q4 2013. Both income and margin were impacted by low capacity utilization in the industrial system, as Volvo CE reduced production output to adapt to declining sales volumes and in order to control inventory levels.

These figures are testament to challenging market conditions in most regions. An improving European market for much of 2014 – which saw growth coming from Germany, United Kingdom and France – was dampened towards the end of the year by a sharp decline, especially in Russia. With the exception of Japan, all Asian markets were below 2013 levels, as was the case in South America – with markets there hard hit by lower commodity prices and reduced mining activity. The Chinese market was especially affected, denting demand for both Volvo CE’s SDLG and Volvo branded products. One bright spot was the North American market, which continued to perform well during 2014.

“Our work towards further improving operational performance and lowering cost levels has good traction,” commented Martin Weissburg, president of Volvo Construction Equipment. “There is still a lot to do, but we have a good momentum in our activities to improve efficiency and reduce costs.”