Record-breaking year for Volvo Construction Equipment

A STRONG fourth quarter of 2006 helped Volvo Construction Equipment to their most successful year ever, with the company reporting several all-time highs in their financial performance.

Sales increased by 17% to SEK40,564 million (2005: SEK34,816 million), while operating income jumped by 41% to SEK3,888 million, up from 2,752 million in 2005. Operating margin also strengthened significantly, rising from 7.9% in 2005 to 9.6% in 2006. In addition, the company reached an all-time record number of machines sold in a 12-month period – more than 37,000. This represents an 11% increase on the previous year.

Volvo CE say these record figures were helped by a strong set of fourth-quarter results. Net sales in the fourth quarter of 2006 were up 4% at SEK10,753 million (2005: SEK10,301 million). When adjusted for currency movements net sales increased further, to 12%. Operating income increased by 35% to SEK992 million from SEK736 million in the same period of 2005. This boosted the operating margin in the quarter to 9.2%, up from 7.1% in the fourth quarter of 2005.

The fourth quarter of 2006 saw the total world market for construction equipment within Volvo CE’s product range increase by 5% compared with the same period in 2005. In the US the market was down by 20% as a result of the cooling housing market, while Europe increased by 7% and Asia increased by 15%, helped by a strong Chinese market. Other international markets also increased strongly in the fourth quarter, rising 30% in the period. For the full year, the total world market for heavy and compact equipment rose by 9%.

Volvo CE say that although their order book remains strong, with a total value on 31 December 2006 some 60% higher than on the same date 12 months earlier, the outlook for 2007 is expected to be mixed. The European market is expected to continue to grow in the range of 0–5%, while Asia is projected to increase by 10%, again driven by China. Other markets are expected to grow by 10–15%. The combined growth in these regions is expected to offset a further reduction in North America, which is expected to decline by between 5 and 10%, again a consequence of reduced housing-related activities.