Strong start to 2008 for Volvo CE

DESPITE a shrinking North American market and cooling demand in Europe, Volvo Construction Equipment have reported a strong start to 2008, with both sales and income up by 38% compared to the first quarter of 2007.

Net sales in the first quarter of 2008 amounted to SEK15,140 million (£1,276 million), compared to SEK11,002 million (£927 million) in the first quarter last year, while operating income increased to SEK1,301 million (£110 million) from SEK946 million (£80 million) in the same period in 2007.

According to Volvo CE, operating income was negatively affected by exchange rates and ongoing integration costs resulting from their acquisitions in road machinery and of Chinese wheel loader manufacturer Shandong Lingong Construction Machinery Co.

However, the company said reductions in production bottlenecks and ongoing cost efficiencies were starting to have a positive impact on profitability, which helped maintain an operating margin at the 2007 level of 8.6%.

Volvo CE added that the first quarter of 2008 saw the total world market for construction equipment within the company’s product range remain at historically high levels, despite some marked regional variations.

In North America the market is expected to decline by 25–30% during 2008, while the European market is expected to remain at 2007 levels. However, the rest of the world is expected to help compensate for the US downturn, with a growth of 20% forecast.

The company added that order bookings remain strong, with an 18% bigger order backlog (in value) than on the same date a year earlier – excluding the acquired Lingong and road machinery business lines.