Volvo CE sales slide in second quarter

IN light of the global market downturn and the continued fallout from the financial crisis, Volvo Construction Equipment say their second-quarter results were broadly in line with the global reduction in demand, with net sales in the period down by 45% to SEK9,151 million (2008: SEK16,732 million).

According to the company, the second quarter of 2009 saw demand for heavy, compact and road construction equipment drop to almost half the levels seen in the same period last year, with 48% fewer machines being sold worldwide. This weakness is widespread, with demand in Europe down 62%, North America down 53%, Asia down 14% and other markets down by almost two thirds (65%).

Given the severity of this situation, the second quarter also saw Volvo CE post an operating loss, amounting to SEK1,259 million, compared to an operating profit of SEK1,629 million in the same period of 2008. The operating margin was also sharply down, at a negative 13.8% compared to a positive 9.7% in the same period last year.

Volvo say these figures were a consequence of production cutbacks and low capacity utilization of only 30% during the quarter. On the positive side, production cutbacks are said to have helped improve the inventory situation, which reduced by a further 11% in the second quarter. Since October 2008 the number of machines in stock has been reduced by 40%.

Given the global economic situation, order bookings at the end of June were 70% down on the same time in 2008, but despite this Volvo CE say they have maintained or even improved their share in most markets and product segments in the quarter. Sales of spare parts and aftermarket service were also said to be faring better in the recession.

According to the company, the outlook for 2009 is characterized by much softer market conditions than in 2008, with the European market expected to decline by between 40% and 50% for the full year, while North America is forecast to be down by 30–40%. The rest of the world is also expected to see a year-on-year fall in demand of between 30–40%.

Commenting on the results, Olof Persson, president of Volvo CE said: ‘We are working hard to maintain a high pace in the implementation of the measures aimed at balancing our costs to suit these lower levels of demand. Despite the current weakness in our markets, I am convinced that the long-term driving forces that generated growth in our industry continue to apply.’