Sales Up 73% as Volvo CE Rebounds Strongly in Second Quarter

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BRIC countries underpin global recovery as Volvo Construction Equipment enjoys substantial increases in orders and profitability in the second quarter of 2010.

The global construction equipment industry is recovering faster than earlier predicted, evidenced by Volvo CE’s significantly improved second quarter 2010 financial results. Strongly driven by the BRIC markets of Brazil, Russia, India and China – which increased by 63% during the quarter – the total world market for heavy, compact and road equipment increased by 43% during the period when compared to last year. All markets were up: Europe increased by 20%, North America by 9%, Asia by 60% and Other markets by 77%. This sharply rebounding market had a positive impact on Volvo Construction Equipment (Volvo CE’s) financial performance during the quarter.

Net sales in the second quarter amounted to SEK 15,295 M (SEK 9,151 M in Q2 2009). This represents a 67% jump in demand, and when adjusted for currency movements increases to 73%. Operating income also improved strongly, increasing to SEK 2,086 M from a loss of SEK 1,259 M in the same period in 2009. Additionally, the company also posted an operating margin of 13.6% in the period, (up from a negative 13.8% in 2009).

Commenting on the results, Mr. Olof Persson, president of Volvo CE said: “The spring selling season is traditionally the most active period in our industry, and so it is encouraging to see momentum building stronger-than-expected during this important period, particularly in Asia and South America. This puts us in good shape for the rest of the year. It is also encouraging to note that our increased sales have been accompanied by considerably increased profitability, a result of cost reduction measures implemented during the recession, improved cost absorption in our factories and better productivity.”

Brighter outlook
In another sign of improving conditions, the value of the order book at the end of the second quarter was 78% higher than at the same date in 2009. These encouraging results have prompted a revision in the outlook for the full year 2010. The European market is now expected to increase by 10% for the full year, up from the previous forecast of 0-10%. North America is now predicted to grow by between 5-10% in 2009, up from the previous expectation of 0-10%. The biggest upward revisions are in Asia and Other International Markets however, with Asia now predicted to rise by 30-40% and Other Markets up 40% – a jump from earlier forecasts of 20% for both regions.

Notable events for Volvo CE during the second quarter included the announcement of a SEK144 M investment in a new excavator manufacturing facility in Bangalore, India and an agreement that will see Ferronordic Machines take responsibility for distribution of Volvo CE products throughout the Russian Federation.

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Beatrice Cardon