Volvo CE sees sales down 9% in third quarter as market demand dips - Press releases : Pat O’Donnell & Co.
24/10/2012 

Volvo CE sees sales down 9% in third quarter as market demand dips



Volvo Construction Equipment (Volvo CE) has reacted quickly to a slowing global market – which was down 11% in the year to August – and uncertainties about the strength of demand in 2013 by slowing the rate of production in its factories and reducing the number of machines held in stock at its dealerships. This ‘under absorption’ of costs in the factories put pressure on earnings in the third quarter of 2012, as did increased price competition and a less favorable geographical and product mix, which saw fewer larger machines sold, particularly to the weakened mining sector.  

Net sales in the three months of July-September decreased by 9% to SEK 13,272 M (14,571 M). Adjusted for currency movements, net sales were down by 8% during the period. Order intake was also affected, with the value of the order book at September 30 being 24% lower than on the same date in 2011.  

This slowdown of global demand in the third quarter of 2012 also weighed on profitability, with operating income at SEK 650 M down from the SEK 1,438 M reported in the same period the year before. This also dented Volvo CE’s operating margin, which at 4.9% was below the 9.9% achieved in Q3 2011. 

“The lower economic activity and the uncertainty about the future are impacting customers’ willingness to invest in new equipment,” said Pat Olney, president of Volvo CE. “As a consequence we have reduced production in our facilities and managed to reduce both our own inventories and those at our dealers.”   

Uncertain outlook
Market conditions for the full year 2012 show few signs of change in the short term. The European market is expected to be down by 0-10% (previous estimate: flat), while North America is expected to increase by between 15-25% (unchanged forecast). South America meanwhile is still on course to rise by between 0-10% and Asia (excluding China) remains expected to rise by between 0-10%. Demand in China itself is projected to fall in 2012 by between 25-35%, down further from the 15-25% previously forecast.   

Table 1. Volvo Construction Equipment, net sales by market area, in millions of Swedish Krona (SEK)

 

Net sales by market area

Third quarter

First nine months

SEK M

2012

2011

2012

2011

Europe

3,803

4,296

12,656

12,883

North America

2,684

1,904

10,054

5,616

South America

931

1,111

3,027

3,116

Asia

4,718

6,312

21,890

22,910

Other markets

1,136

949

3,359

2,622

Total

13,272

14,571

50,986

47,146

 

Ends. 

October 2012  

For further information, please visit: www.volvoce.com/press   

Or contact:  

Clare Gittins                                                             
Director, External Communications                          
Volvo Construction Equipment                                 
Tel: int + 32 4918 60331                                            
Email: clare.gittins@volvo.com       
Twitter: http://twitter.com/VolvoCEGlobal 

Brian O’Sullivan 
SE10
London 
Tel: int +44 77 333 50307  
Email: osullivan@se10.com