News & media : Volvo CE rounds off ‘reasonable’ year despite sharp downturn in fourth quarter - G.W. Van Keppel
3/11/2013

Volvo CE rounds off ‘reasonable’ year despite sharp downturn in fourth quarter



by PRESS INFORMATION

Notwithstanding sharply reduced global demand in the last three months Volvo Construction Equipment rounded off a solid 2012 by extending its market leadership of the Chinese wheel loader and excavator segments, protected profitability via active inventory management – and sold its second highest ever number of machines.

Announcing its fourth quarter and full year results, Volvo Construction Equipment (Volvo CE) reported that net sales for 2012 remained at the same level as the previous year, despite a dramatic drop in global demand in the second half. The company also reinforced its strong position as market leader in the all-important Chinese wheel loader and excavator segment, extending its share in 2012 to an unprecedented 15%. The company also produced its second best ever output, selling 78,491 machines during the year.

For the full year 2012, Volvo CE’s sales increased by less than 1% to SEK 63,558 M, compared to 63,500 M in 2011. Operating income reduced during the year, a result of lower sales and negative product mix, to SEK 5,773 M, down from SEK 6,812 M in the preceding year. Operating margin was also affected, retreating to 9.1% in 2012 from 10.7% in 2011, as was the value of the order book, which on December 31st was 36% lower than a year earlier.

Sharp correction in Q4  
These reasonable full year figures mask a significant slowdown in demand in the fourth quarter results of 2012. A softer world market, in particular mining, saw net sales in the last three months down by almost a quarter (23%) and amounted to SEK 12,572 M (SEK 16,354 M in 2011). When adjusted for changes in the exchange rates, net sales fell by 22%. Operating income was also down, at SEK 363 M, from SEK 1,674 M in the same period in the previous year. However, despite the dramatic fall in sales operating margin remained positive, at 2.9%, thanks to rapid and significant cuts in production and a consequent reduction in inventories.

“Taken as a whole 2012 was a reasonable year,” commented Pat Olney, president of Volvo Construction Equipment. “We sold over 78,000 machines, recorded the company’s second highest ever revenues and our proactive downturn management helped protect cash flow and profitability. We recognized the turn in the industry early, and the work undertaken to reduce pipeline inventories was successful. Stock levels have been reduced by around 30% since late spring and are now in balance with current demand.”    

Prospects to remain flat in 2013  
The prospects for 2013 are expected to remain subdued, with unit sales in Europe predicted to decline by 5-15%, while Asia (excluding China) is forecast to decline by between 0-10%. Meanwhile, China, North America and South America and Other Markets are all forecast to operate in the range of minus 5% to plus 5%.

Table 1. Volvo Construction Equipment, net sales by market area, in Millions of Swedish Krona

 

Net sales by market area

Fourth quarter

Full year

SEK M

2012

2011

2012

2011

Europe

        3,861

    4,881

    16,518

     17,765

North America

        1,973

    2,214

    12,027

       7,829

South America

           761

    1,047

      3,788

       4,163

Asia

        5,143

    7,088

    27,033

     29,999

Other markets

           833

    1,125

      4,192

     3,745

Total

      12,572

  16,354

    63,558

     63,500

 

Ends 

February 2013

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

Or contact:

Brian O’Sullivan
SE10
London
Tel: int +44 207 107 2000
Email: osullivan@se10.com

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