Improving market conditions, especially in Asia and South America, combined with lower costs and increased capacity utilization drive Volvo CE back into profitability in the first financial quarter of 2010.
Volvo Construction Equipment experienced a significant improvement in both sales and income during the first quarter of 2010 as the total world market for heavy, compact and road machinery equipment increased by 30% between January to March, when compared to the same period the year before.
The company’s net sales during the first three months were driven strongly by surges in demand in Asia and South America, rising 36% to SEK 11,148 M (SEK 8,172 M in Q1 2009). When adjusted for currency movements, this out-performance of the wider market increased further, to 51%. Volvo Construction Equipment also made a welcome return to profitability during the first quarter, with operating income improving substantially to SEK 1,006 M, up from a loss of SEK 1,395 M in the same period last year.
Reinforcing the underlying strength of the business, operating margin was also strongly improved at 9% during the first three months, up from a negative 17.1% during the same period in 2009. This improved position was not only the result of higher sales, but also due to cost reducing activities implemented during 2009 and better cost absorption via increased production activity. The value of Volvo CE’s order book on 31st March 2010 was also significantly improved, 53% higher than on the same date in the previous year.
These results come amid a generally improving market situation. While Europe and North America continued to see sales decline in the first quarter, by 5% and 9% respectively, these falls were more than offset by strong increases in Asia, which rose by 55% and Other Markets were up by 45% during the period.
The prospects for the rest of the year are also improving. Despite falls in the first three months, both Europe and North America are expected to grow by 0-10% during 2010, while Asia and Other Markets are both forecast to be up 20%.
Volvo Construction Equipment has continued to invest and innovate throughout this recessionary period for the construction industry. During the first quarter the company announced its plans to create a BRIC-country focused product design centre in Jinan, China that will employ 180 people. And reinforcing its commitment to fuel efficiency, the company unveiled its innovative OptiShift driveline technology that cuts fuel consumption by up to 15%. The quarter also saw Volvo CE release details of its Tier IV solution and the extensive 100,000 hours plus testing that has been done.
“Following a difficult 2009, Volvo Construction Equipment has made a strong start to 2010,” says Olof Persson, president and chief executive of Volvo Construction Equipment. “We have been particularly successful in developing our business in China, demonstrated by our results in Asia growing by 114% during the first quarter. With a global economy that is returning to growth, our established customer relationships and our competitive products and services, Volvo Construction Equipment has every reason to be optimistic about the future.”
|Net sales by market area||First three months|