In spite of weak demand, especially in the mining sector, and unfavorable currency development, Volvo Construction Equipment (Volvo CE) showed good operating margin in Q3, thanks to effective cost control and inventory management.
With no clear sign of a global recovery in the sector in sight, Volvo Construction Equipment (Volvo CE) saw its third quarter results reflect the general downward trend in market conditions, declining 7% compared to the same period in 2012. That said, efficiency enhancements in the global industrial system, cost control measures and an inventory level that is in balance with demand helped Volvo CE record a positive operating margin of 4%.
Net sales in the three months of July-September decreased by 7% to SEK 12,278 M (13,272 M). Adjusted for currency movements, net sales were down by 5% during the period. Sales were negatively impacted by lower activities in the global mining industry, which particularly hit sales of larger and more expensive products.
This slowdown of global demand in the third quarter of 2013 also weighed on profitability, with operating income at SEK 496 M down from the SEK 602 M reported in the same period the year before. This also dented Volvo CE’s operating margin, which at 4% was – despite a billion SEK fewer sales – only slightly below the 4.5% achieved in the same period in 2012.
“While there is still no clear sign of a global market recovery in the construction equipment sector, we did see an uptick in China, driven by sales of smaller equipment, and a slight increase in the European market,” said Pat Olney, president of Volvo CE. “Our base scenario for 2014 is that the markets will remain at largely the same level as we have seen in 2013.”
Market conditions for the full year 2013 show few signs of revival in the short term, and the outlook remains the same as the previous forecast. The European market is expected to be down by 5-15% (measured in units), while North America, South America, Asia (excluding China) and China itself are all expected to be in the range of minus 5% to plus 5%. For 2014 these markets are expected to be in the range of minus 5% to plus 10%, with the exception of China, which is forecast to range from flat to plus 10%.
|Net sales by market area||Third quarter||First nine months|