With momentum slowing after a long period of strong demand, Volvo Construction Equipment saw sales slow by 4% in its third quarter of 2019.
The long period of strong demand growth in the market for construction equipment came to an end in the third quarter of 2019, with Volvo Construction Equipment (Volvo CE) reporting a modest decrease in sales and operating income. The company continued its R&D efforts during the period and used the quarterly results to announce the next phase of its program to launch an autonomous electric hauler.
Net sales in the third quarter decreased by 4% to SEK 17,921 M (18,598). Operating income was also slightly down, at SEK 2,180 M, compared to SEK 2,587 M in the corresponding period in 2018. This equated to an operating margin of 12.2% (13.9%). Profitability was hampered by brand, market and product mix, as well as higher R&D and selling expenses.
Net order intake in the third quarter decreased by 9% compared with the same quarter in 2018. Deliveries decreased by 2%, to 16,460 machines.
Up to the end of August, the European market was up 4%, driven by stable growth in Russia, Germany, Italy. North America saw an increase of 7% over last year, thanks to demand for large excavators, haulers and wheel loaders. South America was up by 10%, driven by growth in Brazil. In Asia (excluding China) the total market was down 11% from last year, spread across all markets. The Chinese market was 7% above last year, thanks in part to increased sales of compact excavators.
“After several years of high market levels, demand for construction equipment is slowing down,” commented Melker Jernberg, President of Volvo CE. “Although many markets are coming off their previous high levels, we expect the underlying need for infrastructure development in many markets to support the industry in the longer term.”
Volvo CE also announced that it has signed a contract for the first commercial pilot of its autonomous battery-electric load carrier. The trials will be conducted with customer Harsco Environmental in Sweden, and represent the next stage in the process of industrializing the technology.
Table 1. Volvo Construction Equipment, net sales by market area, in Millions of Swedish Krona (SEK).