Volvo CE sees slide in Chinese sales but growth in developed markets

7659 Volvo Construction Equipment has seen sales in China fall, while its performance in the developed markets of North America and Europe has improved. The company has seen sales drop 9% for its second quarter results as improvements in North America and Europe fail to compensate for weak demand from China.

The 25% improvement in North America and 11% improvement in Europe, compared to the same period in the year before, has been a cause for optimism. Net sales in the second quarter fell 9% to US$2.144 billion compared with $2.39 billion (SEK 14.624 billion compared with SEK 16.019 billion) in the second quarter of 2013. Taking into account currency movements, net sales decreased by 10%. Operating income also decreased, to $110.1 million from $194.132 million (SEK 751 million from SEK 1.324 billion) in the same period during 2013. Operating margin, at 5.1%, was down compared to the 8.3% achieved in same period last year. Earnings were impacted by the reduced sales. There was a drop in the sales of larger machines along with an increase in sales of the less profitable compact units.

“The second quarter was characterised by a considerable decline in China – the world’s largest market for construction equipment – which meant we had to adapt our operations to a lower level,” said Martin Weissburg, president of Volvo Construction Equipment. “The decline was rapid and accelerated during the quarter but we reacted quickly to ensure that production and inventory levels are soon balanced with demand.

“The situation is brighter in our more mature markets,” continued Weissburg, “with demand in Europe and North America continuing to expand during the quarter. We are further strengthening our positions in these markets with our new products.”

The acquisition of the 1222 Terex Trucks hauler business was completed during the period. The deal includes the main production facility in Motherwell, Scotland and two product ranges that offer both rigid and articulated haulers. It also includes the distribution of haulers in the US, as well as a 25.2% holding in Inner Mongolia North Hauler Joint Stock Co. (NHL), which manufactures and sells rigid haulers under the Terex brand in China.

The quarter also saw Volvo CE inaugurate a new test and development center – the company’s 12th – in Hapcheon, Korea. The facility includes an all-weather test dome, reliability and noise test field, workshops, various complete machine performance test areas and a customer clinic. Engineers at the 253,515m2 site will focus on excavator product development, advanced engineering and product maintenance.

The period closed with the inauguration of the new Customer Center at Volvo CE’s North American headquarters in Shippensburg, Pennsylvania. Part of a multi-year, $100 million investment in North America, the facility combines sales and operator training with customer and company dealer visits, as well as large-scale events.