Continued investments in growth
Celebrating a heritage that dates back 180 years, Volvo Construction Equipment (Volvo CE) is one of the largest and arguably the oldest global producer of products and services for the construction, extraction, waste processing and materials handling industries.
Following a comprehensive product renewal program that has seen over 100 new products launched in the last two years, Volvo CE offers a modern fleet of excavators, haulers, wheel loaders and a range of smaller equipment such as backhoe and skidsteer loaders. The road machinery range includes graders, compactors and pavers. Its Chinese-built range of SDLG branded products includes excavators and wheel loaders.
Volvo CE equipment is distributed to customers through a global network of independent and Volvo-owned dealerships. SDLG branded products are distributed through separate sales channels. The offering also includes services such as customer support agreements, attachments, financing, leasing and used equipment sales.
Measured in units sold, the total European market for heavy, compact and road machinery equipment shrank by 4% compared to 2011, while Asia (excluding China) increased by 11% and demand in China itself fell by a significant 37%. Bucking the trend however were North and South America, who saw market growth during 2012 of 23% and 6% respectively.
Lower economic activity and the uncertainty about the future impacted customers’ willingness to invest in new equipment during 2012. As a consequence Volvo CE reacted quickly to the slowing global market, cutting production in its facilities and reducing inventories throughout the supply chain. During the year the company sold 78,500 machines, compared with 84,000 in 2011.
In 2012, net sales were flat at SEK 63,558 M (63,500). Operating income decreased to SEK 5,773 M (6,812) and operating margin was 9.1% (10.7). After a strong first half of the year, sales and earnings during the second half were negatively impacted by much lower volumes and a negative product mix as well as lower activity in the global mining industry affecting sales of larger and more profitable products. Low capacity utilization also affected profitability.
Investing in new products
At the Intermat exhibition in France in April, Volvo CE launched 60 new products. These machines, in addition to a further 55 new models introduced in 2011, represents the most fundamental overhaul of the company’s product portfolio ever. On show in Paris were the new D-Series excavators in the 13 to 25 ton classes, two short swing excavators and four new models of EW wheeled excavators in the 14 to 21 ton classes.
The new G-Series wheel loaders also featured prominently as did the European launch of the innovative range of C-Series skid steer and tracked loaders. Under the theme ‘Discover a new way’ Volvo CE’s also showcased its new road construction machinery.
Meeting the divergent needs of local markets around the world, new product introductions are designed to meet a broader audience, with a host of new products designed to meet the specific requirements of customers in Asia and other international markets.
Production and distribution
2012 saw the roll out of the latest phase of the company’s factory and distribution investment program. Russia featured in both aspects, with excavator production set to begin in 2013 at a new factory in Kaluga, while the dealer network in Russia is set to double to 90 locations by 2015. There were also capacity and product expansion programs ongoing in India, Brazil, China and the US. In Bangalore, India, a new factory was inaugurated during 2012 to make excavators alongside the existing road machinery already produced at the facility.
In the Chinese city of Jinan, meanwhile, a Technology Centre is under construction that will, when completed in June 2013, employ up to 200 engineers to design products and components primarily for emerging markets.
In May a ground breaking ceremony was held on the USD 100 million expansion of Volvo CE’s facility in Shippensburg, Pennsylvania, USA. When completed it will create a new Americas headquarters, demonstration center and the ability to localize production of larger machines.
The company picked up a number of important honours for its innovative products during the year. Out of a field of more than 80 entries from leading manufacturers, Volvo CE scooped a gold prize at this year’s Intermat 2012 Innovation Award for its revolutionary On Board Weighing system, designed for its F-Series Full Suspension articulated haulers. This allows complete payload management, giving access to data such as total transported load in tons, tons transported per liter of fuel and number of cycles.