Construction Equipment

Earnings recovery despite weak mining segment

  • 8.3% operating margin
  • Total world market down 7% year-to-date
  • SDLG announces entry into the US with wheel loaders
Total world market down year-to-date

Measured in units, the total market for construction equipment in Europe decreased by 13% during January to May 2013 compared to the same period a year earlier. North America declined by 3% while South America was down 6%. Asia, excluding China, was down 3% and China was down 9%.The total world market was down 7% year-to-date and flat in March to May. In China, the market is stabilizing. Compared to the weak second quarter in 2012, the Chinese market was up 4%.

For 2013 the total market in Europe is expected to decline by 5% to 15% (unchanged forecast) measured in units. North America, South America and China are all expected to be in the range of minus 5% to plus 5% (all forecasts unchanged). Asia excluding China is also expected to be in the range minus 5% to plus 5% (previous forecast 0% to minus 10%).

In Europe the markets are particularly slow in Germany, the UK and France. The main effected segments are general construction and road building. However, special efforts together with the European dealers have paid off and are supporting an improved order intake.

In North America, the significant drop in deliveries is primarily a consequence of extraordinary high deliveries during 2012, as Volvo Rents as well as dealers both expanded and renewed their rental fleets following improving prospects for the construction sector.

The mining sector remains on a low level globally. In some of the Asian markets, e.g. Indonesia, the recent turmoil in the capital markets had a negative additional effect on the demand.

In Brazil a number of infrastructure projects and also projects in the private sector have recently been postponed.

Earnings recovery compared with the first quarter

In the second quarter of 2013, net sales decreased by 19% to SEK 16,019 M (19,715). Adjusted for currency movements net sales decreased by 14%. Sales were negatively impacted by lower activities in the global mining industry affecting sales of larger and more expensive products. The global mining industry, which was booming in the first half of 2012, is still on a low level, particularly in Asia.

Operating income decreased to SEK 1,324 M (2,742) and operating margin was 8.3% (13.9). Earnings in the second quarter were up considerably compared to the first quarter but negatively impacted versus the same quarter last year due to lower sales into the higher margin mining segment. Compared with the second quarter of 2012, operating income was negatively impacted by changes in currency exchange rates in an amount of SEK 276 M.

Operating income in the second quarter of 2012 was also positively affected by VAT credits in Brazil of SEK 61 M relating to previous years as well as SEK 100 M from insurance compensation for damages from the earthquake and tsunami in Japan in 2011.

Important events during the quarter

Volvo CE’s subsidiary SDLG has announced that it will enter the US market in the second half of 2013 by launching two wheel loader models.

Volvo CE attended the construction equipment industry’s largest exhibition – Bauma – in April with a display that underlined the company’s status as an innovation leader. New products at the Munich-based show were the ECR25D, ECR58D and ECR88D short radius compact excavators as well as the P6870C asphalt paver.

In May the company opened its new excavator plant in Kaluga, Russia. The 20,660 square meter factory represents a SEK 350 M investment. The plant will initially produce four models of Volvo’s heavy-duty excavators spanning the 20 to 50 ton weight classes.

The second quarter 2013 saw Volvo CE’s remote telematics system CareTrack reach a significant milestone: there are now 50,000 machines worldwide installed with the telematics portal.