Construction Equipment

Sales up 3%, weak earnings

  • Some market stabilization, but mining segment remains soft
  • Volvo CE set to acquire hauler business from Terex
  • Martin Weissburg, previously President of Volvo Financial Services, new President of Volvo CE
Chinese market up in fourth quarter

Measured in units, the total market for construction equipment in Europe decreased by 4% during January to November 2013 compared to the same period a year earlier. North America was up 1% while South America was up 5%. Asia, excluding China was up 1% and China was also up 1%. In China the market shows sign of recovery in general construction.

Compared with the weak period September-November of 2012, the Chinese market was up 24%, mainly driven by smaller and medium sized excavators. Europe was up 7% as was South America, mainly driven by governmental deals with low prices. Asia, excluding China was also up 7%, fully driven by Japan since India and South-East Asia are decreasing.

For 2014 the total market in China is expected to increase in the range of 0% to 10% measured in units (unchanged forecast). Europe is also expected to increase in the range of 0% to 10% (previous forecast minus 5% to plus 10%). North America, South America and Asia excluding China, are all expected to be in the range minus 5% to plus 5% (previous forecasts minus 5% to plus 10%).

In the fourth quarter Volvo CE's deliveries increased by 9% compared to the same period in 2012. The main drivers came from two areas: market growth and market share growth. The global construction equipment industry starts to recover after reaching the lowest level earlier in the year. The main growth comes from China, followed by a lower growth in EMEA and Americas. At the same time, Volvo CE's focus on driving compact product market share proved to be successful both in Europe and China. On the other hand, the mining sector continued to be soft in the fourth quarter, resulting in a low mix of large products in the delivery numbers.

Earnings impacted by mix and currency

In the fourth quarter of 2013, net sales increased by 3% to SEK 13,005 M (12,572). Adjusted for currency movements net sales increased by 6%. The sales increase is mainly a consequence of higher sales of smaller equipment. Demand for larger machines is still muted as the mining segment across the world is still very slow.

Operating income increased to SEK 272 M (235) and the operating margin was 2.1% (1.9). The low earnings in the fourth quarter were negatively impacted by a negative product mix with lower sales into the higher margin mining segment, pricing pressure as well as negative currency exchange movements. Compared with the fourth quarter of 2012 changes in currency exchange rates had a negative impact on operating income of SEK 156 M.

Strengthened product portfolio

In December Volvo CE announced that it has agreed with the Terex Corporation to acquire the hauler manufacturer Terex Equipment Ltd, including related assets and intellectual property. The deal, which is subject to regulatory approval, 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 U.S. 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.