Volvo Penta

Improved profitability despite weak markets

  • Continued weak markets
  • Inroads into new segments
  • Operating margin of 4.0% (0,7)
Weak total market

The total demand for leisure boats is generally weak. Cutbacks and rationalizations continue to dominate everyday operations in the boat industry. In Asia, the level of activity has increased. New marinas are being planned and several European boat builders have been acquired by or have formed joint ventures with Chinese companies. The total demand for marine engines for 2013 fell by slightly more than 10% compared with the year-earlier period. Volvo Penta's deliveries declined 6%, resulting in stronger market shares.

Continued low demand from the Chinese construction sector had a negative impact on the global market for industrial engines during the quarter. Global demand for equipment also remained low within the mining sector. The prebuy effect ahead of the forthcoming emission legislation had a positive impact on demand in Europe during the quarter. The total market for diesel-driven generator sets, Volvo Penta's largest segment in industrial engines, continued to expand as a result of stable demand in Western Europe, Turkey and the Middle East.

Inroads into new segments

The successful introduction of Glass Cockpit, a cooperation between Garmin and Volvo Penta, generated major interest in the industry. This, along with the increased penetration of the IPS, is paving the way for larger market shares and higher sales. Volvo Penta's efforts to enter the segment for boats measuring between 60 and 100 feet have resulted in leading boat builders launching new models with Volvo Penta propulsion.

Volvo Penta continued promoting its product program for off-road industrial engines and during the fourth quarter the first engines complying with Tier4 final were delivered to customers in the US for installation in material-handling equipment, among others.

The volume in the total order book at December 31, 2013 was 7% higher than in the year-earlier period.

Improved operating margin

Net sales in the fourth quarter of 2013 rose 1%, year-on-year, to SEK 1,777 M (1,754). Adjusted for exchange-rate fluctuations, net sales increased by 3%. Sales were distributed between both business segments as follows: Marine SEK 923 M (916) and Industrial SEK 854 M (838).

Operating income amounted to SEK 72 M compared with SEK 13 M in the year-earlier period. Earnings were positively impacted by good cost control and a favorable market and product mix. The operating margin was 4.0% (0.7).