Volvo CE sees decline in Chinese growth

Volvo CE saw stable market growth in North America dented by a faster decline in China and a loss of momentum in Europe in its third quarter results. However, earnings rose in the period, thanks to effective cost control measures and currency tailwinds.

North America

A 9% improvement in the North American market was not enough to overcome negative growth elsewhere in Volvo Construction Equipment’s (Volvo CE) 3Q14 results, which saw revenues rise 2%.

Earning rose at a much greater rate, however (up 31%) thanks to beneficial currency effects, improvement activities and the company’s actions to partly mitigate negative factors it faces in some markets.

Net sales

Net sales in the three months of July-September increased to SEK12,582 million. However, when adjusted for currency movements, net sales were down by 3% during the period. Offsetting continued solid growth in North America, sales during the quarter were weighted down by a loss of momentum in Europe and an accelerated negative growth in China.

Despite largely flat sales in the period, operating income and operating margin both improved, to SEK648 million and 5.1% (4%) respectively. Earnings were positively impacted by favorable currency movements, to the value of SEK125 million, compared to Q3 2013. Earnings were impacted by lower capacity utilisation in the industrial system. To address this further cost saving initiatives will be introduced to right-size the cost structure.

Comments

Commenting on the results, Volvo CE president Martin Weissburg said: “Good momentum in North America was offset by a loss of impetus in Europe and accelerated negative development in the Chinese construction equipment market. We expect demand in China to continue down for the rest of the year and into 2015. To react to this market scenario our focus is on adapting production to ensure a balance between demand and supply, and continuing to execute on our efficiency and cost saving program – while at the same time defending prices and gaining market share.”

Adapted from press release by Katie Woodward

Read the article online at: https://www.worldcement.com/europe-cis/24102014/volvo-ce-reports-third-quarter-results-189/