Volvo Construction Equipment Sees Sales Surge 53 Percent in First Three Months of 2011

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Volvo Construction Equipment experienced a significant improvement in both sales and income during the first quarter of 2011 as the total world market for construction equipment increased by 51percent between January to March, when compared to the same period the year before. The company also became the largest manufacturer of wheel loaders and excavators in China during the period.

The company’s net sales during the first three months were driven strongly by surges in demand in Asia and South America, rising 41percent to SEK 15,759 M (SEK 11,148 M in Q1 2010). When adjusted for currency movements, sales out-performed the wider market, rising to 53 percent. Volvo Construction Equipment also saw a leap in profitability during the first quarter, with operating income improving by almost 70 percent to SEK 1,708 M, up from SEK 1,006 M in the same period last year.

Reinforcing the underlying strength of the business, operating margin was also strongly improved at 10.8 percent during the first three months, up from 9.0 percent during the same period in 2010 – and the highest ever for a first quarter. This improved position was not only the result of higher sales, but also due to cost reduction activities, lower breakeven point and better cost absorption via increased production activity. The value of Volvo Construction Equipment’s order book on March 31, 2011 was also significantly improved, 40 percent higher than on the same date in the previous year.

Improving expectations
These results come amid continuing improvements in the market situation. Europe and North America both saw considerable sales increases during the first quarter; of 57 percent and 59 percent respectively. These were supported by strong increases in Asia, which rose by 54 percent, driven by a charging Chinese market that grew by an incredible 70 percent. South America also performed well, rising by 38 percent, while other markets grew by a more modest 3 percent during the period.

The prospects for the rest of the year are also improving, with the total market expected to grow by between 20-30 percent during 2011. Expectations for both Europe and North America have again been revised upwards; with Europe forecast to grow by 10-20 percent (previously forecast 5-15 percent) while North America is expected to rise 25-30 percent (previously forecast 20-30 percent). Hopes for China have also been marked up, with the country now expected to grow by between 20-30 percent, up from the 5-15 percent previously stated. The total Asian market is forecast to grow by 10-20 percent, while South America is expected to expand by between 5-15 percent.

Eventful three months
It was an exciting quarter for the company, which saw the introduction of over 50 new models to its dealers and customers in Europe and North America. Added to this Volvo became the largest producer of excavators and wheel loaders in China, and its new L220G wheel loader won the coveted Red Dot design award. The company also unveiled plans to invest $100 million in its Shippensburg facility in the U.S. and start production of wheel loaders, excavators and articulated haulers at the site. There was also a change of leadership announced during the first quarter; with Pat Olney replacing Olof Persson as president of Volvo Construction Equipment on May 1, as Persson takes up his new role of executive vice president and deputy CEO of the Volvo Group.

"We have seen the favorable trend continue in both the Chinese and Brazilian markets, while the recovery in North America and Europe is becoming increasingly clear," says Olof Persson. "We are in an intense period of product renewal, which will contribute to further strengthen our competitiveness."