Volvo CE 3Q Earnings Rise, Sales Flat

October 27, 2014

Volvo Construction equipment reported third-quarter 2014 results, which indicated a 9 percent improvement in the North American market. This was not enough to overcome uncertainty and negative growth elsewhere in Volvo CE’s third quarter results, which saw revenues rise 2 percent in the period, the company reported. Earning rose at a greater rate—up 31 percent—thanks to beneficial currency effects, improvement activities and the company’s actions to partly mitigate negative factors it faces in some markets.

Net sales in the three months of July-September increased to SEK 12.582 billion, from SEK 12.278 billion for the same period in 2013. However, when adjusted for currency movements, net sales were down by 3 percent 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 SEK 648 million from SEK 496 million in 2013, and 5.1 percent, respectively. Earnings were positively impacted by favorable currency movements, to the value of SEK 125 million, compared to the third quarter of 2013. Earnings were, however, reined back by lower capacity utilization in the industrial system—and to address this further cost saving initiatives will be introduced to right-size the cost structure.

“Good momentum in North America was offset by a loss of impetus in Europe and accelerated negative development in the Chinese construction equipment market,” said Volvo CE president Martin Weissburg. “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 persisting to hold prices and gain market share.”