Stagnation in Europe and accelerated decline in China dampened demand during Volvo Construction Equipment’s final quarter of 2014, resulting in a dip in sales of 6 percent during the period, according to the company. For the full year, sales at the company were down by 1 percent.
This comes on the heels of Volvo CE's late 2014 announcement that it would cut a total of 1,000 jobs, the majority in the U.S., Poland and Brazil.
For the fourth quarter of 2014, Volvo CE reported that net sales decreased by 6 percent to $1.47 billion (SEK 12.277 billion), compared to $1.56 billion (SEK 13.005 billion) in the same period of the preceding year. These figures were due largely to further declines in China, coupled with strong headwinds in many markets outside of North America. For the full year 2014 Volvo CE saw sales dip by 1 percent.
Operating income decreased during the final period of the year, to a loss of $18.62 million (SEK 155 million), compared to income of $32.68 million (SEK 272 million) in the same period of the previous year. Operating margin was also affected, at negative 6.6 percent, down from a positive 2.1 percent in Q4 2013. Both income and margin were impacted by low capacity utilization in the industrial system, as Volvo CE reduced production output to adapt to declining sales volumes and in order to control inventory levels.
An improving European market for much of 2014—which saw growth coming from Germany, United Kingdom and France—was dampened towards the end of the year by a sharp decline, especially in Russia. With the exception of Japan, all Asian markets were below 2013 levels, as was the case in South America—with markets there hard hit by lower commodity prices and reduced mining activity. The Chinese market was especially affected, denting demand for both Volvo CE’s SDLG and Volvo branded products. One bright spot was the North American market, which continued to perform well during 2014.
“Our work towards further improving operational performance and lowering cost levels has good traction,” said Martin Weissburg, president of Volvo Construction Equipment. “There is still a lot to do, but we have a good momentum in our activities to improve efficiency and reduce costs.”