Weakness in China Dents Volvo Construction Equipment’s Q1

April 27, 2015

Volvo Construction Equipment's total sales dropped five percent in the first quarter of 2015 due to continued weakness throughout Asia, particularly China. However, the North American market experienced growth, primarily in the compact equipment segment. 

Operating income was affected by lower sales volumes, a provision for expected credit losses and lower earnings in China, decreasing to SEK 352 million, compared to SEK 647 million in the first quarter of 2014. These factors weighed on operating margin, which reduced to 2.8 percent, down from 4.8 percent in the same period the year before.

The Chinese market has been in decline since March 2014 and this continued into the beginning of 2015, with a 50 percent drop compared to the year before. This was mainly caused by continued lower levels of economic activity, lower machine utilization, and construction projects and mining activity remaining soft. 

Additionally, the European market is also down by 12 percent, which is driven by a plunge in the Russian market, but the UK and Germany markets are still growing.