Volvo CE reports dip in machine sales

Volvo CE reports a drop in machine sales of 9% in the third quarter as market demand drops. The company says that it is facing a weakening total market, which was down 11% in the year to August. This has also been combined with increased price competition and has put pressure on its third quarter sales and earnings. The company says it has reacted quickly to a slowing global market by slowing the rate of production in its factories and reducing the number of machines held in stock at its dealerships. This
October 30, 2012 Read time: 2 mins
359 Volvo CE reports a drop in machine sales of 9% in the third quarter as market demand drops. The company says that it is facing a weakening total market, which was down 11% in the year to August. This has also been combined with increased price competition and has put pressure on its third quarter sales and earnings. The company says it  has reacted quickly to a slowing global market by slowing the rate of production in its factories and reducing the number of machines held in stock at its dealerships. This put pressure on earnings in the third quarter of 2012, as did increased price competition and a less favourable geographical and product mix, which saw fewer larger machines sold, particularly to the weakened mining sector.

Net sales in the three months of July-September decreased by 9% to US$1.982 billion, compared with $2.1756 billion in the previous year. Adjusted for currency movements, net sales were down by 8% during the period. Order intake was also affected, with the value of the order book at September 30 being 24% lower than on the same date in 2011.

This slowdown of global demand in the third quarter of 2012 also weighed on profitability, with operating income at $97 million down from $214.7 million reported in the same period the year before. This also hit Volvo CE’s operating margin, which at 4.9% was below the 9.9% achieved in Q3 2011.

“The lower economic activity and the uncertainty about the future are impacting customers’ willingness to invest in new equipment,” said Pat Olney, president of Volvo CE. “As a consequence we have reduced production in our facilities and managed to reduce both our own inventories and those at our dealers.”

Market conditions for the full year 2012 show few signs of change in the short term.
The European market is expected to be down by 0-10%, while North America is expected to increase by between 15-25%. South America meanwhile is still on course to rise by between 0-10% and Asia (excluding China) remains expected to rise by between 0-10%. Demand in China itself is projected to fall in 2012 by between 25-35%, down further from the 15-25% previously forecast.

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