Volvo Construction Equipment (Volvo CE) ended its 2004 financial year with a strong set of fourth quarter figures and announced that for the year as a whole the company had reached an all time high of machines sold, reaching nearly 30,000 – a 25% increase on the previous year. Net sales also increased by 25%, rising to SEK 8,035 M (6,499 M in 2003) and operating income doubled to SEK 266 M (133 M in 2003), when adjusted for currency effects and the full year consolidation of the remaining LB Smith dealerships, which added SEK 135 M in sales. Almost 90% of the territories of the L B Smith dealerships have now been sold to strong, well capitalized and experienced dealers. Improvements in earnings were largely related to higher volumes and a positive product and market mix.
“The improvements in sales and operating income were mainly due to higher volumes and price realizations,” commented Volvo CE’s president and chief executive Tony Helsham. “However, these were strongly offset by negative currency effects and increased costs for raw materials.” Announced as part of parent company Volvo A.B.’s figures, Volvo CE was disproportionately affected by the currency effects, most notably the fall in the value of the US dollar – which accounted for approximately half of the SEK 700 M negative impact on Group figures.
The fourth quarter of 2004 saw the total world market for construction equipment within Volvo CE’s product range increase by 17% compared to the same period in 2003. The North American market was up by 27%, Western Europe up 13% and Asia up 2% - the latter up despite a 51% drop in China, which is feeling the effects of the Chinese Government’s efforts to cool the market. “The softening of the Chinese market is a good thing as it was running too hot,” believes Leif Johansson, the Volvo Group’s president and chief executive. “We are now looking at a more manageable rate of growth.” Other international markets were up 40%. The increase in the total market saw gains in both heavy and compact equipment, which grew 14% and 19% respectively in the quarter. The combined total world market for heavy and compact equipment was up by 20%, equally split between heavy and compact machines.
Order bookings remain at a good level and in a strong market Volvo CE has maintained, and in some areas gained, market shares due to a strengthened dealer network and its young product portfolio, which has seen a large number of new products introduced in recent years. The latest of these was the 70 t excavator, which will be unveiled at the Conexpo exhibition in Las Vegas in March, with production starting in late 2005.
Volvo CE expects a rise of 5-10% in North America and by 5% in Europe in 2005. “With the high demand, we forsee a continued strained situation for many suppliers and probably price rises on components and raw materials. Accordingly, we will continue to focus heavily on rationalizing costs and correct pricing of our products,” concluded Volvo A.B. president Leif Johansson.
Table 1. Volvo Construction Equipment, net sales by market area, in Millions of Swedish Krona
| Net sales by market area | Fourth quarter | Full year |
| SEK M | 2004 | 2003 | 2004 | 2003 |
| Europe | 3,731 | 3,568 | 13,453 | 12,348 |
| North America | 2,317 | 1,251 | 7,926 | 5,428 |
| South America | 262 | 212 | 922 | 636 |
| Asia | 1,147 | 1,117 | 4,961 | 3,707 |
| Other markets | 578 | 351 | 1,423 | 1,035 |
| Total | 8,035 | 6,499 | 28,685 | 23,154 |
February 10, 2005
For further information, please contact
Beatrice Cardon
Tel: int + 32 2482 5021
Fax: int + 32 2675 1777
e.mail: beatrice.cardon@volvo.com
