Volvo Construction Equipment has reported a strong finish to 2016, with market share gains in the larger, more profitable machine segments, an increase of 35% in net orders and a 19% rise in deliveries to 10,639 machines in the fourth quarter of the year.
The Swedish construction machinery giant said in statement that order intakes increased in all markets, most notably in China and Europe during the period while net sales increased by 20% to $1.5bn. Adjusted operating income amounted to $56.6m, corresponding to an operating margin of 3.8%. Earnings were positively impacted by a favourable product mix, higher sales volumes, lower costs for credit losses in China and reduced operating expenses, as well as by improved capacity utilisation, Volvo CE said.
Sales saw a slight fall for the full year, however, dropping by 1% to $5.8bn. Adjusted operating income increased to $257.7m, corresponding to an operating margin of 4.4%, the statement said.
Europe recorded a 46% order increase, with improvements in most countries, including Russia, and for all product segments. North America saw a 35% order intake increase from low levels in 2015. In Asia order intake increased by 29%. This was driven by an increased order intake in China, where the excavator market continues to recover, and in India, where strong market growth continued, as well as from increased sales of SDLG branded products in China and Southeast Asia.
Volvo CE’s statement said that the European market was up by 9% through November, mainly driven by a strong recovery in the French market and considerable growth in Germany and Italy, while the UK slowed down. Russian started to recover from low levels in 2015 and recorded growth.
Meanwhile, the North American market was 2% below the preceding year, with a decline for larger machines. However, the market for compact equipment was positive, with growth driven mainly by the increase in demand for compact excavators, the statement added.
The decline in South America continued throughout 2016 with the Brazilian market 44% below 2015. The Asian market, excluding China, was 5% below 2015 through November, mainly driven by a decline in Japan, while India continued to grow strongly. China was 3% above the preceding year – the first growth in the market after a long period of decline. Excavators started to recover in June and through November the market was up by 15% compared with the previous year, Volvo said.
“Global demand for construction equipment was largely flat in 2016,” said Martin Weissberg, president, Volvo CE. “However, there were signs of progress in Asia. Volvo showed positive signs of growth in our stronghold segments of excavators, wheel loaders and articulated haulers. The ongoing work to improve Volvo CE’s competitiveness is yielding results.”
The statement added that a new and more efficient R&D organisation was introduced during the fourth quarter and it was also decided to fit Volvo CE’s in-house produced eight-litre engine into its mid-size excavators and wheel loaders, replacing externally sourced engines.
Furthermore, Volvo CE headquarters will be transferred to Gothenburg to facilitate closer cooperation with the group’s other business areas and operations.
