Volvo CE sales jump

A surge in sales from its North America division helped boost Volvo Construction Equipment revenues by 15% year-on-year in the second quarter to SEK19.7 billion (€2.3 billion).

However, the company has decided to reduce production rates at its European and Chinese plants, and has downgraded its growth forecast for the European market, on the back of weaker conditions in these regions.

North American sales jumped 89% during the three months to 30 June to SEK4 billion (€481 million). Volvo said it continued to expect the total construction equipment market in this region to grow by 15% to 25% for the full year.

But Volvo's Asia division recorded no growth in second quarter revenues compared to last year, at SEK8.2 billion (€977 million). It said it expected the total market for Asia (excluding China) to grow up to 10% in 2012, while the Chinese market is expected to decline by up to 25% for the full-year.

Meanwhile in Europe, Volvo recorded a 2% rise in sales for the second quarter to SEK5 billion (€596 million). However, it lowered its full-year forecast for the market in this region. Previously, the manufacturer expected growth of up to 20% for 2012, but it said it now expected a flat market year-on-year thanks to current economic uncertainty.

South American sales were also flat year-on-year at SEK1.1 billion (€131 million) for the second quarter. Volvo expects this market to grow by up to 10% this year.

Operating income growth

The company's second quarter operating income increased 35% year-on-year to SEK2.6 billion (€312 million), representing an operating margin of 13.3%.

Volvo said the figure was boosted by cost reductions, exchange rates and price realisation, offset by a SEK300 million (€36 million) loss thanks to Japanese supplier issues.

Volvo group president and CEO Olof Persson said, "Over the course of the quarter, it became clearer that growth was weakening in an increasing number of markets, and we note a trend towards higher inventories among our dealers in Europe and China, combined with stiffer price competition.

"As a result, we have decided to reduce production rates in our European and Chinese plants, and we are also downgrading our forecast for the European market."

Excavators in Brazil

Volvo also gave an update on its plans for its subsidiary Lingong, which markets construction equipment under the SDLG brand. To date in Brazil, SDLG has marketed only wheeled loaders, but Volvo said it would now go a step further and launch a range of SDLG excavators to be manufactured at its Pederneiras factory in Brazil.