A long period of strong demand growth in the market for construction equipment came to an end for Volvo Construction Equipment in the third quarter of 2019 with Volvo CE reporting a modest decrease in sales and operating income. The company continued its research and development efforts during the period and used the quarterly results to announce the next phase of its program to launch an autonomous electric hauler.
Net sales in the third quarter totaled SEK 17,921 million (about U.S. $1.86 billion) compared to SEK 18,598 million in the third quarter of 2018, a 3.6-percent decrease. Operating income was SEK 2,180 million compared to SEK 2,587 million in the third quarter of 2018, a 15.7-percent slide. This equated to an operating margin of 12.2 percent, compared to 13.9 percent a year ago. Profitability was hampered by brand, market and product mix, as well as higher R&D and selling expenses.
Net order intake in the third quarter decreased by 9 percent, compared with the same quarter in 2018. Deliveries decreased by 2 percent to 16,640 machines.
Sales in North America in the third quarter totaled SEK 3,556 million compared to SEK 3,843 million in the third quarter of 2018, a 7.5-percent tumble. However, sales in Europe totaled SEK 6,629 million compared to SEK 6,211 million a year ago, a 6.7-percent year-over-year increase. Sales in South America also increased from SEK 580 million in Q318 to SEK 703 million, a 21.2-percent jump.
Sales in Asia declined, from SEK 6,724 million in the third quarter of 2018 to SEK 6,137 million in the recently concluded quarter, an 8.7-percent dive. Sales in Africa and Oceania declined from SEK 1,240 million in Q318 to SEK 895 million, a 27.8-percent swoon.
Despite the disappointing third quarter numbers, Volvo CE is still ahead for the first nine months of the year. Sales totaled SEK 68,889 million for the first nine months of the year compared to SEK 63,915 million in the first nine months of 2018, a 7.8-percent year-over-year increase. North America posted SEK 14,104 million compared to SEK 11,739 million a year ago, a 20.1-percent increase. Europe’s sales of SEK 23,510 million for the first nine months were up 14.3 percent compared to SEK 20,562 million in the first nine months of 2018.
“After several years of high market levels, demand for construction equipment is slowing down,” said Melker Jernberg, president of Volvo CE. “Although many markets are coming off their previous levels, we expect the underlying need for infrastructure development in many markets to support the industry in the long term.”
Volvo CE also announced it has signed a contract for the first commercial pilot of its autonomous battery-electric load carrier. The trials will be conducted with customer Harsco Environmental in Sweden and represent the first stage in the process of industrializing the technology.