Demand stalled in the first quarter for Volvo Construction Equipment as measures to stop the spread of the Covid-19 pandemic took hold. Despite a recovery in the Chinese market in March, sales still dropped by 16.6 percent in the quarter and order intake declined by 7 percent. Sales, profitability, deliveries and orders all showed reversals during the period.
During the first three months of 2020, Volvo CE posted net sales of SEK 20,148 million (about U.S. $2.011 billion) compared to, SEK 24,155 million in Q119, a decline of 16.6 percent. Operating income slipped to SEK 2,678 million compared to SEK 3,646 million in the year-ago period. Earnings were impacted by lower machine volumes and an unfavorable machine mix. The operating margin was 13.3 percent, compared to 15.1 percent in the year-ago quarter.
Order intake decreased by 7 percent in Q1 2020, although demand in China – the world’s biggest market for construction equipment – increased towards the end of the quarter. Deliveries were down, by 13 percent, to 20,170 machines, compared to 23,139 machines in Q1 2019.
The major global construction equipment markets of Europe and North America were both down in the first quarter, declining 1 percent and 2 percent respectively in the first two months of the year before a dramatic drop in March. In Asia (not including China) demand was down by 4 percent compared to the same period last year. The impact of the Covid-19 virus was more pronounced in China, which fell 44 percent during the period, because of market disruption. China did see a rebound in March, with demand up 2 percent compared to the same month in 2019, thanks to government stimulus measures aimed at boosting infrastructure development.
“The measures to stop the spread of the Covid-19 pandemic began affecting our operations in China in February, and had a severe impact in mid-March, when our global supply chain was disrupted and production halted in most parts of our operations,” said Volvo CE’s president Melker Jernberg. “It is clear that we are now entering a tough period, with both production stops and low demand having a negative impact on our profitability. That said, we take confidence in the fact that our customers are active in businesses that are important to society, and that our products and services are vital in building sustainable infrastructure for the future.”
