Improving customer sentiment in the wake of the Covid-19 outbreak led to increased demand for construction equipment and services in the third quarter of 2020, particularly in China, helping Volvo Construction Equipment (Volvo CE) post improvements in sales, orders and machine deliveries in the period.
While net sales in the third quarter decreased by 2 percent to SEK 17,619 million from 17,921 million in the third quarter of 2019, when adjusted for currency movements they were up 6 percent in the period, Volvo said. Adjusted operating income was also slightly down, at SEK 1,963 million, compared to SEK 2,180 million in the corresponding period in 2019. This equated to an operating margin of 11.1 percent, compared to 12.2 percent a year ago.
Net order intake in the third quarter increased by 40 percent compared with the same quarter in 2019. Deliveries increased by 20 percent, to 19,774 machines, in the third quarter, mainly driven by higher sales in China.
Most markets recovered well from the effects of the Covid-19 pandemic in the third quarter, with machine utilization at the end of the period at almost 2019 levels. That said, the ongoing uncertainty created by the pandemic weighed on the European market, which up to the end of August was down by 19 percent.
The North American market was also down by 19 percent, while South America was up 11 percent, albeit from very low levels in 2019. In Asia (excluding China), the total market was down 13 percent. The Chinese market recovered strongly from the impact of the pandemic, driven by government stimulus measures, prompting an increase in demand of 22 percent in the period.
“After the sharp Covid-19 triggered downturn of Q2 we saw construction activity gradually improve across most markets in the third quarter,” said Melker Jernberg, president of Volvo CE. “Demand was particularly strong in China, the world’s biggest market, and here we continued to grow our market share. With continuing uncertainty due to the ongoing spread of the pandemic, we will maintain a tight focus on cost control, and prioritize the health and safety of colleagues, customers and business partners.”
In line with the company’s policy of concentrating on core product groups, Volvo CE divested its North American Blaw-Knox paver range during the third quarter. It also announced that the first deliveries of its all-electric compact machines would begin in UK, France and Germany in the coming weeks.
For the first nine months of 2020, Volvo CE posted SEK 60,642 million compared to SEK 68,889 million, a 12-percent dip. In North America, Volvo CE reported SEK 10,206 million, compared to SEK 14,104, a 27.6 percent slide. In Europe, the drop for the nine-month period was similar at 27 percent, from SEK 23,510 million to SEK 17,154. However, sales increased in Asia, based on its strength in China, from SEK 26,002 million last year to SEK 29,117 million for the nine-month period this year, a 12-percent hike.
