Driven by the global market downturn and the continuing financial crisis, Volvo Construction Equipment posted a 45-percent decline in second-quarter net sales of SEK 9.15 billion (about U.S. $1.2 billion) compared with SEK 16.73 billion for the second quarter of 2008. For the first six months of 2009, net sales worldwide were SEK 17.3 billion (about U.S. $2.3 billion) compared with SEK 31.8 billion for the same period in 2008, also a 45-percent drop.
Second-quarter net sales in North America dropped 49.6 percent for the quarter, SEK 1.52 billion (about U.S. $202.6 million) compared to SEK 3.02 million for the year-ago quarter. The weakness is widespread, with Europe down 62 percent in number of machines sold, 53 percent in North America, Asia down 14 percent and other markets down 65 percent.
Volvo CE posted an operating loss in the second quarter totaling SEK 1.26 billion (about U.S. $167.5 million) compared with an operating profit of SEK 1.63 billion for the second quarter of 2008. Operating margins were down to a negative 13.8 percent, compared to positive 9.7 percent in the same period a year ago. The figures were a result of production cutbacks and low-capacity utilization of only 30 percent during the quarter, resulting in an under-absorption of costs in the manufacturing system. Operating income was affected by expenses related to reducing the workforce. On the positive side, production cutbacks helped improve the inventory situation, which was reduced 11 percent in the quarter. Since October 2008, the number of machines in stock has been reduced by 40 percent.
“We are working hard to maintain a high pace in the implementation of the measures aimed at balancing our costs to suit these lower levels of demand,” said Olof Persson, president of Volvo CE. “Despite the current weakness in our markets, I am convinced that the long-term driving forces that generated growth in our industry continue to apply.”
Order bookings at the end of June were 70-percent off compared to the same period in 2008. China is one of the few bright spots in the global picture, as stimulus funding has helped demand grow 6 percent in the second quarter. In other countries, stimulus investments have yet to have an impact.
The outlook for 2009 is characterized by much softer market conditions than in 2008. The European market is expected to decline by between 40 percent and 50 percent for the full year, with North America down 30 percent to 40 percent. The company expects a similar percentage drop-off in the rest of the world.
During the second quarter, Volvo CE ended motor grader production in Goderich, Canada, with motor grader production consolidated into the company’s road machinery facility in Shippensburg, Pa.
Volvo is based in Gothenburg, Sweden.