Volvo Construction Equipment last week reported a second-quarter 2008 sales increase of 27 percent and operating income increase of 17 percent, as a result of 89-percent sales growth in China. Net sales in the second quarter amounted to SEK 16.7 billion (about U.S. $2.8 billion) from SEK 14.1 billion (U.S. $2.4 billion) in the second quarter a year ago. Operating income increased to SEK 1.6 billion (U.S. $270.9 million) from SEK 1.4 billion (U.S. $232.5 million) in the same period in 2007, largely because of higher volumes. Changes in exchange rates weighed down operating income in the quarter, as did ongoing integration costs of acquired businesses.

“The business’s strong organic growth was maintained in the second quarter and operating income also increased,” said Tony Helsham, president of Volvo CE. “These welcome improvements come despite upward pressure on raw material and component costs. We are, therefore, continuing to improve the efficiency of our purchasing, increase productivity in manufacturing and implement cost savings in order to further improve profitability.”

The second quarter of 2008 saw the total world market for heavy, compact and road machinery equipment increase by 1 percent compared to the same period in 2007. North America continued its downward trend, declining by 18 percent, and was joined by Europe, which also shrank, by 14 percent in the quarter. However, these reductions were more than offset by rises in other regions, with Asia growing by 27 percent — strongly driven by China, which saw sales increase by 89 percent over the same period last year. Other international markets also had a good performance, rising by more than a fifth, to 21 percent, when compared to the second quarter of 2007.

The outlook for 2008 is characterized by softer market conditions than in 2007. North America will continue its downward trend, and looks likely to reduce by 20 percent. Likewise, Europe is expected to decline by 5 to 10 percent during the year. Previously, Europe was forecast to remain flat at 2007 levels. These reductions are likely to be offset by strong increases in the rest of the world, which are expected to grow by 20 percent.

Stockholm, Sweden-based Volvo Construction Equipment is an international company developing, manufacturing and marketing equipment for construction and related industries. Its products include a comprehensive range of wheel loaders, hydraulic excavators, articulated haulers, motor graders, soil and asphalt compactors, pavers, milling machines and compact equipment.