Buoyed by higher volumes, Stockholm, Sweden-based Volvo Construction Equipment’s 2007 financial year continues to be characterized by strong growth in sales and profitability. Sales in the second quarter rose by 24 percent and operating income increased by 10 percent, compared to the same period last year.
Net sales in the second quarter amounted to SEK 14.14 billion (about U.S. $2.1 billion) from SEK 11.41 billion in Q206 (about U.S. $1.69 billion). Operating income increased to SEK 1.40 billion (about U.S. $207.6 million) from SEK 1.28 billion (about U.S. $189.4 million) in the same period in 2006. The increase in income was largely due to higher volumes and high levels of capacity utilization. Operating margin was 9.9 percent, down from 11.2 percent in the second quarter last year.
The second quarter financial statement was the first to include Volvo CE’s latest acquisition — the road development division it purchased from Ingersoll Rand in April. The new division had sales of SEK 1.13 billion (U.S. $168.1 million) and generated an operating income of SEK128 million (U.S. $19.0 million).
The second quarter of 2007 saw the total world market for construction equipment within Volvo CE’s product range increase by 10 percent compared to the same period in 2006. In North America the market declined by 12 percent, largely due to lower activity in the housing construction sector. Offsetting this decline was the European market, which increased by 13 percent and the Asian market, which rose sharply — up 31 percent — buoyed by strong sales in China (+ 54 percent). Other markets also performed well, rising by 25 percent.
Order bookings remain strong, with a 24-percent bigger order backlog (in value) than on the same date a year earlier (excluding Lingong and Ingersoll Rand’s road development division).
The outlook for the second half of 2007 remains favorable. The European market is expected to grow by10 percent during the year, while Asia is expected to increase by around 15 percent; again largely driven by China. Other markets are also forecast to rise by 10 percent, while the North American market is predicted to decline by 10 percent, but remain at a historically high level.
Volvo Construction Equipment is an international company developing, manufacturing and marketing equipment for construction and related industries. Volvo Group is a publicly held company headquartered in Gothenburg, Sweden. With 2006 sales of approximately $34 billion, Volvo’s business areas include heavy trucks, buses, construction equipment, marine and industrial drive systems, aerospace and financial.