North America is Bright Spot amid Q4 Declines for Volvo CE

Volvo Construction Equipment’s sales declined 6 percent in the fourth quarter of 2014 because of stagnation in Europe and accelerated decline in China. Total revenue in the fourth quarter was SEK 12.277 billion (about U.S. $1.46 billion), compared to SEK 13.005 billion a year ago.

For the full year, Volvo revenue was SEK 52.855 billion (about U.S. $6.3 billion), a 1-percent year-over-year decrease.

Operating income decreased during the fourth quarter to a loss of SEK 155 million, compared to income of SEK 272 million in the year-ago period. Operating margin also dropped from 2.1 percent in Q413 to a 6.6-percent drop in Q414. Income and margin were impacted by low-capacity utilization in the industrial system, as Volvo CE reduced production output to adapt to declining sales volumes and in order to control inventory levels.

The numbers indicate challenging market conditions in most regions. An improving European market for much of 2014, with growth in Germany, United Kingdom and France, was dampened towards the end of the year by declines, especially in Russia. With the exception of Japan, Asian markets were all below 2013 levels, as was South America, where markets were hard hit by lower commodity prices and reduced mining activity. The Chinese market was especially affected, with decreased demand for both Volvo CE’s SDLG and Volvo branded products.

The main bright spot was the North American market, which performed well during 2014.

“Our work towards further improving operational performance and lowering cost levels has good traction,” said Martin Weissburg, president of Volvo Construction Equipment. “There is still a lot to do, but we have a good momentum in our activities to improve efficiency and reduce costs.”