Despite a steep drop in demand in the first half of the year due to the COVID-19 pandemic, Volvo Construction Equipment (Volvo CE) recovered well, delivering improvements in sales and operating income in the fourth quarter 2020.
In Q4 2020, net sales increased by 6 percent to SEK 20,810 M (19,716). Adjusted for currency movements net sales were up by 15 percent. Operating income amounted to SEK 2,321 M (1,931), corresponding to an operating margin of 11.2 percent (9.8). Earnings were positively impacted by higher machine and service sales.
For the full year net sales decreased by 8 percent, to SEK 81,453 M (88,606). Adjusted operating income decreased to SEK 10,071 M (11,910), corresponding to an operating margin of 12.4 percent (13.4).
Market Conditions
After a steep drop at the start of the pandemic in the spring, demand started to recover in the second half of the year. Up to November both the European and North American markets were down 14 percent, while South America rose 12 percent, largely a result of an improving Brazilian market. Government stimulus measures fueled a sharp recovery in China, which was up 28 percent, although Asia as a whole was down by 6 percent.
Orders and Deliveries
During the fourth quarter of 2020 Volvo CE saw net order intake increase by 31 percent, driven by improving activity in most markets and dealer restocking. Order intake in Europe increased by 20 percent but fell (compared to the record order intake in 2019) by 18 percent in North America.
In South America order intake was up 182 percent, up from low levels in most markets. In Asia order intake was up 39 percent, boosted by government stimulus in China and improvements in other markets.
Deliveries increased by 21 percent during the fourth quarter 2020, again boosted by higher volumes in China, as well as other Asian markets and Brazil.
"In 2020 the global pandemic presented us with challenges that are unprecedented in modern times," said Melker Jernberg, president of Volvo Construction Equipment. "But together with business partners and suppliers we were able to support customers through all stages of the crisis. Construction activity is now back on a par with pre-pandemic levels, and this is giving confidence to customers, which is visible in our strong order intake."
In the fourth quarter Volvo CE began deliveries of its electric compact wheel loaders and compact excavators, beginning the company's electrification journey.
