The global construction equipment industry continues to demonstrate strong market conditions, evidenced by Volvo Construction Equipment’s (Volvo CE) solid set of second quarter 2011 financial results.

The period also saw the company strengthen its market leadership position in wheel loader and excavator sales in China, taking an 11.8 percent share of this important market.

Despite an overall softening of demand in the Chinese market, as a result of government measures to curtail inflation, sales at Volvo CE were positively impacted by strong momentum in most markets. Net sales in the second quarter amounted to SEK 17,520 M (SEK 15,295 M in Q2 2010). This represents a 15 percent jump in demand, and when adjusted for currency movements, this increased further, to 32 percent. Operating income amounted to SEK 1,893 M, down from 2,086 M in 2010. Both sales and operating income were negatively affected as a result of the earthquake and ensuing tsunami that hit Japan earlier this year. Japanese supplier-related issues resulted in lost sales of approximately SEK 1,200 M and a reduction in operating income of SEK 300 M. This also had a negative impact on operating margin, which at 10.8 percent was down from 13.6 percent in the same period in 2010.

Commenting on the results, Pat Olney, the incoming president of Volvo CE said, "These are a solid set of figures given the significant currency headwinds we faced and the consequences of the tragic earthquake and tsunami that struck Japan during the period. Due to continued uncertainty in the current macro-economic situation, we are maintaining a high degree of cost flexibility in order to be able to quickly adapt to any potential challenges in market conditions."

Positive Outlook

In a sign of improving conditions, the value of Volvo CE’s order book at the end of the second quarter was 38 percent higher than at the same date in 2010. Market conditions for the full year 2011 are expected to remain positive, with a projected growth of 15 to 25 percent (previous forecast 20 to 30 percent). Europe is expected to grow by 15 to 25 percent (previous forecast 10 to 20 percent), North America by 25 to 35 percent (unchanged), South America 10 to 20 percent (previous forecast 5 to 15 percent), Asia 10 to 15 percent (previous forecast 10 to 20 percent), whereof China is expected to grow between 10 to 15 percent (previous forecast 20 to 30 percent).

Notable events for Volvo CE during the second quarter included ’Volvo Days,’ a four week-long event held in May and June in Sweden that saw more than 10,000 customers from more than 70 countries become acquainted with the 50 new Tier 4i/Stage IIIB machines that Volvo CE has launched this year.

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