Sales Slip 14% in Second Quarter at Volvo Construction Equipment

The negative effects of the Covid-19 on society and economic development characterized Volvo Construction Equipment’s (Volvo CE) second quarter results. Weak demand in Europe and North America was partially offset by a strong rebound in the Chinese market, the world’s largest. Despite lower demand impacting sales profitability held up well during the period.

Adjusted net sales in the second quarter decreased by 14%, amounting to SEK 22,876 M (SEK 26,814 M in Q2 2019). Higher sales in China did much to compensate for lower sales in all other markets. Operating income was also impacted, at 3,108 M was down from the 4,153 reported in the same period the year before, equating to an operating margin of 13.6% (15.5%).

Despite the impact of the pandemic on sales, the second quarter 2020 saw order intake increase by 11%, driven by a strong demand for the company’s SDLG branded machines, which were up by 31%. Notwithstanding that most factories in Europe and the Americas were shut down for a month during Q2, a result of countrywide lockdowns and supply issues, deliveries increased by 8% in Q2.

Market development

The year up to the end of May saw both the European and North American markets, measured in units, shrink by 22%, while the Asian market (excluding China) reduce by 21%. The Chinese market has recovered strongly, and was up 13% at the end of May. The South American market was also in positive territory, up by 8% at the same point in the year.

“While demand for construction equipment in both Europe and North America was weak during the second quarter we were able to leverage our strong position in China, which rebounded strongly in the period,” commented Melker Jernberg, Head of Volvo Construction Equipment. “This is allowing us to act from a position of relative strength and to drive transformational technologies that are moving our industry to more sustainable solutions. We are continuing to invest in electrification, automation and connectivity.”

Table 1. Volvo Construction Equipment, net sales by market area, in Millions of Swedish Krona (SEK).