Volvo 1997 Annual Report Download - page 31

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29
Construction equipm ent
The market for construction equipment showed continued growth in 1997 in
North America and beginning of a recovery in Europe. Demand in markets in
East Asia and South America fell sharply during the latter part of the year.
A continuing trend toward concentration was noted within the industry, with
small companies – often specialized in a single product – being acquired by large
companies as part of the latters’ efforts to broaden their product programs and
market coverage.
Construction Equipment maintained its position as a leading manufacturer
and continued, as planned, to broaden and increase its operations organically and
through acquisitions.
Acquisitions – a part of the growth
strategy
Champion Road Machinery Ltd., a
Canadian company, was acquired in
1997. The company is one of the
world’s leading manufacturers of grad-
ers, a type of equipment that supple-
ments Volvo’s construction equip-
ment program and which is of major
importance in serving key customer
segments and priority growth markets.
Groupe Pel-Job, the manufacturer
of mini-excavators that was acquired
at the end of 1995, was merged with
Zettelmeyer during the year to form a
special operating sector for compact
and service equipment. Industrial synergies are thereby being utilized and Con-
struction Equipment is increasingly able to focus on this segment of the market.
In February 1998 a letter of intent was signed with Samsung Heavy Industries
Co. Ltd whereby Volvo Construction Equipment intends to acquire Samsung´s
construction equipment business.
Increased im portance of the North Am erican m arket
Net sales increased by SEK 3,954 M, to SEK 16,758 M, of which SEK 1,332 M was
attributable to Champion Road Machinery, which was acquired during the year.
As a result of Champion’s contribution and strong growth in the market, sales
in North America, as a percentage of total sales, increased to 35% (26). Europe
continued to be the largest single market area. But the percentage of sales there
declined from 57% to 47% as a combined consequence of lower market growth
in Europe and higher expansion outside Europe.
The percentage of sales to customers in the priority growth markets in East
Asia and South America increased, but from a very low level. As part of the pro-
gram in new markets, a local representative office was established in Russia and a
sales office in Poland, during the year.
The new L 220D loader is
designed mainly for rock
and pile loading and is
characterized by high pro-
ductivity combined with
low noise and exhaust
emissions.
SEK million 1995 1996 1997
Net sales 6,916 12,804 16,758
Operating income 717 1,162 1,444
Operating margin, % 12.3 9.1 8.6
Net sales by m arket area
SEK million 1995 1996 1997
Western Europe 4,199 7,163 7,836
Eastern Europe 112 93 263
North America 1,403 3,385 5,785
South America 556 598 991
Asia 339 937 1,036
Other 307 628 847
Total 6,916 12,804 16,758
1 From July 1995. Net sales for full-year 1995 was 13,684
and operating income was 1,679.
A complete 11-year summary is shown on pages 76– 87.