Volvo 1999 Annual Report Download - page 35

Construction Equipm ent
Total m arket
The world market for heavy construction equipment decreased slightly in 1999. The
North American market, the largest single market area in the world, declined by nearly
10%, while the market in Western Europe increased by approximately 15%. Total
demand for heavy construction equipment in other markets decreased by approxi-
mately 5%. However, signs of recovery in Asia became increasingly clear, in South
Korea among other countries and in particular during the second half of the year. The
world market for light construction equipment increased by nearly 10%.
Sales and m arket shares
Construction Equipment sold more than 20,000 units in a single year for the first time.
As a result, the company increased its share of the total market as well as its share in
a number of product groups, including excavators, articulated haulers and compact
wheel loaders.
Net sales, SEK 19,295 M (19,469), were virtually unchanged from the preceding
year. The percentage of light construction equipment sold increased, while there was
a weak decline in the heavy-equipment segment. Adjusted for divestments and acqui-
sitions, sales rose 6%. Western Europe, which accounted for 52% (49) of Construction
Equipment’s total sales, continued to be the largest single market area. North America
accounted for 31% (34) and Asia and the rest of the world for 17% of sales, unchanged
from the preceding year.
At year-end 1999, the value of the order backlog was 20% higher than on the year-
earlier date.
Operating incom e
Operating income amounted to SEK 1,736 M (1998: SEK 1,549 M, excluding items
affecting comparability), the highest ever for Construction Equipment, and the
operating margin was 9.0% (8.0). Factors contributing to the positive trend of income
included improved productivity, the restructuring of the excavator business, including
closing down operations in Eslöv, Sweden and the fact that the operation in South
Korea is making a positive contribution earlier than expected. Capital gains on the sale
of companies and lower product costs also had a favorable impact on income.
The return on operating capital in 1999 increased to 19% (1998: 18%, excluding
items affecting comparability).
Production and capital expenditures
During the year Construction Equipment completed the restructuring of its excavator
business whereby Volvo’s global center for excavators has now been established in
South Korea.
As part of the program to utilize the plant in South Korea as an industrial base for
Construction Equipment’s products in Asia, the company also began production of
articulated haulers there at the end of 1999. The rebuild of Construction Equipment’s
plant in Asheville, North Carolina, U.S., where wheel loaders and articulated haulers
are manufactured, was completed during 1999. Capital expenditures were made to
increase mechanization, to enhance flexibility and in environmental improvement
measures. Concurrently, the possible capacity was increased from 2,000 to 3,000 units
per year.
33
SEK M 1997 1998 1999
Western Europe 7,836 9,557 10,032
Eastern Europe 263 336 193
North America 5,785 6,645 5,982
South America 991 957 507
Asia 1,036 1,092 1,903
Other markets 847 882 678
Total 16,758 19,469 19,295
SEK M 1997 1998 1999
Net sales 16,758 19,469 19,295
Operating income 11,444 1,549 1,736
Operating margin, % 18.6 8.0 9.0
1 Excluding items affecting comparability during
1998. Including items affecting comparability of
SEK (910) M operating income amounted to SEK
639 M and operating margin was 3.3%.
Key ratios Construction Equipment
Net sales/ mark et Construction Equipment
Steve De Stefano
Salesman
The Ages Group
Florida, US
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