Volvo 2005 Annual Report Download - page 69

Download and view the complete annual report

Please find page 69 of the 2005 Volvo annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 162

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162

Volvo Group 2005 65
The total market for compact construction
equipment grew in 2005 by 11%, compared
with the preceding year. The North American
market showed growth of 8% and the
European market was up 8%. Other markets
rose by 21%.
The Chinese market recovered from a tem-
porarily low level, which is favorable for con-
struction equipment in general and for the
excavator business in particular. In contrast, the
weak trend in Korea remained unchanged.
Industry trend
The industry was characterized by a general
upswing in 2005. Consolidation among small
and medium-size manufacturers continued,
although it has not progressed as far as the
truck sector. The large players concentrated
on launching new products, strengthening
their presence in key growth markets and
expanding their distribution networks.
Increased market shares
In total, Volvo CE increased its market share
during the year due to new products and
improved distribution. Deliveries increased by
13% and reached an all-time high level of
more than 33,000 units.
Strong earnings trend
Volvo CE’s net sales rose by 19% to SEK
34,816 M (29,360). Adjusted for exchange-
rate effects, the increase was 18%. The
increase was attributable mainly to increased
volumes, improved distribution and advanta-
geous product and market mix.
Operating income improved by 45% during
the year and amounted to SEK 2,752 M
(1,898), which represents an operating margin
of 7.9% (6.5). The earnings and margin
improvements are due to advantageous prod-
uct and market mix, increased productivity
and good control of selling and administrative
expenses. A program to lower selling and
administration expenses was launched in
2005 to strengthen the operating margin.
Increased competitiveness
from several new products
To reduce costs and exploit synergies, Volvo
Construction Equipment decided to institute
joint management for wheel loaders and articu-
lated haulers.
In mid-March, Volvo launched its largest
excavator to date, the EC 700 B. This 70-ton
excavator, which is manufactured in Korea, is in
high demand. Volvo CE’s excavator business
has performed very well since the acquisition
of Samsung’s construction equipment division
in 1998. Its annual volume has gone from
approximately 5,000 machines to nearly 9,000
machines in 2005. A key component of Volvo
Construction Equipment’s strategy is to expand
in excavators, since it is the largest product
area in the industry.
At year-end, an entirely new generation of
motor graders was introduced – the G 900
series. It consists of seven machines weighing
from 15.5 to 20.9 tons. All machines are
equipped with Volvo V-ACT engines. The new
motor graders will be manufactured at the
Goderich, Canada plant.
Volvo Construction Equipment’s prod-
ucts, spare parts and services are
offered worldwide in more than 125
markets. Customers are using the products in
a number of different applications including
general construction, road construction and
maintenance and in the refuse, mining and for-
estry industries.
Volvo Construction Equipment’s product
portfolio includes wheeled and crawler excav-
ators, a r ticulated haulers, w h e e l loaders , motor
graders and a range of compact equipment
such as wheel loaders, excavators, backhoe
loaders and skid-steer loaders. The pace of
product renewal in the past few years has been
high. The customer offering includes services
such as financing, leasing and used equipment
sales. Manufacturing facilities are located in
Sweden, Germany, France, Poland, the US,
Canada, Brazil, Korea and China.
Volvo Construction Equipment’s rental ini-
tiative, Volvo Rents, continues to develop favor-
ably. During the year, about 40 new outlets
were opened and the total number at year-end
amounted to 116, with 65 in North America
and 51 in Europe. A further 50 facilities are
expected to open in 2006.
Growing total market
In 2005, the total market for heavy and
compact construction machines in Volvo
Construction Equipment’s product segment
rose by 10%. In North America, the market
grew by 10%, Western Europe by 7%, while
the other markets rose by 13%.
Total market growth was driven by both
heavy and compact construction machines.
The North American market for heavy con-
struction machines grew 16%, while the mar-
ket in Europe rose 4%. The other markets
increased by 6%.
Net sales per market
SEK M 2004 2005
Europe 13,453 15,524
North America 8,601 10,337
South America 922 1,238
Asia 4,961 5,717
Other markets 1,423 2,000
Total 29,360 34,816