Volvo 2006 Annual Report Download - page 74

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Construction Equipment
– increased sales and
enhanced profitability
Growing total market
Market conditions were once again favorable in
2006. The total market for Volvo CE’s product
segments rose by 10%. The market declined by
4% in North America and rose by 11% in
Europe, while other markets rose by 21%. The
growth was attributable to overall positive busi-
ness conditions for the industry.
Public and private investments in infrastruc-
tural projects contributed to the sales increase
for heavy construction machines. The North
American market for heavy construction
machines grew by 3%, while the European
market increased by 15%. Other markets rose
22%.
During 2006, the total market for compact
construction equipment increased by 6%,
compared with the preceding year. The North
American market decreased by 8% while the
European market rose by 9%, and other mar-
kets grew by 20%.
>>> In addition to the actual equipment, Volvo
CE offers such services as financing, spare
parts, used equipment, renovated spare parts
and equipment, service agreements, tools and
the opportunity to rent machinery and equip-
ment.
As a result of the renewed and expanded
product offering, new customer segments are
reached. The recently launched excavators for
demolition and forest work are excellent ex-
amples of how the company is approaching
additional market segments.
Volvo CE’s products and services are offered
in more than 125 countries worldwide through
proprietary or independent dealerships.
Rental is the segment of the industry that is
growing fastest, and Volvo CE currently has
nearly 135 rental outlets, primarily in North
America and Europe.
Volvo Construction Equipment has grown considerably in recent
years. Customers from all parts of the world have shown their
appreciation of Volvo CE’s comprehensive investments in new
products and the company can currently offer one of the most
modern product ranges in the industry.
The new L350F is Volvo’s largest wheel loader so far.
Net sales as percentage
of Volvo Group sales Net sales1, SEK bn Operating income1, SEK bn Operating margin1, %
05 06
40.6
0302
21.0 29.423.2 34.8
04
05
7.9
06
9.6
03
3.9
02
1.9
04
6.5
05 06030204
0.4 0.9 1.9 2.8 3.9
1 Years 2004, 2005 and 2006 are reported in accordance
with IFRS and 2002 and 2003 in accordance with prevailing
Swedish GAAP. See Note 1 and 3.
Industry trend
The trend in the global industry for construction
equipment has been highly intensive in recent
years. Suppliers, manufacturers and dealers
are working hard to satisfy very high customer
demands. In certain cases, this resulted in a
shortage of components and raw materials,
such as tires and steel, leading in turn to long
delivery times.
More stringent rules regarding exhaust
emissions and noise, combined with lower fuel
consumption and reduced operating expenses,
have forced the industry to invest more in
research and development in these areas. For
many types of machines, the cost of fuel
accounts for one third of the annual operating
expenses, although it can be as high as 50%
for certain machines.
16%
70Business areas 2006