Volvo 2006 Annual Report Download - page 75

• Increased production volumes in Korea,
China and Germany.
• Rental and after-market services increased
by 111% and 13%, respectively.
• The cost of sales and administration was kept on
a constant level in spite of increased activity level.
• All Volvo Construction Equipment dealers
are participating in the “Partnership
Development Program”.
• Product launches in new segments, such as
demolition and forest work.
Ambitions 2006
• Continued development of the excavator
business.
• Penetration of the domestic market for
wheel loaders in China.
• Continued upgrade of the industrial system
to satisfy customer demand.
• Focused strategy for India and Russia.
• Growth within services.
• Continued focus on tools in order to reach
new segments and customers.
• Further develop excavator business.
• Capitalize on investments made in Korea,
China and Germany.
• Continue to focus on the after-market and
on rental operations, as well as reduce
expenses for sales and administration.
• Continue the dealer development program.
• New products and services for new seg-
ments and customers.
Outcome 2006 Ambitions 2007
Net sales per market
SEK M 2004 2005 2006
Europe 13,453 15,524 18,759
North America 8,601 10,337 11,280
South America 922 1,238 1,358
Asia 4,961 5,717 6,903
Other markets 1,423 2,000 2,264
Total 29,360 34,816 40,564
intense competition. Lingong, which had a
share of 11% of the Chinese market for wheel
loaders in 2005, is a technologically advanced
company with very modern production plants.
Products
Products launched in 2006 included the
L350F, a new wheel loader. Equipped with a
16-liter Volvo diesel engine, the L350F is the
largest wheel loader in Volvo’s history, which
means that the company can approach new
customer segments.
capacity utilization and good control of selling
and administrative expenses, as well as to
active price management.
Acquisitions
In September 2006, Volvo CE announced its
intention to acquire the equivalent of 70% of
the shares in Shandong Lingong Construction
Machinery CO (Lingong), a major Chinese manu-
facturer of construction equipment with an
extensive network of dealers in China. The
acquisition was finalized in January 2007.
China is the world’s second largest market
for construction equipment and the world’s
largest market for wheel loaders. The Chinese
market is expected to grow additionally, and
Volvo CE intends to participate actively in this
growth.
Since Lingong was founded in 1972, the
company has established a position as one of
the leading players in a market subject to
Increased deliveries
Volvo Construction Equipment increased deliv-
eries in 2006. For example, Volvo’s deliveries of
excavators rose by 20%. The high deliveries
were the result of new products and improved
distribution. The number of machines sold dur-
ing 2006 increased by 11% to a record level
of more than 37,000 units.
Strong earnings trend
Volvo CE’s net sales rose by 17% to SEK
40,564 M (34,816). Adjusted for exchange-
rate effects, the increase was 17%. The in -
crease was attributable mainly to higher vol-
umes, improved distribution and an
advantageous product and market mix.
Operating income improved by 41% during
the year to SEK 3,888 M (2,752), representing
an operating margin of 9.6% (7.9). The earn-
ings and margin improvements were due to the
advantageous product and market mix, high
Business areas 2006 71