Volvo 2009 Annual Report Download - page 48

SEGMENTS 2009
Volvo CE is the world’s leading manufacturer of articulated haulers and wheel loaders and
one of the leading manufacturers of excavators, road construction equipment and compact
machines.
Construction Equipment
– continued very tough market conditions
olvo Construction Equip-
ment’s (Volvo CE’s) products,
services and spare parts are
offered in more than 125
countries. The products are
mainly used in general con-
struction, road construction and maintenance
as well as in the refuse, mining and forestry
industries.
The product portfolio includes articulated
haulers, wheel loaders, wheeled and crawler
excavators, motor graders, pavers, milling
machines, compactors, and a range of compact
equipment such as wheel loaders, excavators,
backhoe loaders and skid-steer loaders.
Asia leads the recovery
Measured in units, the total world market for
heavy, compact and road machinery equip-
ment decreased by 39% compared to 2008.
In Europe the market was down 50% and in
North America by 49%. China increased by
25% while Asia as a whole declined by 9%.
Other markets fell by 60%.
The rapid introduction of governmental
stimulus packages had an effect on the Asian
market. In particular, China developed strongly.
Asia accounted for over one third of the sales
during 2009.
The BRIC countries, especially the growing
markets in Asia, lead the global growth thanks
to tax reliefs and stimulus packages. These
countries are expected to continue their
investments in infrastructure, road building
and public construction, which brings a con-
tinued need for construction equipment.
Through the SDLG brand in China, Volvo CE
can offer a broader product portfolio with a
greater range in price, attachments and adap-
tations to local conditions.
Deliveries and sales
During 2009 Volvo CE sold 38,783 machines,
a decrease of 39% compared to 2008. Net
sales amounted to SEK 35,658 M (56,277),
which was a decline of 37%. The operating
loss amounted to SEK 4,005 M (Income SEK
1,808 M) and the operating margin was a
nega tive 11.2% (Positive 3.2%).
The operating loss is mainly a result of the
sharp drop in sales with low cost coverage in
the production as a consequence. The operat-
ing prot was also impacted by layoff-related
costs, restructuring of the operations in North
America and inventory write-downs.
The efforts to reduce company and dealer
inventories were successful and the number of
units in inventory was reduced by 47% during
2009. Inventories were in balance with demand
at the end of the year.
Cash flow and internal efficiency
During the year, focus was directed towards
efforts such as inventory reduction in order to
improve cash flow. A comprehensive program,
including the closure of factories, adaptation
of unsold machines to meet needs of new cus-
tomers and relocation of products to markets
with demand, was carried out. In spite of dif-
cult market conditions, these efforts contrib-
uted to a positive cash flow for the year.
During the year, a number of activities aimed
at improving internal efciency were also car-
ried out, among them a comprehensive reor-
ganization to globalize the business area’s
resources. This involves quicker and more ef-
cient decision making in order to be an effec-
tive and competent supplier with a clear cus-
tomer focus.
V
16% (18)
Net sales as percentage of
Volvo Group sales
1) Years starting 2006 are reported according to a new
reporting structure. See note 7.
Construction Equipment manufactures equipment
for construction applications and related indus-
tries.
Number of employees
13,456
Position on world market
Volvo CE is the world’s largest manufacturer of
articulated haulers and wheel loaders, and one
of the world’s largest manufacturers of excavation
equipment, road development machines and com-
pact construction equipment.
Brands
Volvo and SDLG (Lingong).
0908070605
(4.0) SEK bn
%
1.84.24.12.8
(11.2)3.27.99.77.9
Operating income
1
Operating margin
1
Operating income and operating margin1
0908070605
35.7 SEK bn56.353.642.134.8
Net sales1
44