Volvo 2012 Annual Report Download - page 66

BOARD OF DIRECTORS’ REPORT 2012 GROUP PERFORMANCE
CONSTRUCTION
EQUIPMENT
Continued
investments
in growth
ollowing a comprehensive product
renewal program that has seen over
100 new products launched in the
last two years, Volvo CE offers a
modern fleet of excavators, haulers, wheel load-
ers and a range of smaller equipment such as
backhoe and skidsteer loaders. The road machin-
ery range includes graders, compactors and pav-
ers. Its Chinese-built range of SDLG branded
products includes excavators and wheel loaders.
Volvo CE equipment is distributed to custom-
ers through a global network of independent and
Volvo-owned dealerships. SDLG branded prod-
ucts are distributed through separate sales chan-
nels. The offering also includes services such
as customer support agreements, attachments,
financing, leasing and used equipment sales.
Market turbulence
Measured in units sold, the total European market
for heavy, compact and road machinery equipment
shrank by 4% compared to 2011, while Asia
(excluding China) increased by 11% and demand
in China itself fell by a significant 37%. Bucking
the trend however were North and South America,
who saw market growth during 2012 of 23% and
6% respectively.
Lower economic activity and the uncertainty
about the future impacted customers’ willingness
to invest in new equipment during 2012. As a
consequence Volvo CE reacted quickly to the
slowing global market, cutting production in its
facilities and reducing inventories throughout the
supply chain. During the year the company sold
78,500 machines, compared with 84,000 in 2011.
In 2012, net sales were flat at SEK 63,558 M
(63,500). Operating income decreased to SEK
5,773 M (6,812) and operating margin was 9.1%
(10.7). After a strong first half of the year, sales
and earnings during the second half were nega-
tively impacted by much lower volumes and a
negative product mix as well as lower activity in
the global mining industry affecting sales of
larger and more profitable products. Low cap-
acity utilization also affected profitability.
Investing in new products
At the Intermat exhibition in France in April,
Volvo CE launched 60 new products. These
machines, in addition to a further 55 new models
introduced in 2011, represents the most funda-
mental overhaul of the company’s product port-
folio ever. On show in Paris were the new D-Series
excavators in the 13 to 25 ton classes, two short
swing excavators and four new models of EW
wheeled excavators in the 14 to 21 ton classes.
The new G-Series wheel loaders also fea-
tured prominently as did the European launch of
the innovative range of C-Series skid steer and
tracked loaders. Under the theme ‘Discover a
new way’ Volvo CE’s also showcased its new
road construction machinery.
Meeting the divergent needs of local markets
around the world, new product introductions are
designed to meet a broader audience, with a
host of new products designed to meet the spe-
cific requirements of customers in Asia and
other international markets.
Production and distribution
2012 saw the roll out of the latest phase of the
company’s factory and distribution investment
program. Russia featured in both aspects, with
excavator production set to begin in 2013 at a
new factory in Kaluga, while the dealer network
in Russia is set to double to 90 locations by
2015. There were also capacity and product
expansion programs ongoing in India, Brazil,
China and the US. In Bangalore, India, a new
factory was inaugurated during 2012 to make
excavators alongside the existing road machin-
ery already produced at the facility.
In the Chinese city of Jinan, meanwhile, a
Technology Centre is under construction that
will, when completed in June 2013, employ up to
200 engineers to design products and compo-
nents primarily for emerging markets.
In May a ground breaking ceremony was held
on the USD 100 million expansion of Volvo CE’s
facility in Shippensburg, Pennsylvania, USA.
When completed it will create a new Americas
headquarters, demonstration center and the
ability to localize production of larger machines.
Industry recognitions
The company picked up a number of important
honours for its innovative products during the
year. Out of a field of more than 80 entries from
leading manufacturers, Volvo CE scooped a gold
prize at this year’s Intermat 2012 Innovation
Award for its revolutionary On Board Weighing
system, designed for its F-Series Full Suspension
articulated haulers. This allows complete payload
management, giving access to data such as total
transported load in tons, tons transported per liter
of fuel and number of cycles.
Volvo CE manufactures equipment for
construction applications and related
industries.
Number of employees
14,800
Position on world market
Volvo CE is the world’s leading manu-
facturer of articulated haulers and one
of the world’s leading manufacturers
of wheel loaders, excavators, road
development machines and compact
construction equipment.
Brands
Volvo and SDLG (Lingong).
F
Share of Group
net sales
21% (21)
Celebrating a heritage that
dates back 180 years, Volvo
Construction Equipment
(Volvo CE) is one of the
largest and arguably the old-
est global producer of prod-
ucts and services for the
construction, extraction,
waste processing and mate-
rials handling industries.
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