Volvo 2013 Annual Report Download - page 81

Volvo Construction Equipment (Volvo CE)
is the third largest and, at over 180 years
old, the longest established global producer of
products and services for the construction, ex -
trac tion, waste processing and materials han-
dling industries. The company boasts a portfolio
that exceeds 200 machines and a comprehen-
sive range of supporting products and services.
Main equipment includes excavators, articulated
haulers, wheel loaders and a range of smaller
equipment such as backhoe and skid steer load-
ers. The road machinery range includes motor
graders, compactors, pavers and milling machines.
The Chinese-built range of SDLG branded prod-
ucts includes excavators, loaders and compac-
tors. The company’s offering also includes ser-
vices such as customer support agreements,
at tach ments, fi nancing, leasing and used equip -
ment sales.
Volvo CE equipment is distributed through a
global network of independent and Volvo- owned
dealerships. SDLG branded products are dis-
tributed through separate sales channels.
Lower volumes
Measured in units sold, the total world market
for heavy, compact and road machinery equip-
ment increased by 2% in 2013, compared to
2012. The European market was down by 4%,
while Asia (excluding China) was up 2% and
demand in China itself increased by 3%. North
and South America proved more resilient, record-
ing market growth during 2013, of 2% and 4%
respectively. Volvo CE sold 70,800 machines
compared with 75,500 in 2012.
The important Chinese market, where VolvoCE
remains the market leader in wheel loader and
ex cavator sales, showed signs of increased sta-
bility, if not quite a market recovery. Elsewhere,
there were improving trends in the Middle East
and some European countries too. Demand in
the important mining segment was weak during
the year.
During 2013 net sales declined by 16% to
SEK 53,437 M (63,558). Net sales declined in
all markets. Adjusted for changes in exchange
rates, net sales declined by 12%.
Operating income declined to SEK 2,952 M
(5,667) and the operating margin amounted to
4. 9% (8.9). Profi t abilit y was negatively impac ted
by lower sales, a negative product mix, price pres-
sure and an unfavorable exchange rate devel-
opment amounting to SEK 623 M.
New product development
In April Volvo CE attended the construction
equipment industry’s largest exhibition – Bauma
– announcing its technical solution to the Tier 4
Final/Stage IV emissions regulations as well as
displaying new products such as the ECR25D,
ECR58D and ECR88D short radius compact
excavators and the P6870C asphalt paver. Prod-
uct introductions were supported by new Volvo
branded attachments, fi nancing solutions, ap -
proved used equipment, genuine Volvo parts,
cus tomer support agreements and fl eet man-
agement solutions.
Production and distribution
In 2013 Volvo CE further expanded the produc-
tion footprint. In May the company opened a
new excavator plant in Europe’s second-largest
market: Russia. The 20,660 square meter fac-
tory in Kaluga represents a SEK 350 M invest-
ment and is initially producing four models of
Volvo excavators, spanning 20 to 50 tons.
Volvo CE also inaugurated wheel loader pro-
duction in its Shippensburg facility in the U.S.,
along with a new headquarters for its Americas
sales operation. Volvo CE also announced that
it was moving production of backhoe loaders
from Mexico to its main Latin American produc-
tion facility in Pederneiras, Brazil.
SDLG started production of its excavators in
Brazil. It was also announced that SDLG would
enter the North American market, initially offer-
ing two wheel loaders through a selected group
of dealers. SDLG also entered into a number of
distribution agreements to sell machines through-
out EMEA, Asia Pacifi c and North America, while
in its Chinese home market the creation of SDLG
Financial Services offers customers improved
fi nancial services.
2013 also saw the remote telematics system
Caretrack reach a signifi cant milestone: there
are now 50,000 machines worldwide with the
monitoring system.
Acquisition of hauler business from Terex
In December Volvo CE agreed to acquire the
off-highway hauler business of the Terex Cor-
poration for a purchase consideration of approx.
SEK 1 billion on a cash and debt free basis. The
acquisition improves Volvo CE’s penetration in
the core earthmoving segment and extends its
presence in light mining. The deal, which is sub-
ject to regulatory approval, includes the main
production facility in Motherwell, Scotland and
two product ranges that offer both rigid and
articulated haulers. It also includes the distribu-
tion of haulers in the U.S. as well as a 25.2%
holding in Inner Mongolia North Hauler Joint
Stock Co (NHL), which manufactures and sells
rigid haulers under the Terex brand in China
with a market-leading position. In the fi rst nine
months of 2013 the businesses in the acquisi-
tion (excluding NHL) had net sales amounting
to approx. SEK 1.1 billion and the operating
income was approx. SEK 35 M.
Net sales by market
SEK M 2013 2012
Europe 16,356 16,518
North America 8,319 12,027
South America 3,314 3,788
Asia 21,911 27,033
Other markets 3,539 4,193
Total 53,437 63,558
Deliveries by market
Number of
machines 2013 2012
Europe 13,522 12,545
North America 5,240 6,782
South America 3,568 3,908
Asia 44,892 49,263
Other markets 3,564 2,982
Total
deliveries 70,786 75,480
Of which
Volvo 38,155 40,331
SDLG 32,631 35,149
Of which
in China 27,559 30,780
Net sales
SEK bn
Operating income (loss)
and operating margin
SEK M
%
2,592
12
5,667
8.9
13
2,592
4.9
11
6,812
10.7
10
6,180
11.5
09
(4,005)
(11.2)
1312111009
53.4
63.6 53.463.553.835.7
loader
from
Volvo
Construction
Equip
ment, designed specifi cally to meet the
needs of customers in
C
hina and othe
r
emergi
ng
markets
.
%
8.9
4.9
10
.7
11.5
(
11.2
)
T
he L105 i
s
th
e
a mid-
s
iz
e
d wh
ee
l
loa
der
fr
om
Vol
vo
Con
str
uct
ion
Eq
uip
-
77