Volvo 2014 Annual Report Download - page 78

Established in 1832 in Eskilstuna, Sweden, Volvo
Construction Equipment (Volvo CE) provides
machines, attachments and services for the con-
struction, extraction, waste processing and materi-
als handling industries. Distributing its products via
a global network of dealers, it is a leader in excavators, articulated
haulers, wheel loaders – and a range of smaller equipment, such
as compact excavators and skid steer loaders. The road machin-
ery range includes compactors and pavers. Its Chinese-built
range of SDLG-branded products includes excavators, wheel
loaders, backhoe loaders, compactors and motor graders, while
its newly-acquired Terex Trucks has a worldwide fi eld population
of rigid and articulated haulers. The company’s offerings also
include customer support agreements, attachments, fi nancing,
leasing and used equipment sales.
North America up, China sharply down
Measured in units sold, the total world market for heavy, compact
and road machinery equipment shrank by 4% in 2014, compared
to 2013. The European market was up by 7%, while Asia (exclud-
ing China) fell by 2%, South America was down by 17% and
China fell by a severe 18%. North America gained momentum,
however, recording growth of 11%. Volvo CE’s global deliveries
declined by 13% to 61,317 machines during 2014, compared with
70,786 in 2013.
During 2014 net sales decreased by 1% to SEK 52.855 M
(53,437). Net sales increased in North America and Europe whereas
they declined in Asia, South America and Other markets. Adjusted
for changes in exchange rates, net sales decreased by 4%.
Operating income excluding restructuring charges declined to
SEK 1,231 M (2,592) and the operating margin excluding restruc-
turing charges amounted to 2.3% (4.9). Restructuring charges
amounted to SEK 579 M (0). Operating income was negatively
impacted by lower sales volumes, low capacity utilization and a
provision for expected credit losses in China amounting to SEK
660 M. The provision followed an extended period of declining
demand, low machine utilization, primarily in the mining industry,
and lower raw materials prices leading to a weakening of the
fi nancial positions of dealers and customers in the country.
Currency exchange rates had a negative impact of SEK 224 M on
operating income compared with 2013.
Product development
2014 saw Volvo CE unveil an overhaul of its core product range.
New machines included new series of wheel loaders, excavators
and articulated haulers, as well as a number of emissions-compli-
ant road machinery introductions. All new mach i nes meet, where
necessary, the low-emission requirements of Stage IV/Tier 4
Final legislation, which came into force on January 1st, 2014. The
previously announced acquisition of Terex Corporation’s hauler
business was completed during 2014. Now rebranded as Terex
Trucks, the company adds its ranges of rigid and articulated haul-
ers to the Volvo CE product portfolio.
The market decline in China weighed on volumes
and profi tability in 2014. With core product ranges
renewed, production fl exibility remains in focus to
cope with market volatility.
MARKET
HEADWINDS
impacted
PROFITABILITY
CONSTRUCTION EQUIPMENT
Facts Volvo CE manufactures a range of equipment for construc-
tion applications and related industries.
Position on world market Volvo CE is a leading manufacturer
of rigid and articulated haulers, wheel loaders, excavators, road
development machines and compact construction equipment.
Brands Volvo, SDLG (Lingong) and Terex Trucks.
Number of regular employees 14,901 (14,663)
Share of Group net sales, %
19 (20)
BOARD OF DIRECTORS’ REPORT 2014
GROUP PERFORMANCE
74