COVID-19 factors in to declines through second quarter for Volvo CE
The global pandemic took a big bite out of Volvo Construction Equipment's financial results in the second quarter of 2020, sending sales down 14 percent even with a solid rebound in the company's key Chinese market.
The Sweden-based company reported net sales of SEK 22,786 M in Q2, down from 26,814 M in 2019. It reported a reduced operating income of 3,108 M, a drop from the 4,153 M reported in the same period during 2019.
However, there were some positive indicators in the quarter, including an increase in order intake of 11 percent; the company said this increase was driven by demand for machines in the SDLG brand, which saw an increase of 31 percent. While most factories in the Americas and Europe were shut down for a period of time during the quarter, deliveries ticked up by 8 percent.
European and North American markets, measured in units, slid by 22 percent, while the Asian market saw a reduction of 21 percent. China, however, recovered strongly and had increased 13 percent at the end of May. South America was also into positive territory at an 8 percent increase.
"While demand for construction equipment in both Europe and North America was weak during the second quarter we were able to leverage our strong position in China, which rebounded strongly in the period," commented Melker Jernberg, Head of Volvo Construction Equipment. "This is allowing us to act from a position of relative strength and to drive transformational technologies that are moving our industry to more sustainable solutions. We are continuing to invest in electrification, automation and connectivity."
Volvo CE's parent company, the Volvo Group, reported a net sale decrease of 38 percent worldwide.
"The second quarter of 2020 was characterized by the COVID-19 pandemic and its negative effects on society and economic development. Measures adopted by countries to control the spread had a significant impact on our production and supply chain as well as on demand for our products and services. Our net sales decreased by 39 percent to SEK 73.2 billion. After having been standing still in April, production was gradually restarted in May and is currently running well thanks to great efforts by our colleagues and suppliers. We also took forceful actions to reduce activities and costs, including salary reductions, temporary layoffs as part of governmental programs and a reduction of purchased services. All of these activities contributed to the Volvo Group achieving an adjusted operating income of SEK 3.3 billion (15.1) with a margin of 4.5 percent (12.5)," said Martin Lundstedt, President and CEO.