7/27/2007 Sales at Volvo CE Jump by 24% in Q2

Volvo Construction Equipment (Volvo CE) had a strong second financial quarter of 2007, reporting a sales increase of 24% and operating income up by 10%.

Buoyed by higher volumes, Volvo Construction Equipment’s 2007 financial year continues to be characterized by strong growth in sales and profitability. Sales in the period rose by 24% and operating income increased by 10%, compared to the same period last year.

Net sales in the second quarter amounted to SEK 14,146 M (SEK 11,416 M in Q2 2006). Operating income increased to SEK 1,398 M from SEK 1,276 M in the same period in 2006. The increase in income was largely due to higher volumes and high levels of capacity utilization. Operating margin was 9.9%, down from 11.2% in the second quarter last year.

The second quarter financial statement was the first to include Volvo CE’s latest acquisition – the road development division it purchased from Ingersoll Rand in April this year. The new division had sales of SEK 1,132 M and generated an operating income of SEK128 M.

The high demand for Volvo CE products continued to put some parts of the company’s industrial structure under strain during the quarter. A combination of high capacity utilization and delivery disruptions from suppliers had a negative impact on productivity as a consequence. Changes in exchange rates also weighted on operating income in the second quarter.

World Markets

The second quarter of 2007 saw the total world market for construction equipment within Volvo CE’s product range increase by 10% compared to the same period in 2006. In North America the market declined by 12%, largely due to lower activity in the housing construction sector. Offsetting this decline was the European market, which increased by 13% and the Asian market, which rose sharply – up 31% – buoyed by strong sales in China (+ 54%). Other markets also performed well, rising by 25%.

Order bookings remain strong, with a 24% bigger order backlog (in value) than on the same date a year earlier. (Excluding Lingong and Ingersoll Rand’s road development division.) And the outlook for the second half of 2007 remains favorable. The European market is expected to grow by10% during the year, while Asia is expected to increase by around 15%; again largely driven by China. Other markets are also forecast to rise by 10%, while the North American market is predicted to decline by 10% - but remain at a historically high level.

Table 1. Volvo Construction Equipment, net sales by market area, in Millions of Swedish Krona

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