Volvo CE sees demand in China cut in half, profit plunges 46% in 1Q

Updated May 1, 2015
Despite continued rocky conditions, Volvo CE says its restructuring plan is developing well.Despite continued rocky conditions, Volvo CE says its restructuring plan is developing well.


Citing weak demand in China, where sales have been cut in half, Volvo Construction Equipment reported a drop in revenues and a plunge in profit for the first quarter of 2015.

For the quarter, which ended March 31, total sales at Volvo CE fell 5 percent to 12.7 billion SEK ($1.5 billion). A major drop in sales to Asia was largely offset by gains in both Europe and North America.

Profit for the quarter was a different story however, plunging 46 percent to 352 million SEK ($41.2 million). The rough 1Q earnings report follows a 4Q where the company saw income plummet 157 percent to a loss of $18.55 million.

RELATED >> Volvo CE pres Weissburg says company “well-positioned” to ride value trend

Despite the continued sharp declines, Volvo CE says its restructuring plan, which began in November with the discontinuation of its backhoe and motor grader lineups, is “developing according to plan.” Those machine models are being transitioned to the company’s Chinese SDLG brand.

“We are working to adapt to lower volumes and are implementing a series of measures to reduce cost levels. However, our efforts could not fully offset the significant drop in volumes,” Volvo CE president Martin Weissburg said in a statement.

In an address given at the Intermat trade show in Paris last week, Weissburg discussed a silver lining for the company at the moment, saying it is “well-positioned,” to wide the current “value” wave in the equipment market. He said the company has had “greater success than we anticipated,” marketing its value-priced SDLG wheel loaders through Volvo dealers.

Sales in Asia fell 21 percent during the 1Q period to 4.7 billion SEK ($548 million). Volvo says the Chinese market has been in decline since March 2014 and is now down 50 percent from where it was a year ago.

Meanwhile, sales in North America improved by 8 percent for the quarter to 2.6 billion SEK ($301.6 million) while European sales grew 10 percent to 4.06 billion ($476 million).