Strong sales in regions outside of China weren’t enough to prop up Volvo CE’s results during the first quarter of 2022. The construction equipment manufacturer saw a 9% decline in overall global sales compared to the same period in 2021.
Volvo CE’s net sales decreased to SEK 22,613 M from SEK 24,742 M during the same quarter last year. Order intake decreased by 42% and deliveries were down 33%, driven by the market decline in China and high levels of order intake in the first quarter of 2021 as the world recovered from the pandemic. Operating income took a hit due to lower machine volumes and higher material costs.
China saw sales decline 33%, says Volvo CE, primarily due to a spike in Covid-19 cases, as well as price pressure on excavators. Asia outside of China has also been negatively impacted by price increases on machines in India, related to new emission regulations, and has reported an 8% fall.
Housing and infrastructure investments and strong demand for commodities in other markets helped soften the sting, with South America reporting a 62% increase in sales, North America rising 11%, Africa and Oceania up 5% and Europe up 2%. Service sales also increased by 17%.
In Volvo Group's Q1 report, President and CEO Martin Lundstedt said the company anticipates periodic production delays and stoppages throughout the year due to ongoing global supply chain disruptions for semiconductors and other components, unpredictable freight, the continued spread of Covid-19, particularly in China, and the war in Ukraine.
“Construction activity in Europe and North America has remained on good levels, driven by both the commercial sector and infrastructure investments. Order backlogs are extended and lead times long, and this has negatively impacted order intake,” said Lundstedt. “The Chinese market, on the other hand, continued to decline. Volvo CE’s net sales decreased by 9% to SEK 22.6 billion, primarily related to China. The adjusted operating margin amounted to 12.4%.”
Melker Jernberg, president of Volvo CE, added: “There can be no doubt that the industry and the wider world itself is in the midst of extremely challenging times, but I am proud that we as an organization are tackling these issues head on – supplying our customers with the products and services they need today, while focusing on the tragic humanitarian crises going on around the globe and taking action on urgent climate change. During this difficult period, we are keeping up the speed of transformation to more sustainable construction and infrastructure solutions, helping to decarbonize value chains, all the while safeguarding our communities around the world.”
The quarter marked the launch of Volvo’s first fully electric machine in the Asian market – the ECR25 Electric compact excavator – and the introduction of a tailored carbon reduction program.
“It is clear that our customers and their customers are really beginning to push for a transition into electric vehicles and machines to decarbonize their value chains. This is a development that will only accelerate,” said Lundstedt. “We are maneuvering from a position of strength with a competitive electric offer already today. And we continue to accelerate our investments to roll out even more electric products and solutions in the near future.”