Ending its accounting year with a strong set of fourth quarter figures, Volvo Construction Equipment (CE) announced that in 2006, it reached several all-time highs in its financial performance. Sales increased by 17% to SEK 40,564 M (34,816 M), while operating income jumped by 41% to SEK 3,888 M, up from 2,752 M in 2005. Operating margin strengthened significantly, rising to 9.6%, up from 7.9% in 2005. Finally, the company reached an all-time high of machines sold in a 12-month period--more than 37,000 in 2006, representing an 11% increase on the previous year.
These record figures were helped by a strong set of fourth-quarter results. Net sales in the fourth quarter were up 4% and amounted to SEK 10,753 M (SEK 10,301 M in 2005). When adjusted for currency movements, net sales increased further to 12%. Operating income increased by 35% to SEK 992 M from SEK 736 M in the same period in 2005. This boosted the operating margin in the quarter to 9.2%, up from 7.1% in the fourth quarter last year.
The fourth quarter of 2006 saw the total world market for construction equipment within Volvo CE's product range increase by 5% compared with the same period in 2005. The U.S. market was down by 20%. The cooling housing market driving the reduced demand for compact equipment was particularly affected (down 28%). Europe increased by 7% and Asia increased by 15%, helped by a strong Chinese market. Other international markets also increased strongly in the fourth quarter, rising 30% in the period. For the full 2006 year, the total world market for heavy and compact equipment rose by 9%.
A mixed outlook for 2007 is expected. The European market is expected to continue to grow in the range of 0-5%, while Asia is projected to increase by 10%, again driven by China. Other markets are expected to grow by 10-15%. The combined growth in these regions is expected to offset a reduction in North America, which is expected to decline by 5-10%, again a consequence of reduced housing-related activities.