Pressure on third quarter sales and earnings at Volvo Construction Equipment has led to the company slowing the rate of production in its factories and reducing the number of machines held in stock at its dealerships.
This ?under-absorption? of costs in the factories put pressure on earnings in the third quarter of 2012, as did increased price competition and a less favorable geographical and product mix, which saw fewer larger machines sold, particularly to the weakened mining sector.
Alan Barnett, the managing director of CJD Equipment, national distributor for Volvo Construction Equipment in Australia, told Quarry that the planned slow down in production will not affect Australian customers.
?We carry a lot of stock and we forecast ahead six months,? Barnett said. ?There may be a problem with specific builds but otherwise we don?t think so.?
Net sales in the three months of July to September decreased by nine per cent and net sales were down by eight per cent during the period.
Order intake was affected, with the value of the order book at the end of September 24 per cent lower than on the same time in 2011.
?The lower economic activity and the uncertainty about the future are impacting customers? willingness to invest in new equipment,? said Pat Olney, president of Volvo CE.
?As a consequence, we have reduced production in our facilities and managed to reduce both our own inventories and those at our dealers.?
Market conditions for the full year 2012 show few signs of change in the short term.
Barnett told Quarry that in Australia, there has been a slight weakening in the market over the past two months. This was due mainly to companies temporarily holding off on projects.
The European market is expected to be down by up to 10 per cent while North America is expected to increase between 15 and 25 per cent.
South America is still on course to rise by between up to 10 percent, as is Asia (excluding China). Demand in China is projected to fall in 2012 by between 25 and 35 per cent.
Sources: Volvo Construction Equipment, CJD Equipment