Volvo AB (VOLVB)’s construction-equipment unit, the world’s third-largest maker of wheel loaders and excavators, sees no recovery in sight in southern Europe, chief Patrick Olney said.
“I don’t see any signs” of improvement in the construction markets in Spain, Portugal, Italy or Greece, Olney said in a phone interview yesterday. “The market collapsed in 2009 and has not shown any recovery since then.”
Volvo Construction Equipment’s business in those countries dropped more than 80 percent in the financial crisis that began in 2008, he said from the unit’s Brussels headquarters.
The division, Volvo’s second-biggest after heavy trucks, more than doubled its North American sales in the first quarter and is a market leader in China, where it has a joint venture with local company Shandong Lingong Construction Machinery Co. Volvo competes globally against bigger rivals Caterpillar Inc. (CAT), based in Peoria, Illinois, and Komatsu Ltd (6301) in Tokyo.
Southern Europe’s troubled economies so far haven’t affected customers in the rest of Europe, said Olney, 43, who got promoted to lead the business last year when former division chief Olof Persson was named Volvo CEO.
“I can’t say there’s been a psychological impact on the customer level that we’ve seen,” he said. “Our customers are very practical people. They look at the work they have in front of them, and they make decisions based on the work, availability of financing and a number of other individual factors.”
North American Rebound
North America is benefiting from “tremendous pent-up demand” to replace aging equipment, along with a growing economy and more housing starts, he said.
Olney reiterated Volvo’s forecasts from April 26 that the total North American construction-equipment market will grow between 15 percent and 25 percent in 2012, more than the 10 percent to 20 percent the company expects for Europe.
“One key now for Volvo is whether North America, which was very strong in the first quarter, will continue to grow,” Christer Magnergard, an analyst with DNB Bank ASA in Oslo who recommends that investors sell Volvo’s shares, said by phone. “It looks that way.”
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