Volvo CE India eyes increased profitability on back of mass production of larger machines

Volvo Construction Equipment (Volvo CE) India, anticipates a boost in profitability on the back of mass production of larger machines and higher overall sales volumes.

"I'm sure we will see much more profits ahead when we go into the mass market with bigger machines and more volumes of machines," Dimitrov Krishnan, Managing Director of Volvo CE India said, refusing to comment on the company's financials.

Krishnan's optimism comes amidst Volvo CE India's ongoing struggle to turn a net profit, despite experiencing year-on-year growth in operating revenue. Data from the Ministry of Corporate Affairs shows a net loss of Rs 70.34 crore in FY23 against an operating revenue of Rs 2,183.63 crore. Likewise, in FY22, the net losses stood at Rs 13.00 crore, with an operative revenue of Rs 1,806.09 crore. FY21, on the other hand, was relatively much better, with Rs 21.09 crore in net profit out of Rs 1,498.85 crore of operating revenues the company generated. In FY20, the net loss stood at Rs 29.61 crore with an operating revenue of Rs 1,242.76 crore.

This bullish outlook appears to stem from the robust growth trajectory witnessed by India's construction equipment industry in recent years. According to the Construction Industry Institute, the industry is poised for a 15% compound annual growth rate (CAGR) over the next five years. FY24 saw a remarkable 26% year-on-year growth, with unit sales reaching 1,35,650 compared to 1,07,779 in FY23.

Industry stakeholders attribute this growth to the government's focus on infrastructure development and pre-election projects, leading to positive momentum across all five major construction equipment segments.

Furthermore, industry leaders were surprised by the atypical sales growth witnessed even during the recent general elections (April 19 - June 1). Traditionally, a slowdown precedes elections and lasts until a new government is formed. However, this year saw a 20–27% year-on-year sales increase from January to April, defying the usual 10-15% drop, or even 20%, during periods of political uncertainty.