Volvo Construction Equipment’s operating income for the fourth quarter of 2014 will be negatively impacted by approximately SEK 650 M from a provision for expected credit losses in China. The provision will have limited impact on the Volvo Group’s cash flow and net financial debt in the fourth quarter 2014.
Following an extended period of declining demand, low machine utilization and lower raw materials prices, profitability for customers and dealers primarily in the Chinese mining industry has declined and their financial position has weakened. The risk for future credit losses has therefore increased and as a consequence Volvo Construction Equipment (Volvo CE) is provisioning SEK 650 M in the fourth quarter of 2014. The current provision level for expected credit losses is based on the Group’s prevailing best estimate.
