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Stronger yen hits Komatsu's earnings

April 28, 2017

Komatsu, the world number two construction eqipoment maker, reported annual earnings down as a stronger yen erased gains from increasing demand in China and Indonesia.

Komatus reported revenue for the year ended March down 2.8% from the previous year to $16.20bn.

Komatsu's results follow rival Caterpillar's surprisingly strong earnings released earlier this week, which the American company said came from stronger construction equipment sales in China.

Komatsu said sales of construction equipment in China grew to 97.3 billion yen in fiscal 2016 compared to 69.6 billion yen the year before, with sales especially robust in the fourth quarter. China's gross domestic product grew at an annual rate of 6.9% in the first quarter of 2017, with growth strongest toward the end of the three-month period.

Mikio Fujitsuka, chief financial officer, Komatsu, said he expected the current momentum in China to continue until a key Communist Party congress in the fall, but added that the peak in sales likely has passed with the Lunar New Year. Demand in China grew 48% in fiscal 2016 compared to the year before, while demand in Southeast Asia grew 13%, led by Indonesia and Malaysia, Komatsu said.

Komatsu expects demand for construction machinery in China to gradually slow toward the fall, and expected growth of 5% to 10% in fiscal 2017 compared to the previous year.

Komatsu has been expanding its business overseas. The company recently wrapped up its $2.9 billion acquisition of Wisconsin-based Joy Global.

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