Komatsu sales cheer after China slump

436 Komatsu posted a 1.1% gain in first-quarter profit as sales in Europe, Africa and parts of Asia helped overcome a slump in China.

The world’s second-biggest maker of construction equipment reported a net income rose to 37.7 billion yen (US$370 million) in the three months ended 30 June from 37.3 billion yen a year ago, the Tokyo, Japan-based company said today in a statement reported by Bloomberg. Revenue also rose 1.1% to 460.2 billion yen.

Sales of construction, mining and utility equipment, Komatsu’s biggest business segment, were strongest in Europe where they rose 31%. Asia (outside Japan and China) Latin America, the Middle East and Africa also posted gains, while in Europe “demand for construction equipment gradually recovered, centering on the major markets of Germany, France and the United Kingdom, as European economies came out of prolonged stagnation affected by the Eurozone crisis.”

Sales were partly depressed by construction project delays in China where building equipment sales fell 15% in the quarter.

Komatsu chief executive officer Tetsuji Ohashi said that a slowdown in China could threaten to undermine the appetite of commodity suppliers to invest in new gear.
Ohashi said Komatsu’s China sales in April and May 2014 were about 20% on the previous year. The nation accounted for 9% of Komatsu’s total last year and the company had hoped to grow that to 10% this year. The rest of Asia-Pacific, not counting Komatsu’s Japanese home market, made up 20%, including sales to the mining nations of Australia and Indonesia that are feeding China’s economy.

395 Caterpillar, the largest maker of mining machinery, forecast full-year sales and earnings that fell short of analysts’ estimates, an outlook that came as the company said it does not see any sign of an upturn in the industry this year. Caterpillar’s second-quarter Asia-Pacific sales fell 14%, the company said.

Overall, operating profit at Komatsu rose 21% to 63.5 billion yen, as higher product prices and a weaker yen compensated for lower volumes. The Japanese company maintained its full-year outlook for net income of 154 billion yen.

Akira Sugiki, a senior executive officer at Komatsu, said: “Sales of new equipment in China and mining machinery parts are forecast to miss our estimates. Sales from some regions such as Europe and Africa are stronger than we anticipated and are set to exceed our estimates.”

Bloomberg reported that 6512 Hitachi Construction Machinery, Japan’s second-biggest building equipment maker, cut its profit forecast by a third to 30 billion yen for the year to 31 March, citing a shortfall in China demand and in some other Asian countries.

473 Volvo Construction Equipment also saw sales drop 9% for its second quarter results as improvements in North America and Europe failed to compensate for weak demand from China.