Komatsu feels pinch
Staff reporter, 21st Aug 2012
AUGUST 21: MERRILL LYNCH has reined in revenue and earnings forecasts for Komatsu as it detects further signs of slowing mining machinery demand and delays in the recovery of Chinese construction equipment sales.
“We cut our [third quarter FY13 operating profit] estimate from 324 billion Yen to Y240 billion – down 6% year-on-year], due chiefly to lower construction machinery sales forecasts for China and Asia, and a change in our Euro/Yen assumption (from Y100 to Y95),” the investment bank said.
“We revise our outlook [for the third quarter] to one of weak growth in construction and mining machinery demand, and expect [profit] growth of just 4% to Y250 billion.”
Merrill Lynch lowered its third-quarter forecast for Komatsu’s mining machinery segment sales from Y664 billion to Y624 billion “as we are seeing signs of coal miner capex being reined in as prices fall”.
“Though enquiries for mining machinery from the iron ore and copper sectors remain firm, the mining majors are taking a cautious line on capex, so we are now forecasting sales of mining machinery to remain around flat,” the bank said.
It said signs of a slowdown in mining machinery sales in Asia were particularly evident in Indonesia, where “cut-backs in coal mining production and production plans are leading to a slowdown in mining machinery demand”.
“Komatsu’s sales agent in Indonesia, United Tractors, reported a sharp 32% decline in June unit sales, due in large part to a 48% year-on-year drop in sales to the mining sector,” Merrill Lynch said.
“United Tractors cut its own 2012 unit sales forecast from 9500 to 8500. In its revised projections after the 1Q announcement management at Komatsu, citing the risk of unit sales undershooting this forecast, lowered its unit sales assumption to just over 7000.”
The bank said construction machinery demand was growing in Japan and North America, mainly due to the rental sector, and “we believe this growth in demand could be enough to offset the sales decline in China”.
“However, Komatsu’s share of the rental market in Japan and the US is small, so its growth in both these markets lags behind the market average.
“In [the first quarter] construction machinery segment sales growth was 2% in Japan, 12% in North America.”
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