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Komatsu Sees Record Year for Mining Equipment Sales on China

Komatsu Ltd. (6301), the world’s second- biggest mining equipment maker, expects global demand for its machines to reach a fresh record next year, fueled by China and India’s search for coal, iron ore and copper.

Industry wide sales of dump trucks, excavators and bulldozers and other mining equipment will climb at least 10 percent to 6,600 units in the year starting April 1 after jumping 24 percent or more this year, Kazuhiko Iwata, the president of Komatsu’ mining equipment division, said.

Mining companies are pressing ahead with projects in Indonesia, Australia and Chile and haven’t been deterred by Europe’s debt crisis or the slowing global economy, Iwata said. Komatsu and Caterpillar Inc. (CAT) are relying on sales to mining companies after China slowed public works and housing projects, curbing demand in the world’s largest market.

“Demand for mining equipment is growing as China and other emerging countries need resources,” Iwata said yesterday in an interview in Tokyo where Komatsu is based.

The company’s sales from mining equipment will increase 30 percent to 543 billion yen ($6.9 billion) in the year to March 31, the company said in a Dec. 12 presentation to investors. The proportion of its mining-related sales has more than doubled to 29.4 percent from 13.9 percent in 2003, it said. Komatsu supplies trucks and excavators to companies including Rio Tinto Group (RIO), Vale SA (VALE3) and China Shenhua Energy Co. (601088) and Codelco.

Mining Demand

Komatsu is “benefiting from demand for large machines used in mining, given a limited number of players and growing demand for resources,” said Yoku Ihara, an investment adviser at Retela Crea Securities Co. in Tokyo.

Caterpillar last month offered as much as HK$6.89 billion ($886 million) to buy China’s ERA Mining Machinery Ltd., following its $8.8 billion acquisition of Bucyrus International Inc. in July.

Komatsu, which doesn’t produce underground mining equipment, intends to enter the business through acquisitions or in-house product development, Iwata said. The company is looking for a partner with technology to develop value-added products such as driverless machines, he said.

“As a late comer, offering the same products as existing models wouldn’t place Komatsu in a good position in the market,” Iwata said. Komatsu has held “no concrete talks” on possible acquisitions.

Komatsu dropped 1.9 percent to 1,819 yen at 1:02 p.m. in Tokyo, taking its decline for year to 26 percent.

China’s market for excavators, mostly used in construction, will shrink 20 percent to 89,000 units in the year to March 2012, while gains in Japan and other regions in Asia and North America are set to offset the decline, according to an Oct. 25 estimate by Hitachi Construction Machinery Co. (6305)

To contact the reporter on this story: Masumi Suga in Tokyo at msuga@bloomberg.net

To contact the editors responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net; Andrew Hobbs in Sydney at ahobbs4@bloomberg.net.

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