Hitachi Construction to Expand Capacity in Indonesia, CEO Says

Hitachi Construction Machinery Co. (6305), Japan’s second-biggest maker of excavators, will boost output capacity in Indonesia to meet demand for construction, forestry and mining equipment in Southeast Asia’s largest economy.

The annual capacity of the company’s plant in Cibitung, West Java, will rise 67 percent to 5,500 units by March 2014, from 3,300 currently, Chief Executive Officer Michijiro Kikawa said in an interview.

Indonesia’s central bank forecasts economic growth to accelerate to as much as 6.7 percent this year as the government boosts spending on railways, airports and roads. Across the industry, excavator sales in the Southeast Asian country will rise 40 percent in the year ending March, faster than an estimated 15 percent increase in India, Kikawa said.

“Demand in Indonesia will grow at a faster pace than we had thought,” Kikawa said March 21 at the company’s headquarters in Tokyo. “We’re accelerating expansion to catch up with demand.”

Hitachi Construction Machinery, also the world’s largest maker of giant excavators, said this month it will also build a second Indonesian plant in Cibitung to make underground carriages as part of a 47 billion-yen ($570 million) plan to expand its ability to produce large mining equipment.

Photographer: Kiyoshi Ota/Bloomberg

Michijiro Kikawa, president and chief executive officer of Hitachi Construction Machinery Co. Close

Michijiro Kikawa, president and chief executive officer of Hitachi Construction Machinery Co.

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Photographer: Kiyoshi Ota/Bloomberg

Michijiro Kikawa, president and chief executive officer of Hitachi Construction Machinery Co.

The shares fell 1.7 percent to 1,823 yen in Tokyo yesterday. Hitachi Construction Machinery has risen 41 percent this year, outpacing the 20 percent gain in the Nikkei 225 index.

New Hires

The company will hire about 560 employees and temporary workers in Japan by March 2016 as it adds two plants in Ibaraki prefecture, northeast of Tokyo, under the expansion plan. Of that number, about 150 will come from Hitachi Ltd. (6501), which owns half of the company, Kikawa said.

Construction machinery makers, including Komatsu Ltd. (6301) and Caterpillar Inc. (CAT), are relying on sales in countries such as Indonesia after China slowed public works and housing projects. Industry sales of excavators in China have fallen at least 30 percent this quarter from a year earlier, and the decline may extend until June or July, Kikawa said.

Indonesia, North America and Japan will boost global demand for excavators by 7 to 10 percent in the financial year starting April 1, Kikawa said. Demand in Europe will fall because of its sovereign debt crisis, while Chinese sales will likely be in line with global growth aided by a recovery expected after mid-2012, he said.

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

To contact the editor responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net.

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