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Komatsu Cuts Profit Outlook on China Sales, Mining Slowdown

Komatsu Ltd., the world’s second-biggest maker of construction equipment, cut its annual profit forecast after first-quarter earnings dropped 42 percent on lower sales in China and a slowdown in Indonesian demand.

Net income may be 157 billion yen ($2 billion) for the 12 months ending March 31, compared with a forecast of 190 billion yen made in April, the Tokyo-based company said today in a statement. Profit was 32.1 billion yen in the three months to June 30.

China’s economy grew at the slowest pace in three years in the last quarter, curbing sales of machinery. Komatsu joins Hitachi Construction Machinery Co. and Sany Heavy Industry Co. in lowering forecasts this month because of slower Chinese demand.

“There are excess inventories in China,” Chief Executive Officer Kunio Noji said today on a conference call. “The industry will face intense sales competition.”

The company plans to charge 2 to 3 percent more for its products in China this year, he said. Industry-wide sales in China may fall as much as 30 percent this year,Komatsu said today in a presentation. It had earlier forecast growth of as much as 5 percent.

Komatsu released its results after the market closed in Japan. The stock has declined 2.3 percent this year compared with a 2.8 percent gain for the Nikkei 225 stock average and Caterpillar’s 5.4 percent drop.

First-quarter revenue in China dropped 46 percent to 407 billion yen, it said. Sales in Japan, Komatsu’s biggest market, increased 1.8 percent in the period, and sales from North America gained 12 percent.

Mining Slowdown

Komatsu today cut its full-year sales forecast for mining equipment by 6 percent to 624 billion yen after declines in coal prices slowed demand from miners in Indonesia.

Hitachi Construction, Japan’s second-largest producer, on July 25 cut its operating profit forecast 7.7 percent for the year through March, citing delays in an expected recovery in China. The company boosted its full-year net income outlook by 14 percent to 40 billion yen.

Sany Heavy, China’s biggest maker of excavators, has lowered its sales forecast for the equipment. Excavator sales may increase 10 percent this year, slower than a previous target of 40 percent, Vice Chairman Xiang Wenbo said in a July 11 interview.

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