Komatsu’s Profit Rises on Japan Construction Demand

Komatsu Ltd., the world’s second-biggest maker of building equipment, said fourth-quarter profit rose 25 percent, boosted by earthquake reconstruction spending in its home market of Japan.

Net income gained to 44.1 billion yen ($431 million) in the three months ended March 31 from 35.2 billion yen a year earlier, according to a presentation provided by the company following the release today of 12-month earnings.

The results underscore how rebuilding following the March 2011 earthquake and tsunami and preparations for the 2020 Tokyo Olympic Games are overshadowing lower spending on equipment at Komatsu’s mining company customers.

For the full year, sales in Japan rose 17 percent to 342.2 billion yen, the company said in a regulatory statement. Demand for equipment in coal and iron ore mines remained slack for the year, the company said.

“As far as we’ve heard regarding mining customers’ appetites for investment, things are tough,” Chief Executive Officer Tetsuji Ohashi said at a briefing in Tokyo. “Major miners are continuing to cut their capital expenditures.”

Though sales to mining company customers are cooling, the weakening of the Japanese currency has also helped the maker of construction equipment. The yen averaged 102.7 to the U.S. dollar in the fourth quarter compared with 90.7 in the same period a year earlier, according to the company’s calculations. The yen has declined 15 percent since the beginning of 2013.

Annual Forecast

Komatsu forecast net income will fall 3.5 percent for the current fiscal year to 154 billion yen because of an expected decline in mining equipment sales. Revenue is likely to decline 3.8 percent to 1.88 trillion yen, while operating profit is forecast to rise 1 percent to 243 billion yen.

Sales to mining company customers could fall 17 percent to 419 billion yen this fiscal year after an 18 percent drop last year.

Caterpillar Inc. yesterday posted better-than-expected earnings and raised its profit forecast for 2014 as construction overcame mining declines.

The world’s largest producer of construction and mining equipment said large mining-truck sales have declined about 80 percent from their 2012 peak.

Komatsu rose 0.4 percent to 2,151 yen in Tokyo trading before its results and outlook were released.

(Corrects timeframe for yen’s decline in sixth paragraph in story originally published April 25.)
Before it's here, it's on the Bloomberg Terminal.