Komatsu's Quarterly Profit Falls 19% as Mining Sales Slump

  • First-half demand in most major markets weaker than expected
  • Weakening of yen to partially offset shortfall in demand

Komatsu Ltd., the world’s second-biggest manufacturer of construction and mining machinery, reported a 19 percent decline in second-quarter profit as China’s slowdown and the bust in commodity prices cut sales to miners and builders.

Net income fell to 32.6 billion yen ($271 million) for the three months to Sept. 30 from a revised 40.3 billion yen a year earlier, the Tokyo-based company said in a statement on Wednesday. Komatsu reiterated that full-year net income will probably fall 10 percent to 138 billion yen, while operating profit is likely to slip 8.7 percent to 221 billion yen.

Komatsu and rivals Caterpillar Inc. and Hitachi Construction Machinery Co. are seeking navigate the fallout from the slowdown in growth in China as well as the global slump in commodity markets. Construction and mining equipment account for almost 90 percent of Komatsu’s revenue. First-half demand was weaker than anticipated in all major markets outside the Middle East, especially China, Chief Financial Officer Mikio Fujitsuka told reporters. 

“Demand will remain severe in the second half,” Fujitsuka said. The company now expects full-year demand in China to fall by half, steeper than its April estimate of a 20 percent to 25 percent decline. “The shortfall in demand will be partially offset by the benefit of the weakening of the yen,” Fujitsuka said.

Everybody Hurts

Komatsu’s competitors are also hurting. Profit excluding one-time items at Caterpillar was 75 cents a share for the July-September period, trailing analyst estimates. Sales were the lowest in five years at the Peoria, Illinois-based company.

On Tuesday, Hitachi Construction Machinery, Japan’s second-biggest producer of building machinery, cut its sales and profit targets for the year, saying that the slowdown in demand in China had spread to its markets in the developed world. Its shares fell as much as 7.1 percent Wednesday before paring losses.

For the first six months, sales at Komatsu’s construction, mining and utility business fell 5.9 percent to 794.1 billion yen.

By region, Komatsu saw the biggest drop in construction and mining equipment sales in China, with a 44 percent decline for the six months to Sept. 30. Sales fell 2.1 percent in Japan and 16 percent in Latin America, while they surged 28 percent in North America, the company said.

Komatsu ended 1.8 percent lower at 1,976.5 yen in Tokyo on Wednesday, extending this year’s decline to 26 percent. The quarterly result was released after market closed.

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