Komatsu Warns of Tough 2016 as Commodity Bust Cools Spending

  • CEO comments coincide with reduced capex forecast from Rio
  • Komatsu isn't counting on usual uptick in China demand

Komatsu Ltd., the world’s second-biggest maker of mining and construction equipment, said it faces another tough year ahead as falling commodity prices cool customers’ investment plans.

“Demand will probably be lower than the current year’s level,” Chief Executive Officer Tetsuji Ohashi told reporters Tuesday at the company’s Tokyo headquarters. “We anticipate there will be fewer markets showing growth.”

Ohashi said that the bottom of the market for mining equipment is getting closer, without giving a time-frame for recovery. In October, following a 19 percent slump in Komatsu’s quarterly profit, his view was that a recovery is unlikely next year and uncertain in 2017.

His comments Tuesday coincided with a statement from Rio Tinto Group saying that the world’s second-largest miner had cut its capital expenditure forecast for 2016 to about $5 billion, from a previous estimate of less than $6 billion.

Komatsu isn’t counting on the usual uptick in demand seen among buyers in China after the Chinese New Year, Ohashi said. The company’s exposure to China, once its largest market, has shrunk to just 4 percent of sales as growth weakens in Asia’s largest economy.

Demand for mining equipment may enter a fifth year of declines in 2016, with the largest miners predicting another 25 percent cut in capital spending, according to a Nov. 30 report from Bloomberg Intelligence. Komatsu’s Japanese rival, Hitachi Construction Machinery Co., said in October that China’s excavator market is set to contract to less than one seventh of its 2010 peak in the current year to March.

Ohashi said the majority of the company’s job losses are behind it, after cutting more than 3,500 positions worldwide since 2013.

Komatsu closed down 2.1 percent in Tokyo trading, taking its loss for the year to date to 26 percent.

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