Hitachi Construction Cuts Profit Forecast as Demand Weakensby
Sales declines seen in both building and mining operations
CFO warns demand yet to hit bottom as miners cut spending
Hitachi Construction Machinery Co. Ltd. cut its full-year profit forecast by 27 percent, as weaker global demand adds to pressure from China’s economic slowdown.
Japan’s second-biggest building and mining-equipment maker swung to a small loss over the first nine months after posting net income of 20.8 billion yen ($175 million) a year ago. It now expects profit of 9.5 billion yen for the year though March, from an earlier forecast of 13 billion yen.
The company blamed its revision on sales declines in both construction and mining, and foreign exchange losses due to drops in emerging market currencies, according to a statement. It left unchanged its forecasts that the global market for excavators would fall 19 percent this fiscal year, and that Chinese demand would fall by almost half. Rival Komatsu Ltd. reports earnings on Friday.
Hitachi Construction also left its operating profit target unchanged as it expects cost cutting to cover lower sales. It didn’t break out its third-quarter figures.
“It doesn’t feel like global demand has hit bottom, things remain tough,” Chief Financial Officer Tetsuo Katsurayama said at a briefing in Tokyo. “Major miners and contractors are squeezing their investments significantly. We are suffering from the impact.”
The company now anticipates a 30 percent decline in demand for its super-large dump trucks used by miners, from a 10 percent drop previously forecast, he said.
China’s excavator market, excluding local suppliers, is set to contract to less than one seventh of its 2010 peak this fiscal year, according to a previous estimate by the Tokyo-based company. Its Chinese sales had shrunk to 8.9 percent as a proportion of revenue in 2015 from 26 percent five years earlier.
The company’s shares closed 4.1 percent lower at 1,608 yen before it reported earnings.