Komatsu report 14% decline in Q1 2015 profits

Tokyo-based manufacturer joins Japanese peers in reporting dismal results in the Chinese market

A Komatsu sulks in a used machinery lot.
A Komatsu sulks in a used machinery lot.

Komatsu has joined other large Japanese industrial suppliers in warning that earnings are suffering as China’s slowdown bites into sales of construction equipment, reporting a 14% decline in Q1 2015 profits.

The Tokyo-based firm is particularly keyed into the fluctuating demand for raw material in the world’s second-largest economy, and the results follow a halving of profits for Hitachi Construction Machinery, Japan’s second-biggest maker of building equipment.

In an interview with Bloomberg, Yasuhiro Inagaki, senior executive officer of Komatsu, said: “Chinese demand declined by 50% in the first quarter. Unlike in the past, demand didn’t increase much after the Lunar New Year [February].”

The company began warning at least a year ago that sales in China were falling more steeply than anticipated, and in April 2015, it reported a 15% decline in fourth-quarter profit.

Equipment makers are particularly witnessing declines in sales of larger diggers and dump trucks used by mining companies amid a deepening slump in prices for copper, iron ore, and coal.

Kobe Steel, which produces everything from metals to excavators, also reported that earnings at its construction machinery unit slid by 84%.

Speaking to reporters in Tokyo, Naoto Umehara, executive vice president of Kobe Steel, said: “Demand in China is deteriorating as the country’s infrastructure investment stagnates. We have yet to see any sign of a recovery.”

However, Komatsu's Inagaki pointed out that the rate of decline in Chinese demand is likely to be slower from the second quarter.

“We will closely monitor the situation in China as the government may take more steps to stimulate the economy,” he added.

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