Tuesday, October 29, 2013
Weak Mining Demand Slams Brakes On Komatsu's Recovery
TOKYO (Nikkei)--Komatsu Ltd. (6301) announced Monday that it now expects fiscal 2013 operating profit to fall 1% on the year to 210 billion yen, a whopping 95 billion yen downgrade attributed to falling sales of mining equipment in Asia and Latin America.
The firm had initially forecast a 44% jump in operating profit to 305 billion yen for the year ending in March.
Demand for coal mining equipment is falling as the resource's price dips amid slowdowns in emerging economies and a shift to natural gas.
Komatsu had projected a 25% decrease in demand for mining equipment, but now sees it falling 50%. In Indonesia, "there was little demand in July and August," partly because of the rupiah's sharp depreciation, says Chief Financial Officer Mikio Fujitsuka.
Group sales are now seen slipping 1% to 1.86 trillion yen. Sales in Japan grew on demand linked to earthquake reconstruction. The figure in China will also likely surpass earlier plans amid increasing investment in infrastructure there.
Meanwhile, in North America, machinery rental operations are sluggish. Although the weaker yen improves profitability, it is not enough to absorb the impact of falling sales. Net profit is seen growing only 8% on the year.
Industry peer Hitachi Construction Machinery Co. (6305), on the other hand, said Monday that it will maintain its full-year operating profit projection of a 61% jump to 83 billion yen. Mining equipment is faring well in Russia, and sales of general construction machinery are recovering in the U.K. and elsewhere in Europe.
Like Komatsu, the firm is enjoying steady demand in Japan and China, but its mining equipment operations in Indonesia are struggling as is its North American rental business.
(The Nikkei, Oct. 29 morning edition)