Komatsu expects demand rise in China

Construction equipment maker Komatsu Ltd., which has seen sales fall for seven consecutive quarters in China, expects demand there to recover this year, aided by stimulus spending.

The world’s top producer of diggers and the second-biggest maker of bulldozers and dump trucks after Peoria, Illinois-based Caterpillar Inc. forecasts China demand to grow 5 percent to 10 percent in the year starting April 1, said President Kunio Noji. The yen’s slide to its lowest level since May 2010 will also help boost competitiveness, he said.

“Demand in China will definitely improve,” Noji said in an interview last week at Komatsu’s Tokyo headquarters. “Our company will see an immediate earnings improvement once demand recovers, because we don’t have any excess stockpiles and are able to speed production.”

Total retail sales of construction equipment in China, the world’s biggest market, slid about 19 percent in 2012 to $32.3 billion, according to data compiled by Bloomberg. While construction may rebound after China’s Lunar New Year holidays, inventory levels may weigh on excavator production, said Karen Ubelhart, a Bloomberg Industries analyst in New York.

The yen, which last week traded as low as 94.46 to the dollar, is about 7 percent weaker than the ¥88 the company has budgeted on for the current quarter. A drop in the currency’s value bolsters Japan’s exporters when overseas earnings are repatriated.

Komatsu’s unit sales in China may match year-ago levels for the current quarter after a peak decline of 60 percent earlier in the fiscal year, Noji said.

China’s gross domestic product rose 7.9 percent in the final three months of 2012 from a year earlier, halting a seven-quarter deceleration. The World Bank forecasts economic growth in the Asian nation will accelerate to 8.4 percent this year, more than four times the pace of the U.S., and versus a 0.1 percent contraction in Europe. (Source: The Japan Times)