Sany Q3 profit drops 59% due to weakening demand

Sany Heavy Industry, the largest heavy machinery manufacturer on the mainland, reported a 59% fall in third-quarter net profit, hit by weakening demand caused by the slowdown in the country.

Sany, which competes with United States firm Caterpillar in earth-moving, excavation and paving machines, posted a net profit of 714.2 million yuan for the third quarter, down from 1.73 billion yuan a year earlier, the firm said.

That lagged an average forecast of 1.3 billion yuan from four analysts surveyed.

Sany's domestic sales were flat during the first three quarters of the year, outperforming a 20 to 30% slide in the sector overall, the firm's vice-president, He Dongdong, said last week. Overseas sale rose 50%.

Sany's shares, which have dropped more than 25% this year, closed 0.6% lower yesterday, before the results were announced.

Sany's president, however, believes the country's construction equipment sector is slowly but surely digging itself out from under a mountain of inventory and will return to growth in the second or third quarter of next year as the economy recovers.

Xiang Wenbo said the industry would return to high-speed growth during the 2013-17 period, which he expects to be a "golden age" of development in the country under new Communist Party leaders due to take office at a once-a-decade handover next month.

The industry outlook has been muddied by huge stockpiles of unsold equipment after a four-year boom fuelled by the country's massive 2008-09 stimulus programme.

"For the industry to return to true growth may have to wait until the second or third quarter of next year because of the destocking process," Xiang said.

The coming five years "could be a golden age of development for this government", he said at Sany's massive new glass-and-steel factory on the outskirts of Shanghai last week. "I think we can expect this."

Caterpillar, the global leader in tractors and excavators, has cut its forecast for the second time this year and warned about global growth, but said it also expected big infrastructure spending next year.

Xiang declined to speculate on possible new stimulus spending under the country's new leaders.

But, he said, the country's infrastructure, including roads, airports and sewage systems, was in such dire need of improvement that more investment was a foregone conclusion.

"I think everyone can expect Chinese investment in the coming 10 to 20 years because China's industrialisation and urbanisation are not complete," he said.