Hitachi Construction hopes to boost earnings with wheel loaders

Hitachi Construction Machinery aims to corner more of the wheel loader market.

TOKYO — Japan’s Hitachi Construction Machinery is going on both the defensive and offensive to better cope with China’s economic slowdown. The construction machinery maker is gradually shifting its focus from the shrinking Chinese market to Europe and the U.S.

     Hitachi Construction grew significantly by increasing sales of its core hydraulic shovels in China, but demand there is expected to be one-seventh of what it was five years ago in the current fiscal year. Sales in China are forecast to account for just 6% of total sales through March 2016. There is no sign of recovery in Chinese public investment, which was a key driver of demand for hydraulic shovels.

     The company expects its net profit to decrease by half on the year to 13 billion yen ($105 million). Chinese demand for hydraulic shovels is expected to halve on the year to 15,000 units. The hydraulic shovel market in China has shrunk over the past five years after peaking at 110,000 units in fiscal 2010. China operations account for less than 10% of Hitachi Construction’s total sales, compared with nearly 30% at their peak.

     The worse-than-expected performance prompted the company to solicit applicants for early retirement for the first time in 14 years. “We strive to cut bigger fixed costs than competitors,” said Chief Financial Officer Tetsuo Katsurayama.

     The company’s operating profit margin was 4% in the April-September period of 2015, well below rival Komatsu‘s 11%. This fiscal year, the company is expected to post restructuring costs of more than 10 billion yen, including the costs of consolidating production sites.

New earnings source

In October, Hitachi Construction went on the offensive by acquiring Japanese manufacturer of wheel loaders KCM from Kawasaki Heavy Industries. Wheel loaders are four-wheeled, shovel-type construction vehicles for loading earth and sand, removing snow, and are also used in agriculture. Global annual demand for wheel loaders stands at about 200,000 units, the second highest number for a type of construction vehicle behind hydraulic shovels at about 300,000 units.

     China is the destination for about 120,000 of the 200,000 units, where there are approximately 100 local makers. Price competition is so intense that few foreign manufacturers enter the Chinese market. “We will try to win the remaining 80,000 units, which are worth as much as 1.2 trillion yen,” said Akira Tatsumi, executive vice president of KCM.

     In the previous fiscal year, KCM had a global share of 2.5% on a unit basis and its sales stood at about 26 billion yen. Hitachi Construction also makes small wheel loaders. Their combined share will be 8%, generating about 63 billion yen in sales. That represents nearly 10% of Hitachi Construction’s total sales, and “wheel loaders have high profit margins,” according to Katsurayama.

     Acquiring KCM as a subsidiary will help make production more efficient and cut costs. A further improvement in profit margin can be also expected, since it will become easier to procure components. KCM mainly operates in North America, while Hitachi Construction’s biggest market is Europe. The two companies will seek to capture a 10% share of the global market together.

Nevertheless, Hitachi Construction’s stock price has remained stagnant, with its price-to-book ratio falling below the liquidating value of 1. The company’s stock price tends to fluctuate significantly in response to the release of Chinese economic data.

     “A high dividend yield will provide a boost for Hitachi Construction’s share price,” said Taku Ouchi, an analyst at SMBC Nikko Securities. In order for stock prices to rise further, however, better earnings are needed. “We will do our best to make sure that our employees will be happy to have become part of the Hitachi Construction Machinery group,” said Tatsumi.

Recent News

 
Versatile Carmix takes concrete to North Mara Gold Mine in Tanzania
    The gold mine in North Mara is situated in the north-west of Tanzania, at about 100 kilometres east of Lake Victoria and 20 kilometres south of the border with Kenya. The gold mine works an average of 8,000 tonnes of minerals a day and produced 287,188 ounces of gold in 2015. The gold
WORKERS’ MEMORIAL DAY
Workers’ Memorial Day, observed each year on April 28, honors workers killed, injured, or made ill at work. Since 1992, BLS has collected data on both nonfatal work injuries and illnesses that result in days away from work, and fatal work injuries. In 2015, the occupations with the highest number of nonfatal injuries and illnesses
TOP 15 CONSIDERATIONS FOR MAINTAINING UNDERCARRIAGE HEALTH AND PRODUCTIVITY
The undercarriage of a machine represents a significant portion of a piece of equipment’s purchase price. Proper maintenance and operation practices are critical for protecting your equipment investment. Undercarriage maintenance is critical to the overall productivity of a machine. It is the mechanism that gives tracked machines much of their power and stability. It also
Deere Adds 8-Year / 20K Hour Warranty on 944K Electric-Drive Components
John Deere is now offering a 96-month / 20,000-hour power electronic components warranty on the Deere 944K hybrid wheel loader. The warranty is retroactive to existing machines in the field and provided on new 944K loaders through October 31, 2018. The warranty includes a 96-month (eight-year) or 20,000-hour (whichever comes first) non-prorated assurance on wheel
VERMEER SILVER SERIES DRILL RODS COMPOSED OF S135 COMMON GRADE STEEL
  Vermeer’s Silver Series drill rod is composed of S135 common grade steel and is threaded in the same facility as the company’s Firestick drill rod with the same column wall thickness. The Silver Series drill rod is available in four sizes: 1.66-inch, 1.9-inch, 2.06-inch, and 2.375-inch, for use on the D7x11 through the D24x40
CHILE: Construcción regional cae 7,5% y suma dos meses con cifras en rojo
Datos de Cámara Chilena de la Construcción estimaron retroceso de 7,5% en febrero que se suma al -10% de enero. Se busca consolidar esfuerzos público-privados para enmendar el rumbo. Por primera vez desde el año 2002, cuando se comenzó a publicar el Índice de Actividad de la Construcción Regional (INACOR), la Región de Coquimbo inicia

About Us

 
In Tractopart we supply quality construction Parts and Heavy Equipment Parts with excellent discount rate for New , Used Rebuilt & Surplus parts for excavators, Wheel loader dozers, and undercarriage for all heavy equipment brands, we are locate in Miami, Fl

Contact Info

 

At Tractopart we focus on providing high quality parts at a great price. Our parts are subjected to rigorous inspection procedures that allow us to ensure product quality.


Phone: 786.219.1010
Email: sales@tractopart.com
Main Office: 3505 South Ocean Drive #204
Hollywood, FL 33019