Zoomlion, China’s second-biggest construction equipment maker, Misses Estimates on Finance Costs, Demand Weakness; The stock has slumped 21 percent since Ming Pao reported on Jan. 8 that it had received an unsigned letter alleging that Zoomlion’s sales are exaggerated

March 29, 2013 Leave a comment

Zoomlion Net Misses Estimates on Finance Costs, Demand Weakness

Zoomlion Heavy Industry Science and Technology Co., China’s second-biggest construction equipment maker, posted profit that missed analyst estimates as government measures to cool the property market damped demand while finance costs and provision for bad debts increased.

Net income in 2012 fell 9.1 percent to 7.33 billion yuan ($1.18 billion) from 8.07 billion yuan in the prior year, according to a filing to the Hong Kong stock exchange today. That compares with the 8.49 billion yuan average of 26 analysts’ estimates compiled by Bloomberg. Sales climbed 3.8 percent to 48 billion yuan.

Zoomlion, based in Changsha, Hunan province, and bigger rival Sany Heavy Industry Co. face a drop in orders as slowing economic growth and government curbs on the property market sap demand. Zoomlion is also seeking to boost investor confidence after its shares slumped following a January report in Hong Kong’s Ming Pao newspaper that the company’s sales may have been exaggerated.

“Economic growth in China remained slackened with low investment in infrastructure,” the company said in today’s statement, “The construction machinery industry was also under severe challenges brought by the sluggish growth of production and sales and the increase in credit risks.”

Shares (1157) of Zoomlion rose 0.9 percent to HK$9.37 at the close in Hong Kong trading, before the earnings were released. The stock has slumped 21 percent since Ming Pao reported on Jan. 8 that it had received an unsigned letter alleging that Zoomlion’s sales are exaggerated.

Finance Costs

Zoomlion has repeatedly denied the allegations. It is “a company with integrity,” Zhan Chunxin, the chairman, told reporters in Guangzhou Jan. 11.

The company last month suspended the sale of its sanitation business after failing to get any offers for almost a year. The unit makes street sweepers and garbage trucks.

Net finance costs last year jumped to 274 million yuan from 36 million yuan in 2011, the statement showed. General and administrative expenses increased 27 percent to 2.37 billion yuan because of a “significant” increase in provisions for bad debts and impairment of inventories, it said.

Zoomlion proposed to pay a final dividend of 0.2 yuan per share, compared with the payout of 0.25 yuan a year earlier.

To contact the reporter on this story: Jasmine Wang in Hong Kong at Jwang513@bloomberg.net

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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