China’s Zoomlion and Sany Heavy suffer third-quarter profit hits
November 1, 2013 Leave a comment
October 30, 2013 1:25 pm
China’s Zoomlion and Sany Heavy suffer third-quarter profit hits
By Paul J Davies in Hong Kong
Zoomlion, the diggers and pumps company whose finances have been at the centre of a Chinese media scandal, said third-quarter profits dropped by more than one-third as its bitter local rival Sany Heavy reported profits down by half. On Saturday a Chinese reporter confessed to taking bribes to write damaging stories about the company after being arrested by police from Zoomlion’s home city of Changsha in the latest set of accusations against the group.Chen Yongzhou, a reporter from the Guandong-based New Express newspaper, was formally charged by authorities with defaming Zoomlion on Wednesday, Xinhua reported.
Zoomlion has battled a string of questions about the reliability of its numbers and accusations of outright fraud over more than a year and has consistently denied any impropriety.
The Chinese construction equipment industry has come under intense pressure since the huge government stimulus, which followed the financial crisis, began to run out and a boom in property building and physical infrastructure began to decline.
Sales have been falling and inventories of unsold equipment have been building up at both local government-backed Zoomlion and the privately owned Sany Heavy, according to analysts at Daiwa Securities, who were expecting a 33 per cent decline in Zoomlion’s profits in the third quarter.
Net profits at the company fell by 34 per cent to Rmb889m ($146m) from Rmb1.34bn in the third quarter last year, on sales that were 13 per cent lower at Rmb8.7bn.
Cash flows from operations, which have been a focus among analysts concerned about the amount of vendor financing used by Zoomlion and rivals, showed a big decline from last year, with cash of just Rmb8.4bn coming into the company in the third quarter versus Rmb179bn a year ago.
Sany Heavy meanwhile, said its third-quarter profits dropped by more than half to Rmb327m from Rmb714m in the same period last year.
The problems for construction and other heavy equipment makers have not been confined to China, however. Komatsu and Hitachi Construction of Japan both lowered their outlooks for the year this week after reporting declining sales and profits in the first half.
However, for Komatsu, while sales in Asia outside of Japan and China were down by 30 per cent, Japanese sales were up 13 per cent at Y150bn ($1.5bn) and Chinese sales rose 16 per cent to Y73bn after a recovery in demand for mining equipment, the company said.
US-based Caterpillar, the world’s biggest heavy machinery maker, also cuts its full-year earnings forecast after reporting lower than expected quarterly profits.
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