World’s Top Construction, Mining Equipment Makers Flash Warnings

(Bloomberg) -- Komatsu Ltd. added to a lackluster reporting period for the world’s top construction and mining equipment makers, posting a 22% drop in first-quarter profit on waning demand in China and Indonesia.

• Operating profit fell to 74.8 billion yen ($689 million) for the three months ended June 30 from 96 billion yen a year earlier, the Tokyo-based company said Monday. That missed the lowest analyst estimate.

Key Insights

• A slowdown in manufacturing and simmering trade tensions are weighing on economic growth and creating headwinds for heavy equipment makers. Caterpillar Inc., the industry leader and an economic bellwether, last week projected 2019 earnings at the low end of its forecast amid rising costs, declining sales in Asia and a slowdown in oil and gas spending in the prolific Permian Basin.
• Komatsu’s domestic rival Hitachi Construction Machinery Co. last week reported a 13% drop in profit and Chief Financial Officer Tetsuo Katsurayama warned of a “dark turn since the start of this fiscal year as overall demand in China began declining” amid U.S.-China trade friction.
• Komatsu said Monday earnings were crimped by falling coal prices that eroded sales of mining trucks in Indonesia, as well as waning demand for construction equipment in China amid the prolonged trade war with the U.S.
• The company reiterated full-year profit will probably fall 15% to 337 billion yen.

Market Reaction

• Komatsu shares are up 3.2% this year. Quarterly results were released after the stock market closed on Monday.
• Analysts have 8 buy recommendations, 13 holds and 1 sells, according to data compiled by Bloomberg.

Get More

• Komatsu’ full-year sales forecast was 3.3% below the average analyst estimate.
• Click here for more on Komatsu earnings.

To contact the reporter on this story: Masumi Suga in Tokyo at msuga@bloomberg.net

To contact the editors responsible for this story: Phoebe Sedgman at psedgman2@bloomberg.net, Jake Lloyd-Smith

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