Bloomberg News

Sany Heavy Cut Excavator Sales Goal on Weak China Demand

July 13, 2012

Sany Heavy Industry Co. Vice Chairman Xiang Wenbo

Xiang Wenbo, vice chairman of Sany Heavy Industry Co. Photographer: Nelson Ching/Bloomberg

Sany Heavy Industry Co. (600031), China’s biggest maker of excavators, lowered its sales forecast for the equipment as slowing economic growth and government curbs on property market sap demand.

Excavator sales may increase 10 percent this year, slower than a previous target of 40 percent, Vice Chairman Xiang Wenbo said in a July 11 interview in Changsha, Hunan province, where the company is based. Sany will still outperform the industry, which may see a fall in demand, he said.

“At the beginning of this year, we estimated the whole market to grow slightly. Now it seems we were too optimistic,” Xiang said. “The government has introduced easing measures since the second quarter, which will only be felt by the market later.”

Xiang said a “meaningful recovery” in demand for earth- moving equipment may not be visible until the first quarter of next year. China cut benchmark interest rates twice in a month and allowed banks to offer bigger discounts on lending costs to spur investments. Slowing growth may also prompt the government to loosen controls introduced to prevent a property bubble.

Sany’s concrete machinery unit, which contributes more than half its sales, may post little change in growth or have a slightly higher expansion, Xiang said. The company is sending more employees for training as demand remains weak, he said.

“The adjustment is in line with the current market atmosphere,” said Han Weiqi, a Shanghai-based analyst at CSC International Holdings Ltd., who recommends buying the stock. “It is unexpected but understandable.”

China Market

Sales of excavators contributed to 21 percent of Sany’s sales last year, according to data compiled by Bloomberg. China, the world’s biggest market for construction equipment, accounted for 93 percent of the company’s revenue.

Sany rose 1 percent to 12.91 yuan at close of Shanghai trading. The stock has dropped 30 percent in the past year, compared with a 22 percent decline in the benchmark Shanghai Composite Index.

China’s economy expanded 7.6 percent last quarter from a year earlier, the weakest growth in three years, the National Bureau of Statistics said in Beijing today. The pace compares with an 8.1 percent gain in the previous period and the 7.7 percent median forecast of economists.

“Stimulating economic growth still relies on fixed asset investment and real estate,” Xiang said. “The government has enough capability to maintain economic growth, which is China’s biggest advantage.”

Komatsu Sales

Nationwide excavator sales plunged about 38 percent in the first six months, according to data from consultancy China Construction Machinery Business Online. Komatsu Ltd. (6301)’s sales of excavators in the country fell more than half in the quarter ended in June from a year earlier, its Chief Executive Officer Kunio Noji said last week. Domestic and overseas suppliers of mining equipment may have accumulated inventories of more than six months, he said.

Sany’s acquisition of German concrete-pump maker Putzmeister Holding GmbH will help the company boost overseas sales to more than 10 percent of revenue this year, Xiang said. Putzmeister aims to post a 20 percent growth in sales to 700 million euros ($855 million), he said.

Xiang said Sany has completed all preparations and is waiting for the right time for its planned share sale in Hong Kong. He didn’t elaborate. The company postponed the offer because of a stock market slump after trying to raise as much as $3.3 billion last year. The size of the sale has been reduced to about about $2 billion, two people with knowledge of the matter said in May.

To contact Bloomberg News staff for this story: Jasmine Wang in Hong Kong at jwang513@bloomberg.net; Michael Wei in Shanghai at mwei13@bloomberg.net

To contact the editor responsible for this story: Vipin V. Nair at vnair12@bloomberg.net


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