Magazine

No. 20: Komatsu


INDUSTRY

Heavy equipment

SALES

$13.4 billion

PROFITS

$551 million

Four years ago, when Masahiro Sakane took over at Komatsu Ltd., the world's second-largest producer of heavy construction equipment, the company was in a financial hole so deep that even one of its trademark hydraulic excavators would have had a hard time digging it out. An ailing domestic economy -- Komatsu's biggest market -- was the main source of the Japanese company's woes. Nine months after Sakane took over, Komatsu posted a net loss of $710 million.

But today, Sakane's top worry is whether Komatsu can keep up with demand. The big difference? Sales outside Japan now represent 63.7% of revenue, compared with just 46.5% in 2001. That reflects a strategic decision by Sakane to target emerging markets. He has also been an unflinching cost-cutter, shaving $450 million in fixed costs by pruning the payroll. Komatsu expects operating margins in its core construction machinery and mining equipment division to reach 9.7% by March, 2006 -- on a par with industry leader Caterpillar Inc. () By 2010, sales in fast-developing Brazil, Russia, India, China, and South Africa will likely increase to 20% of the total, up from 11% now. ``There's a lot more growth ahead,'' says Sakane. And Komatsu is in an excellent position to exploit it.


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