Hitachi construction, output, China--Hitachi Construction to Boost Output to Record on China Demand

Oct. 8 (Bloomberg) -- Hitachi Construction Machinery Co., the world,s biggest maker of giant excavators, plans to produce a record number of machines in the fiscal second half because of higher-than-estimated demand in China.

Components to assemble 25,000 excavators is expected to be produced in the six months ending March 31, Chief Executive Officer Michijiro Kikawa said in an interview at the company,s headquarters in Tokyo. That,s 32 percent higher than the 19,000 units in the fiscal first half.

Demand in China, the world,s largest user of excavators, may increase 33 percent this fiscal year as the nation,s stimulus plan stokes a construction boom, Kikawa said. The government is funding roads, railway networks and buildings to develop China,s hinterland, driving demand for excavators, wheel loaders and other construction machinery.

"Nothing can stop urban construction and the government,s investments in the western and northeastern regions," Kikawa, 63, said yesterday.

Hitachi Construction, 50 percent owned by Hitachi Ltd., fell 0.6 percent to 1,823 yen on the Tokyo Stock Exchange as of 10:08 a.m. The stock has fallen 24.5 percent this year as a rising yen erodes profit.

Stronger Yen

Earnings will probably fail to keep pace with the growth in demand because of a strengthening yen, Kikawa said. The currency hit a new 15-year high against the dollar yesterday, eroding the competitiveness of Japanese exporters.

The currency traded at 82.39 to the dollar as of 8:13 a.m. in Tokyo, compared with the 88 yen to the dollar rate Hitachi Construction had expected from the second quarter of the fiscal year.

Net income will rise 74 percent to 7 billion yen ($84.9 million) for the year ending March 31, Hitachi Construction forecast in July. Sales will probably increase 22 percent to 740 billion yen.

"Sales won,t exceed a peak because of the yen," Kikawa said, without giving a new forecast.

Hitachi Construction is the third-largest excavator maker in China, with a 15.9 percent market share, ranking after Japan,s Komatsu Ltd. and South Korea,s Doosan Infracore Co.

China may need as many as 97,000 excavators for year ending March 31, compared with a July estimate of 92,700 units, Kikawa said. The nation accounted for half the global market last year with sales of 73,000 units.

His comments come amid concern the Chinese government,s efforts to cool down the country,s property market will weaken demand for construction machinery. "We had expected China,s growth would slow due to the government,s tightening measures, but actually didn,t," Kikawa said.

--Editors: Indranil Ghosh, Tan Hwee Ann

Source: Bloomberg