Komatsu China--Komatsu China Sales Ahead of Pace on Public Spending

Dec. 17 (Bloomberg) -- Komatsu Ltd., Asia’s largest maker of construction equipment, is selling more excavators in China than anticipated this quarter as the government spurs infrastructure development in its interior regions.

China unit sales of excavators, the best-selling construction equipment, are on pace to climb 25 percent in the quarter ending Dec. 31, exceeding the firm’s October estimate of 15 percent growth, President Kunio Noji said. Komatsu holds a 14 percent market share in China, ranking ahead of rivals including South Korea’s Doosan Infracore Co., China’s Sany Heavy Industry Co. and Caterpillar Inc., according to Nomura Securities Co.

Urbanization in China, set to surpass Japan as the world’s second-largest economy this year, and the nation’s appetite for coal are lifting sales of excavators and mining dump trucks. China replaced Japan as Tokyo-based Komatsu’s biggest market last year and is forecast to drive 20 percent of the company’s sales this year, up from 5 percent four years ago.

“Chinese demand remains strong as far as we gauge it,” Noji, 64, said yesterday in an interview at the company’s headquarters. Komatsu’s excavators are equipped with GPS technology that enables engineers in Tokyo to track how the machines are used at construction sites.

Robust Building

Noji said demand in China has been higher than anticipated in the quarter ending this month, indicating robust building activity. China’s infrastructure spending will probably increase the market for digging machines by 10 percent next fiscal year, Noji said.

“Komatsu is less vulnerable to a shift into tightening policies as its operations are related to the area that needs spending,” said Yoku Ihara, an adviser to Retela Crea Securities Co. “There’s no change in the trend that the country will invest in construction projects and resources.”

Komatsu rose 0.6 percent to 2,500 yen at the 3 p.m. trading close on the Tokyo Stock Exchange. The stock has risen 29 percent this year, compared with a 2.3 percent drop in the benchmark Nikkei 225 Stock Average.

Outside China, Komatsu is looking to expand operations in Latin America, including Brazil. Noji visited Komatsu’s Sao Paulo factory a couple of weeks ago. Heavy machines are used in Brazil for iron ore mining, cultivation of eucalyptus trees and sugar cane, and road construction.

“Many projects are being lined up in Brazil,” the president said. “I expect growth will be sustained.”

Second Plant

Komatsu may build a second plant in Latin America by the end of 2012 as demand is set to surpass production capacity at the existing factory, which produces excavators, wheel loaders and bulldozers. The company will decide next year whether to add a factory, Noji said.

Revenue in Latin America surged 42 percent in the fiscal first half to 107 billion yen, surpassing North American sales, according to an Oct. 28 presentation by Komatsu. Latin America accounted for 14 percent of its sales, while North America, Komatsu’s largest market until 2007, accounted for 11 percent. (by Masumi Suga )

--Editors: Brian Fowler, Dave McCombs.

Source: Bloomberg