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Hitachi Construction Hoping to Boost their Earnings with New Wheel Loaders

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Published on : Nov 26, 2015

Hitachi Construction Machinery of Japan is considering to go offensive as well as defensive to cope up with the slowdown of China’s economy. The Japan’s construction machinery manufacturer is shifting its way from the shrinking China market to the U.S. and Europe. Hitachi Construction Machinery grew considerably in the recent past in the China construction market by increasing sales of its hydraulic shovels. Sales in the China market is predicted to be 6% of total sales throughout March 2016. Chinese public investments doesn’t see any sign of recovery, which in return is the key factor driving the demand for hydraulic shovels. 

The machinery manufacture company is expecting that its net profit would decrease by almost half to 13 bn yen on the year. Demand for hydraulic shovels in China is predicted to cut up to 15,000 units till the year end. The market of hydraulic shovels in China had seen a downfall in the recent past after peaking at 110,000 units in 2010. During this period, China operations accounted for less than 10% Hitachi Construction’s total sales. It was for the first time in around 14 years that due to such a low performance, the company had to ask the applicants to retire early. Tetsuo Katsurayama, the Chief Financial Officer stated that the company strives to cut down on bigger costs. 

During the period between April and September 2015, the company’s operating profit margin was around 4%, which was well below 11% of Komatsu. Hitachi Construction went offensive in October by acquiring KCM, the Japanese wheel loaders manufacturer. Wheel loaders are shovel-type, four-wheeled construction vehicles that are used for loading earth and sand or removing snow. The wheel loaders are also commonly used in agriculture. China is the place where around 120,000 of the 200,000 unites will be manufactured by around 100 local makers.

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