Komatsu profits dive 52% amid weak global demand and high yen

Global economic trends and a strong yen hit Japanese construction equipment maker Komatsu Ltd. hard last quarter, with the company today reporting a 52% drop in profits in the three months to 30 June this year compared to the same period last year.

Profits were down in all regions except Russia and former Soviet republics in Central Asia, with the biggest hits sustained in the Middle East (down 47% from the same period last year), Africa (down 35%), and Asia (excluding China and Japan, down 23.5%).

China’s economic slowdown and the resulting fall in oil and metals prices have led to slack or falling demand for construction and mining machinery across the world, including in Latin America, Komatsu’s sixth biggest market, where profit was down 16% in the quarter.

In a statement today Komatsu also blamed the value of the yen for the slowdown in sales. The yen has been trending upward for the last year.

Profits fell by 4.5% in Europe, and slightly (0.3%) in Komatsu’s biggest market, North America.

The only bright spot for the manufacturer was the region defined as the Commonwealth of Independent States (CIS), which includes Russia and former Soviet republics such as Kazakhstan. Here profits surged by 35% thanks to a sharp rise in gold mining.

Despite the poor quarter, Komatsu has its eyes on expansion, making an offer last week to buy the US heavy equipment maker Joy Global Inc. for about $2.89bn.

Other well-known equipment makers are suffering. Caterpillar Inc. this week lowered its forecast for 2016 sales and earnings for the second time in three months, while Hitachi Construction cut its full-year profit forecast yesterday by 38%.

Image via Komatsu

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