Komatsu profits down 19% in Q2 2015

436 Komatsu, the world’s second-biggest manufacturer of construction and mining machinery after Caterpillar, reported a 19% fall in Q2 2015 profit, Bloomberg reports.

As with US construction and mining equipment manufacturing giant 395 Caterpillar, China’s slowdown and the world slump in commodity prices cut sales to the mining and building sectors.

Net income in Q2 (July-September) 2015 fell to 32.6 billion yen (US$271 million) for the three months to September 30 from a revised 40.3 billion yen ($334.27 million) a year earlier, the Tokyo-based company said in a statement today.

Komatsu reiterated that full-year net income will probably fall 10% to 138 billion yen ($1.44 billion), while operating profit is likely to slip 8.7% to 221 billion yen ($1.83 billion).

Like all leading OEMs, Komatsu is also battling the fallout from the slowdown in growth in China as well as the global slump in commodity markets.

Construction and mining equipment account for almost 90% of Komatsu’s revenue. First-half demand was weaker than anticipated in all major markets outside the Middle East, especially China, chief financial officer Mikio Fujitsuka told reporters.

“Demand will remain severe in the second half,” Fujitsuka said. The company now expects full-year demand in China to fall by half, steeper than its April estimate of a 20% to 25% decline. “The shortfall in demand will be partially offset by the benefit of the weakening of the yen,” Fujitsuka said.

Komatsu’s competitors are also hurting. Profit excluding one-time items at Caterpillar was 75 US cents a share for the July-September period, trailing analyst estimates. Sales were the lowest in five years at the Peoria, Illinois-based company.

On Tuesday, 6512 Hitachi Construction Machinery, Japan’s second-biggest producer of building machinery, cut its sales and profit targets for the year, saying that the slowdown in demand in China had spread to its markets in the developed world.

For the first six months, sales at Komatsu’s construction, mining and utility business fell 5.9% to 794.1 billion yen ($6.58 billion).

By region, Komatsu saw the biggest drop in construction and mining equipment sales in China, with a 44% decline for the six months to Sept. 30. Sales fell 2.1% in Japan and 16% in Latin America, while they surged 28% in North America, the company said.