Kobelco’s parent company Kobe Steel has booked a JPY 39.8 billion (US$ 340 million) extraordinary loss in its accounts for the third quarter of the fiscal year against bad debts and write-downs in its Chinese construction equipment business, which focuses on excavators.

A statement from the company said, “Kobe Steel posted (the) allowance for doubtful accounts in the construction machinery business in China.” It went on to say it had also taken a charge for “The loss on the valuation of investment securities of affiliate companies and provision for loss on guarantees.” The loss due to bad debts was JPY 37.6 billion (US$ 321 million), while the write-down booked on the value of its investments and affiliate companies was JPY 2.2 billion (US$ 19 million).

These provisions meant Kobe Steel made a net loss of JPY 13.9 billion (US$ 118 million) for the first nine months of the fiscal year to the end of December 2015. This compared to a profit of JPY 64.1 billion (US$ 548 million) for the same period last year. The company’s net sales for the nine months were JPY 1,353 billion (US$ 11.6 billion), down only -1.5% from the figure of JPY 1,373 billion (US$ 11.7 billion) a year ago.

The Kobelco Construction Machinery, which makes excavators, subsidiary had sales for the first nine months of the year of JPY 209 billion (US$ 1.79 billion), a -12.9% decline on the same period last year. The business made an ordinary loss of JPY 9.4 billion (US$ 80 million) for the period, compared to a profit of JPY 20.5 billion (US$ 175 million) a year ago. This fall in ordinary profit of some JPY 30 billion (US$ 257 million) corresponds to the bulk of Kobe Steel’s provision for the likely scale of its bad debts in China.

The division is forecast to achieve revenues of JPY 270 billion (US$ 2.3 billion) for the full fiscal year, down 13% on the previous 12 months. The full-year ordinary loss is expected to be JPY 16 billion (US$134 million), against a profit of JPY 21 billion (US$180 million) in fiscal 2014.

Kobelco Cranes, which makes crawler cranes, meanwhile saw a +7% rise in sales over the nine month period, with revenues rising to JPY 55.4 billion (US$ 473 million). However, ordinary income fell some 38% to JPY 2.8 billion (US$ 23.9 million). The company said this was due to, “Higher expenses for quality maintenance and the improvement of products."

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