Hitachi back in profit as global demand recovers

Hitachi Construction Machinery reported first quarter sales to 30 June of JPY 167.3 billion (US$ 1.9 billion), up +43.4% on the JPY 132.3 billion (US$ 1.5 billion) recorded for the same period last year. Following a loss of -JPY 2.4 billion (-US$ 27.8 million) 12 months ago, the company reported earnings before interest and tax (EBIT) of JPY 4.3 billion (US$ 49 million) for the first quarter of this year.

A spokesperson said, "Although there are some concerns about the financial crisis in some parts of the world, the outlook for the global economy is trending upward because of the stimulus packages implemented by individual countries.

"With respect to the market for construction machinery, as well as clearly increased demand in emerging countries such as China and Indonesia, demand in the US is beginning to recover and that of Europe is also showing a steady increase."

Sales in the company's construction machinery business, excluding industrial vehicles, rose +27% to JPY 154 billion (US$ 1.7 billion), up from JPY 121 billion (US$ 1.3 billion) reported for the first quarter last year.

A statement said that although both public and private investments remained sluggish in Japan, demand for hydraulic excavators increased in the first quarter compared to the same period last year. "Demand from sectors such as demolition, steel, scrap, environment and recycling, resources and forestry increased while demand for other construction machinery remained flat," said the spokesperson.

In the US, although housing starts and public investment remained sluggish, economic conditions have begun to recover due to the stimulus package according to the spokesperson. "Demand for construction machinery appeared to hit the bottom in the first quarter and finally turned upward. Similarly, there are signs that the economy has bottomed out in Europe and demand for construction machinery has increased steadily," he said.

In the Russia, the Confederation of Independent States (CIS), Africa and the Middle East sales in the first quarter jumped +92% to JPY 11.2 billion (US$ 128 million), up from JPY 5.8 billion (US$ 67 million) 12 months ago.

The spokesperson said, "In Russia and the CIS, the economy seemed to have partially bottomed out but demand for construction machinery remained at low levels. In the Middle East, the economy is going relatively well in Saudi Arabia, while there are also signs of recovery in Turkey."

In Asia and Oceania demand increased steadily due to stimulus packages and rising exports. In India Hitachi added Telco Construction Equipment as a subsidiary to maintain its high market share in what is a highly competitive market, while in Australia the company targeted new clients in the cement, rental and mining sectors.

Sales in the region for the first quarter increased +36% to JPY 42.9 billion (US$ 491 million), up from JPY 31.6 billion (US$ 361 million) 12 months ago.

Demand for construction machinery increased in all regions of China with sales up +50% to JPY 51.6 billion (US$ 589 million) from JPY 34.3 billion (US$ 392 million) 12 months ago.

Outlook

A statement said that regarding the global demand for hydraulic excavators, especially in emerging markets such as China, India and Southeast Asia, demand increased steadily and demonstrates an upward trend. Also in the advanced nations, demand is clearly headed for recovery due to a replacement demand in the US.

Hitachi expects demand to exceed its previous estimate announced in April 2010, however there is still uncertainty about the future business environment due to domestic material costs and foreign currency and as such the company will leave its forecast unchanged for the 2010 fiscal year.