IC February 2009 business news

06 March 2009

Having hit rock bottom in November, there were signs towards the end of last year that crane manufacturers' shares might stage a recovery, or at least hold their ground.

January, however, saw the sector suffer a five-week losing streak where the IC Share index fell 21.65% to 183.48 points. This is only just above the low of 175.02 points that it struck last autumn.

Mainstream indicators also lost ground over the first few weeks of the year, and although their falls were steep, they were not on a par with the losses in the lifting sector. Even the Nikkei 225, which is being hammered by poor results from Japan's export-orientated conglomerates and a currency that continues to appreciate, was only down 11.6% in the same five-week period.

Losses for the FTSE 100 and Dow meanwhile, were 8.72% and 9.80%, respectively - less than half the fall for the crane sector.

The problem has been below-expectation financial results, both in the lifting sector and the wider equipment industry. Perhaps most influential were Caterpillar's results in week five, which highlighted a 64% drop in operating profits for the last three months of the year and pointed to tough conditions in 2009.

Although not a crane manufacturer, Caterpillar is by far the world's largest construction equipment maker, and its shares are also a component of the Dow. As such, it is a bell-weather for the global sector, and its results announcements tend to move the entire industry's shares.

In addition, week five saw Manitowoc announce a loss for the final quarter of last year, and there was also a drop in profits for Palfinger. In Japan meanwhile, results for the third quarter of the fiscal year (the last three months of the calendar year) were also poor, with major equipment manufacturers like Hitachi and Komatsu slashing their profit forecasts.

Even the inauguration of President Obama, and the promise of a big fiscal stimulus package in the US could not reverse the slide for share prices.

Currencies

A weakening economic outlook in Europe saw the Dollar gain against the British Pound and particularly the Euro in January. At the other end of the spectrum, it lost another 1.40% against the Yen.

This has been the trend for more than a year now. In the last 12 months the Dollar has put on a massive 37% against the Pound and 13% against the Euro, but at the same time has lost more than 15% of its value to the Yen.

While European exporters will welcome a reversal of the long slide in the Dollar that was seen from 2004 to early 2008, Japanese manufacturers have a problem on their hands. After years of a stable but weak Yen, Japanese exporters are now going to have to contend with smaller profits or a price disadvantage on overseas markets.

February IC Share Index

Stock Currency Price at start Price at end Change % Change 12 months ago 12 month % change

IC Share Index* 234.16 183.48 -50.69 -21.65 533.26 -65.59

Dow Jones Industrial Average 9035 8149 -886 -9.80 12743 -36.05

FTSE 100 4603 4201 -402 -8.72 6039 -30.43

Nikkei 225 9043 7994 -1049 -11.60 13860 -42.32

Hitachi Construction Machinery YEN 1095 905 -190 -17.35 2605 -65.26

Konecranes € 13.22 11.45 -1.77 -13.39 21.45 -46.62

Kobe Steel YEN 168 137 -31 -18.45 363 -62.26

Manitowoc US$ 9.49 5.91 -3.58 -37.72 39.17 -84.91

Palfinger € 11.39 8.89 -2.50 -21.95 21.99 -19.15

Tadano YEN 490 378 -112 -22.86 1051 -64.03

Terex US$ 18.74 12.57 -6.17 -32.92 60.56 -79.24

*IC Share Index, end April 2002 (week 17) = 100

Exchange rates - value of US$

Currency Value at start Value at end Change % Change Value 12 months ago 12 month % change

YEN 91.33 90.05 -1.28 -1.40 106.30 -15.28

0.7212 0.7627 0.0415 5.76 0.6734 13.27

UK£ 0.6931 0.6996 0.0065 0.94 0.5079 37.73

Period: Week 1 - 5

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