Tough year ahead for Kobelco

Kobelco Cranes has reported a satisfactory 2008 financial year but forecasts a much tougher 2009.

In the 12 months that ended 31 March 2009, the Japanese company sold about 920 new cranes, an 8% increase over the 850 units sold in the 2007 fiscal year. This meant net consolidated sales were up 19.6% in 2008 to JPY85 billion (US$867.5 million). Operating income was 2.2% up on 2007 at JPY9.5 billion ($96.6 million), while ordinary income was down 1.4% at JPY9 billion ($91.8 million). Net income stood 14% higher than 2007 at JPY6 billion ($61.3 million). But non-consolidated net income was down 25% compared to the previous 12 months at JPY3.9 billion ($40.6 million).

Although original profit targets were not achieved, Kobelco said large capacity crawler cranes sold well, making a significant contribution to profitability. The impact of below target profits in the latter part of the financial year was minimised through good results in the first half and by backlog orders carried over from the previous fiscal year.

"Conditions in the overseas crane markets have drastically deteriorated since October 2008 due to the global financial crisis. Projects were postponed or suspended one after another due to difficulties in raising funds in many countries, including emerging countries such as India. To make matters worse, a sharp rise in the value of the yen boosted the actual purchase prices for crane users in the region, including Korea and Southeast Asia, where contracts had been quoted in yen. This resulted in forcing many customers to postpone or cancel their orders," said the company.

"Also in the domestic crane market, demand for wheel cranes drastically declined in the second half. This resulted in sharp drops in the sale prices of used machines. The crawler crane market, which initially seemed relatively strong, gradually started to decline," Kobelco added.

The conditions have led to an uncertain future and the company is forecasting falls in its consolidated figures across the board for the 2009 fiscal year, compared to 2008. They include: consolidated sales, -3.8%; operating income, -60%; ordinary income, -60.1%; net income, -73.4% to JPY1.6 billion ($16.3 million).

The company will seek to reduce the impact through a range of measures, including further co-operation with partners, improving sales and distribution networks in all markets, reconstruction of the used machine business and expanding the parts sales network. It will also strengthen the wheeled mobile division through its new 25 tonne capacity City Conscious model.