China’s construction machinery makers report H1 earnings plunge amid industry downturn, Covid outbreaks, analysts expect slower falls in H2
DATA MACRO
China’s construction machinery makers report H1 earnings plunge amid industry downturn, Covid outbreaks, analysts expect slower falls in H2
DATA MACRO

China’s construction machinery makers report H1 earnings plunge amid industry downturn, Covid outbreaks, analysts expect slower falls in H2

 

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Sany Heavy Industry, China’s largest and the world’s fifth largest engineering machinery manufacturer, reported its revenue plunged 40.9% in the first half from a year earlier to 39.67 billion yuan. Net profit attributable to shareholders tumbled 73.85% year over year to 2.634 billion yuan.

The sharp decline in first-half revenue and profit was mainly attributable to the downtrend in the sector and declines in domestic sales of construction machineries due to the impact of the economic slowdown, the Covid resurgence and low effective operating rate of construction projects, the company said in a stock exchange filing.

The company’s revenue from excavators, one of its key products, reached 16.7 billion yuan in the first half of the year, sliding 35.64% from a year earlier. Meanwhile, sales of its other products ranging from cranes and concrete mixer truck tumbled across the board by 25% – 53.58% during the same period.

Due to weakening demand from the real estate sector, the falling replacement demand as well as high comparison base last year, excavator sales in China’s domestic market declined year over year for 14 consecutive months from May 2021 to June 2022, according to a note from Xiangcai Securities.

Data from the China Construction Machinery Association showed that in the first half of the year, China’s 26 major machinery manufacturers sold about 91,100 units of excavators in China’s domestic market, slumping 52.9% from a year earlier.

In addition, operating time of existing construction machineries also declined significantly. Hours of machine use per unit in China, compiled by Komatsu, reached 518.3 hours in the first half of the year, sliding 18.2% from the same period last year.

Other major machinery manufacturers in China also reported slumping sales for the first half. Xcmg Construction Machinery Co. Ltd, one of the country’s top construction machinery makers, reported a revenue of 38.2 billion yuan for the first half, sliding 28.23% from a year earlier. Net profit reached 2.32 billion yuan in the first half, sliding 38.98% from a year earlier.

First-half revenue declined amid sliding market demand due to the impact of the macro economic environment, it said.

Zoomlion Heavy Industry Science & Technology Co., Ltd, another leading construction machinery manufacturer, reported a net profit attributable to shareholders of 1.736 billion yuan over the first half of the year, slumping 64.4% from a year earlier. Revenue reached 21.3 billion yuan, plunging 49.8% from the same period last year.

Due to declines in new construction starts in the infrastructure and real estate sectors and the impact of the Covid outbreaks, domestic sales of construction machineries declined significantly in the first half of the year, Zoomlion said.

Data from the National Bureau of Statistics had shown that China’s new property construction starts by floor area reached 660 million square meters, sliding 34.4% from a year earlier, and projects completions reached 286 million square meters, slumping 21.5% from a year ago.

While domestic demand was sluggish, overseas markets posted rapid growth. Sany Heavy Industry said its overseas revenue reached 16.5 billion yuan in the first half of the year, rising 32.9% from a year earlier, and in particular, its revenue from excavator exports reached 7.56 billion yuan, surging 50% year over year. Zoomlion said its overseas revenue reached 3.89 billion yuan in the first half, jumping 40.5% from a year ago.

China International Capital Corporation (CICC) estimated that, as China’s production resumption proceeds, construction activities are expected to pick up in the third quarter, and in the second half of the year, construction machinery sales are expected to decline at a slower pace, with full-year sales of excavators and cranes expected to slide 20% and 35%, respectively.

According to data released by the China Construction Machinery Association, China’s domestic sales of excavators reached 17,900 units in July, rising 3.42% from a year earlier, returning to growth for the first time this year.