Construction machinery industry

On October 29th, Shantui announced its earnings announcement. Its revenue in the first three quarters and the third quarter showed a slight increase, but the third quarter loss still reached 59.125 million yuan, which directly “overwhelmed” the profit in the first half of the year. While Liugong, which released financial statements on the same day, did not experience a significant decline in performance, when responding to investors’ questions, the company stated that the most difficult time for the machinery industry should have passed. “The current sales situation of construction machinery industry is more than the same period of last year. There has been some improvement, but the rate is not high and it is unlikely that there will be significant improvement."

Shantui’s single-quarter loss of nearly 60 million Shantui’s shares announced that from July to September this year, the company’s revenue was 2.398 billion yuan, a slight increase of 5.21% from the same period of last year, and the first three quarters also had an increase of 1.23%. Revenue reached 8.175 billion yuan.

Compared with the increase in revenues, the company’s net profit was in the third quarter. According to statistics, Shantui’s net profit for the first half of this year still achieved a net profit of 33,309,200 yuan despite a 46.64% year-on-year decline. In the third quarter, it ended with a loss of 59.125 million yuan.

Dragged down by the third quarter results, the company's net profit in the first three quarters fell 89.07% year-on-year, with a loss of 25.9303 million yuan. In explaining the declining performance, Shantui said that due to the continuing sluggish concrete market in the first three quarters, its holding subsidiary Shantui Chutian Engineering Machinery Co., Ltd. provided provisions for partial inventory price declines.

In fact, not only Chinese companies, such as Caterpillar's mechanical vanguards, have also seen a declining performance. According to Caterpillar’s ​​fiscal third quarter 2013 financial report, its total sales and revenue for the third quarter was US$13.42 billion, a decrease of 18% from US$16.45 billion in the same period of last year; net profit was US$946 million, compared to the same period of last year. The US$1.7 billion fell 44%.

Yesterday evening, Liugong, another mechanical company, also released its third quarter earnings report. Data shows that Liugong's net profit for the first three quarters reached 282 million yuan, a decrease of 14.61%; however, the company's performance began to show signs of improvement in the third quarter, achieving a net profit of 21.46 million yuan in a single quarter, a slight increase of 2.57%.

The main business of Liugong is the production and sales of construction machinery and accessories such as loaders, excavators, road rollers, forklifts, cranes, pavers, graders, and skid steers. At present, the proportion of domestic and foreign income is 70%: 30%.

"The most difficult period has passed"

Liu Gong once proposed at the 2010-2015 strategic plan publicizing meeting that in 2015 Liugong would achieve an annual sales income of RMB 50 billion. The international market sales revenue was RMB 10 billion, and the company entered the world's top 10 construction machinery industry.

Today's market performance seems to be insufficient to support the above data.

Recently, Liugong explained on the interactive platform for investor relations. Liugong's 2010-2015 strategic plan was formulated from the end of 2009 to the first half of 2010, during which the industry was affected by the “4 trillion” policy and the situation was very optimistic. “It now appears that the 2015 target of the industry enterprises lacks the conditions for realizing market demand, and the target has not been realized.”

In fact, in the past, the “4 trillion” policy overdrawn the market demand of the industry. At present, the amount of construction machinery in the market is too large, and disorderly competition among enterprises has also brought some negative impact on the industry. These influences are difficult to eliminate in the short term.

Liugong said that the current sales of construction machinery industry have improved compared to the same period of last year, but the rate is not high, and there is little possibility of significant improvement. "The global machinery industry has not yet risen so fast, but China's GDP has started to improve in the third quarter, indicating that China's economy has started to grow steadily. It should have passed the most difficult time for the machinery industry."

Taking Liugong’s performance as an example, the company’s net profit for the first half of last year was 310 million yuan, and its annual net profit was 278 million yuan, which meant that it was a loss in the second half of last year, and it was profitable in the first quarter and second quarter of this year. And the gross profit rate has increased significantly. "It should be said that the trough is in the second half of last year." Liu Gong responded to investors.

The favorable news is that the construction of national urbanization has been carried out one after another. The market demand it brings is obviously different from the “blowout” market demand brought by “four trillion”. “The more rational, scientific and rational structure adjustments that the government currently adopts, and the decision to promote sustained and stable economic growth will promote the sustained and stable low-speed growth of the construction machinery industry. Therefore, the era of blind pursuit of sales by enterprises has become history.” Liu Gong Said.