17.10.2016

Zoomlion drops 15%

Chinese crane and equipment manufacturer Zoomlion has reported lower revenues and higher losses during the first half.

Total revenues were almost 15 percent lower than in the same period last year at RMB 9 billion ($1.33 billion) due to lower sales of construction equipment, partially offset by higher sales of agricultural equipment and municipal sweepers and drain cleaners. Which included the acquisition of Italy’s Ladurner group. On the crane side high unsold inventories with both the company and its dealers in China is also limiting new production.

Pre-tax losses increased from a loss of RMB304 million ($45 million) to a loss of RMB 969 million ($144 million) Due to the lower revenues and restructuring costs involved with head count reductions and other changes.

The statement in the interim report said: “In the first half of 2016, with the State’s further effort in vigorously promoting structural reform on the supply side, the drop in the construction machinery industry has narrowed. The industry is, however, still in the stage of deleveraging, inventory reduction and reduction of industrial capacity. The progress of marketization of environmental industry has accelerated and the scale of the industry is increasing continuously.
The agricultural machinery industry is undergoing product upgrading and structural adjustment. During the reporting period, the group recorded an operating revenue of approximately RMB9.004 billion and a net loss attributable to shareholders of the parent company of approximately RMB0.829 billion which is mainly due to the effects of the decrease in revenue of the construction machinery industry, staff severance payment and fluctuation in exchange rate. Nevertheless, the two segments of agricultural machinery and environmental industry have recorded year on year growth in operating revenue and significant growth in the operating cash flow. During the Reporting Period, the Company maintained its leading position in terms of market shares in concrete machinery and crane machinery. The Company captured the largest market share in street sweeping truck.”

“Construction machinery sector has been proactively adapting to the New Normal by streamlining the corporate structure and laying off redundant staff, while focusing on the promotion of industrial upgrades, sales and marketing reforms, so as to establish the the new innovative model driven by regional markets. The Company gradually launched “Product 4.0” series and promoted product upgrading to further comprehensively enhance the product quality”

Vertikal Comment

Looking at the latest results it is easy to see why Zoomlion was keen to merge with Terex. When it comes to mobile cranes it has a long way to go before it can make an impact on the global market. In fact it could be argued that rather than make progress in this area it is falling further behind.

This said it has a strong position in the Concrete pump and to a lesser extent the tower crane market. It seems to have demonstrated an ability to grow through blue chip western acquisitions, although most of these have been private companies. Acquiring a large public company is far more challenging.