Business / Industries

Heavy equipment companies see light at the end of the tunnel

By Xu Wei (China Daily) Updated: 2015-04-07 08:27

Heavy equipment companies see light at the end of the tunnel

Zoomlion Heavy Industry Science & Technology Development Co Ltd equipment on display at a trade show in Shanghai. Provided to China Daily

'One Belt, One Road' initiatives offer hope to firms like Zoomlion amid stagnant sales in domestic market, reports Xu Wei.

Plans by China's leaders to revive ancient intercontinental land routes and develop maritime links are being seen by many makers of heavy machinery as the key to survival in a brutally competitive industry.

The initiatives are formally known as the Silk Road Economic Belt and the 21st Century Maritime Silk Road, often referred to as "One Belt, One Road". These programs offer heavy equipment producers an opportunity to do more business overseas and escape from an unprecedented domestic slump.

Last year was "the worst ever", Zhan Chunxin, chairman of Zoomlion Heavy Industry Science & Technology Co Ltd, said in describing what happened as demand dried up amid a plunge in the property market.

"The slump in economic growth caught us totally unprepared. We had no idea how to cope," said Zhan.

The company said in its annual report that net profit slumped 84.53 percent in 2014 to 594 million yuan ($96.64 million).

"With developers curtailing projects as housing prices fell, demand for construction machinery, including concrete machinery and tower cranes, fell significantly last year. Demand for concrete machinery fell by 38.6 percent, while demand for tower cranes fell by 40.52 percent," the company said in its regulatory filings to the Shenzhen Stock Exchange, where the company is listed.

The company's major competitors have been struggling, too. Sany Heavy Industry Co Ltd said in its third-quarter report that net profit slumped 46.5 percent year-on-year.

XCMG Construction Machinery Co Ltd, which is based in Xuzhou, Jiangsu province, warned in January that net profit probably contracted 65 to 75 percent last year. It cited the "continuous sluggish construction machinery market".

Zhan said he is confident that Zoomlion will make a comeback this year, despite the downbeat economic and property outlook.

"We have taken steps to cut costs, including staff reductions and simplifying procedures within the company," he said.

The company is also emphasizing on other industries, especially environmental protection.

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