Hitachi Construction Machinery

Global

Explanatory Meeting for the Second Quarter Ended September 30, 2014 Outline of Answers to Main Questions

Q: The forecast for the second half of FY2014 shows a decrease in net sales and an increase in profit as compared to the first half. What are the main factors for an increase in profit?

A: We anticipate the net sales in the second half will be lower than the first half primarily due to a decrease in the sales of machineries. Regarding profit, despite there being negative factors due to the assumed exchange rate in the second half, we anticipate an increase in profit owing to the increased net sales and sales proportion of the profitable business segments (i.e., the parts and service business, the rental business, and the business in China) and the reduced materials costs.

Q: Please tell us about the order situation of the mining machinery. Also, please let us know your expectation on when the recovery of the mining market will begin.

A: For both ultra-large hydraulic excavators and dump trucks, we have confirmed orders for approximately 30% on a unit basis against the forecast for the rest of FY2014 from the third quarter onward. The market remains adverse due to cutbacks in capital investments of resource companies that were affected by a downturn in resource prices. Therefore, we forecast that the demand of mining machineries in FY2014 will be over 20% lower than in FY2013 and that it will take a year or more for the recovery.

Q: Regarding the mining parts and service business, I understand that mining machinery demand grew from 2011 to 2012. Could we expect an increase in sales of the parts and service business, bolstered by mechanical overhaul demand for the machineries delivered at the relevant time?

A: The operating rate of the delivered machineries has been low since last year. The rate differs depending on regional factors, such as suspended mines or mines with high operating rates; however, it generally remains unimproved, if not worsened. Therefore, we expect that more time will be required for the overhaul demand to result in an increase in sales for the parts and service business.

Q: Under the circumstances where the Chinese construction machinery market and global mining machinery market indicate a severe outlook, what kind of initiatives would you have in mind to increase profit in and after FY2015 (ending March 31, 2016)?

A: Regarding sales, we are making efforts to increase sales of mining dump trucks by expanding the AC-3 series line-up and setting the regional focus on Central and South America for our sales growth. Also, as for general construction machineries, we are committed to expanding the sales of the parts and service business by the global implementation of the new service menu called “ConSite,” which provides comprehensive support to customers for their machines. In addition, despite the sluggish mining machinery market where resource companies have cut back their investments due to a downturn in resource prices, we would steadily undertake the parts supply and repair service of the operating machineries. Regarding cost, we would continue to implement material cost reduction initiatives globally and strive to reduce overhead costs as well.

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