China Construction Machinery Business Online
Earnings up for major Chinese construction machinery makers
Post Date: 2017-06-07

Major Chinese construction machinery manufacturers are showing better earnings as they reap the benefits of infrastructure improvement ordered by local governments for roadways, subways and other projects.

Sany Heavy Industry's net profit rose eightfold in the January-March period from a year earlier to 746 million yuan ($109 million), while Zoomlion Heavy Industry Science and Technology swung back into the black.

Despite the solid earnings, there are worries that the market is overheating.

Sany, the biggest private maker of construction machinery, racked up 9.37 billion yuan in sales in the first quarter of 2017, up 79% year-on-year. The improved figures reflected a jump in sales of excavators and other machines since last autumn. Operating profit soared 20 times to 947 million yuan.

Sales at Sany increased to 50.7 billion yuan in 2012 thanks to Beijing's 4 trillion yuan economic stimulus package following the U.S. financial crisis. But in 2016 sales plunged to 23.2 billion yuan as demand slackened due to Beijing's tougher stance on inefficient infrastructure projects run by local governments.

The construction machinery market started to recover last autumn, breaking out of a five-year slump, Sany President Xiang Wenbo explained.

State-owned Zoomlion incurred a net loss of 660 million yuan in the January-March period of 2016, but registered a profit of 85 million yuan a year later on a 74% increase in sales to 5.27 billion yuan. It also posted an operating profit of 46 million yuan, recovering from an 854 million yuan loss a year earlier.

Sany and Zoomlion attributed higher earnings to its participation in infrastructure improvement projects, called public-private partnerships.

A PPP taps private sector know-how and funds for design, construction and management on public works projects. Many countries, including Japan, have adopted this model.

China introduced PPP sometime around 2014 and were in full swing by 2016. In January 2016, there were some 7,000 PPP projects underway in China. That number had swelled to 11,200 by the end of the year. Total investment in these projects, including those at the planning stage, amounted to 14.6 trillion yuan at the end of March this year, up from 13.5 trillion yuan at the end of 2016.

According to the China Construction Machinery Association, 14,500 excavators were sold in February, up fourfold from a year earlier. Sales in the first four months of this year doubled to 54,700 units.

Sales of bulldozers in April increased about 90% to 685 units.

In addition to construction machinery makers, other companies are benefiting from the new investment climate.

China State Construction Engineering, a major construction company, received orders totaling 585 billion yuan as of April, up about 20% from a year earlier. China Energy Engineering Group participated in PPP projects totaling 70 billion yuan in 2016 alone.

PPP infrastructure projects by local governments are contributing to China's 6.9% economic growth in the first quarter of 2017. 

Key Words: Chinese construction machinery
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