May 12, 2005
Kobelco Construction Machinery's financial results for fiscal
2004 (April 1, 2004 - March 31, 2005)
TOKYO - Kobelco Construction Machinery Co., Ltd. announces
its financial results for fiscal 2004, ended March 31, 2005.
General Market Conditions
The construction machinery market in Japan continued to be
firm in fiscal 2004. Although public works decreased, demand
was strong for replacement machines, centered on hydraulic
excavators and mini excavators.
In the overseas market, overall demand continued to be strong.
Fiscal-tightening measures implemented by the Chinese government
dampened the booming economy. However, North America, Europe
and Southeast Asia were on an upward trend.
Review of Kobelco's Operations
Under a new formation in April 2004, the Kobelco Construction
Machinery Group focused on solidifying its business foundation
to increase profitability and furthering its global development
for the future.
On the back of growing world demand for construction equipment,
Kobelco increased its volume of units sold. Both in Japan
and overseas, it worked to adjust product prices to minimize
the higher cost of materials and parts. It also worked to
reduce overall expenses and improve procurement capabilities.
In China, amid the sharp decline in demand, Kobelco reduced
production and improved its debt management. To meet market
growth in the medium-term future, Kobelco improved its production,
marketing and services in the year under review.
Kobelco's financial results for fiscal 2004 are as follows:
(* Ordinary income, also known as pretax recurring
profit, is pretax income before extraordinary gains and losses.)
|(in millions of yen)
(ended Mar. '05)
(ended Mar. '04)
|Ordinary income *
Consolidated sales reached 174.5 billion yen, with domestic
sales comprising 93.3 billion yen and overseas sales making
up 81.2 billion yen. More financial soundness was achieved
by reducing external debt and improving shareholdersf
In a year marked by natural disasters, Kobelco donated construction
machinery to Niigata, which was hit by the Niigata Chuetsu
Earthquake in Japan. In addition, with its global alliance
partner CNH Global N.V., Kobelco donated equipment and relief
goods to assist the regions devastated by the Indian Ocean
Review of Fiscal 2004
Unit sales of new construction equipment in Japan steadily
increased in the fiscal year. On the back of rising demand
for hydraulic excavators and mini excavators, Kobelco introduced
value-added products and actively undertook marketing and
after-sales service activities. Examples include a full model
change of the Beetle series of mini excavators and the introduction
of a GPS system as standard on hydraulic excavators.
Owing to the growing environmental need to comply with the
End-of-Life Vehicle Recycling Law that went into effect in
January 2005, sales of environmental and recycling machines
in Kobelcofs line-up continued to be strong. Examples
include car dismantling machines and building demolition equipment
built on excavator base machines.
Kobelco worked to rationalize the business structure to expand
its diverse base. To increase the profitability of its stock
business, Kobelco moved its Resale Center to Kobe in May 2004.
In April 2005, it turned its training business into a separate
company, Kobelco Training Services Co., Ltd.
Overseas (excluding China)
Based on its global alliance with CNH, Kobelco worked to strengthen
the Asia-Pacific region and its joint ventures with CNH in
North America and Europe.
In the ASEAN region, a sharp rise in demand in Indonesia
enabled Kobelco to boost sales volume of new machines and
greatly increase market share. Owing to active demand for
used machines, Kobelco formed tie-ups with local companies.
In July 2004 a subsidiary in Vietnam began marketing used
machines. These activities led to a considerable increase
in the number of units sold.
At the joint ventures with CNH in North America and Europe,
the range of OEM products and the number of units sold increased
in the active U.S. market. In Europe, Kobelco completed the
transfer of technology to its manufacturing and marketing
venture in Italy. This enabled commercial production of a
total of eight excavator models ranging from 13 tons to 48
For Europe and South America, CNH started a new brand strategy
Overseas sales also commenced for the new mini excavator
SR-3 series (known as the Beetle series in Japan).
In response to the drastic change in the Chinese market and
to further strengthen its business foundation, Kobelco implemented
the following measures:
- In anticipation of future growth, Kobelco completed its
second excavator plant in China, Hangzhou Kobelco Construction
Machinery Co., Ltd., located in Hangzhou, Zhejiang Province,
in January 2005. From March, production of a 20-ton excavator
- At Chengdu Kobelco Construction Machinery Co., Ltd. in
Chengdu, Sichuan Province, production was temporarily curtailed.
As inventories went done, production was resumed at the
end of 2004.
- Due to macrocontrols and fiscal tightening affecting excavator
sales, Kobelco promoted sales activities with the protection
of accounts receivable taken into consideration.
- To further improve services, GPS systems for remote monitoring
of equipment performace were developed. Marketing began
in January 2005.
- To improve its parts supply and services, Kobelco opened
Guanzhou Service Center in March 2005 following other service
centers in Shanghai and Chengdu.
Outlook for fiscal 2005
Although demand in the world construction equipment market
is expected to be on the same level as in the previous fiscal
year, macrocontrols by the Chinese government and high material
cost, mainly for steel, are factors that will put downward
pressure on profits.
In fiscal 2005, Kobelco's development of new models will
peak to meet the Tier 3 exhaust emission regulations that
will first go into effect in October 2006 in Japan. With low
operation at its second excavator plant in China, Kobelco
anticipates it will face higher burdens temporarily as it
strives toward higher profitability.
Kobelco is positioning fiscal 2005 as the year to reform
its management, development, production and China business.
In this business environment, Kobelco aims to undertake the
following strategies to reinforce its profit structure in
- Increase product prices in light of high material costs.
- Strengthen operations in collaboration with CNH Global
and Chinese joint venture partners and reinforce the total
- Undertake the steady development of new models to meet
- Improve cost competitiveness by building optimum production
- Introduce new, bigger environmental machines to meet market
- Strengthen marketing by improving the distribution network
in the ASEAN region, which is sharply rising.
- Further promote compliance activities.
Consolidated Forecast for fiscal 2005
|(in millions of yen)
(ending Mar. '06)
|Ordinary income *