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Construction machinery makers enjoy stimulus push

By Liu Yiyu (China Daily)
Updated: 2010-01-28 08:11

Construction machinery manufacturers will report better-than-expected earnings for 2009, thanks to a huge increase in demand from the government's stimulus package.

Eighty percent of manufacturery expect last year's profits to reveal record growth, above the 60 percent average reported by listed companies that filed pre-disclosures in their annual reports recently.

There are currently 96 listed machinery makers in China, and the majority of them expect revenue to be over 50 percent, while several are forecasting a 10-fold rise in revenue for 2009.

Sany Heavy Industry Co reported a 50 percent increase in profits while XCMG Construction Machinery Co - China's largest construction equipment maker - is predicting its 2009 profit will reach 1.73 billion yuan, 14 times higher than last year.

The huge profits are largely due to last year's rebound in the construction sector. The bulk of China's listed machinery makers have infrastructure and construction equipment manufacturing businesses.

Demand for construction machinery has a strong correlation to increases in fixed-asset investments. China's fixed-asset investments, including property, factories and equipment, grew 30 percent last year, according to the National Bureau of Statistics.

Infrastructure construction projects, which absorbed 80 percent of the government's 4 trillion yuan stimulus package, in combination with an up tick in new construction in the property sector, helped spur demand for construction machinery.

According to the latest annual report from the China Machinery Industry Federation, industrial output soared to a new high of 10 trillion yuan on the heels of the central government's policy of encouraging domestic consumption.

"Eighty percent of machinery sales were supplied to the domestic market," said Cai Weici, vice-president of the federation.

With demand up, several machinery makers are taking the opportunity to launch IPOs. China Erzhong Group, Deyang Heavy Industries Co, China First Heavy Industries, as well as China XD Electric Co, raised a total of 20 billion yuan in their IPOs this month.

The China Machinery Industry Federation forecasts the industry may still enjoy 50 percent growth early this year, but those figures will drop in the latter half.