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Despite having seen sales in China fall for seven consecutive quarters, Komatsu President Kunio Noji told Bloomberg the company expects Chinese demand to increase between 5 and 10 percent in 2013.
“Our company will see an immediate earnings improvement once demand recovers because we don’t have any excess stockpiles and are able to speed production,” Noji said.
Komatsu saw China become its largest regional sales market in 2011 — passing even its home country of Japan — only to see the country fall to its fourth biggest market in 2012 when growth of the Chinese economy stalled, Bloomberg reported.
China is the world’s largest market and Bloomberg reports that total construction equipment sales there slid nearly 19 percent in 2012 to $32.3 billion.
A major reason for Noji and Komatsu’s optimism in China is the most recent skid of the country’s currency against the dollar. Each drop in the yen helps Japan’s exporters.
In fact, as Bloomberg reports: “Komatsu forecasts that each one yen decline against the dollar will boost operating profit by 1.4 billion yen ($15 million) for the current three months, while every 0.1 yen decline against the yuan will increase earnings by 100 million yen in the period.”
Komatsu forecasts those declines in the yen to add up to a 23 billion-yen boost by the end of the quarter.