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Construction Machinery Year-end Report: The Market Is Picking Up, Some People Are Happy, Some People Are Worried
- Feb 14, 2019 -
  • n Winter is over and spring is coming. In 2018, most construction machinery companies, including industry leaders, achieved varying degrees of growth.

  • n At present, although the number of domestic construction machinery supporting parts enterprises is large, the core technical capabilities are insufficient, which has hindered the improvement of the overall competitiveness of the industry for a long time. Many key components need to be imported, resulting in high production costs and lack of international competitiveness.

  • n In recent years, in order to improve the industrial chain and increase market share, mergers and acquisitions among domestic construction machinery companies have become more frequent.

After nearly five years of heart-breaking adjustment, the construction machinery industry had an inflection point in the second half of 2016.In the following 2017, sales of construction machinery products in almost all segments showed a rapid growth.In 2018, the market continued to pick up, but the growth rate has now slowed down.

The data shows that from January to September 2018, 25 mainframe manufacturing enterprises included in the statistics sold a total of 156,242 excavation machinery products, a year-on-year increase of 53.3%.In September, the total of 25 domestic main loader manufacturers included in the statistics sold nearly 8,400 loaders, down 6.28% year-on-year.Since April 2018, the loader's sales have declined for five consecutive months.From January to September, the domestic sales of automobile cranes totaled 24,691 units, a year-on-year increase of 67%.From January to September, the cumulative sales of domestic bulldozers reached 5,747 units, a year-on-year increase of 28%.From January to September, the cumulative sales of domestic road rollers totaled 15,122 units, a year-on-year increase of 10%.From January to September, the domestic flat grade machine sold more than 4,200 units, a year-on-year increase of 22.7%.

In April 2018, Caterpillar topped the list of the top 20 global construction machinery manufacturers in the 2018 by the British KHL Group. Komatsu and Hitachi ranked second and third, ranking in the top 10 global rankings in China. Among the enterprises, Xugong Group rose from the 8th in 2017 to the 6th, and Sany Heavy Industry rose from the 11th to the 8th.

The Big Three under the data

The performance of the first three quarters of 2018 announced by listed companies in construction machinery shows that most companies including Sany Heavy Industry, Zoomlion and Xugong have achieved different degrees of growth.

Since 2018, Xugong’s payback level has improved significantly, historical bad debts have basically cleared up, and the quality of operations and gross profit margins have improved.

Sany Heavy Industry's three business segments - excavation machinery, concrete machinery, lifting machinery in the first three quarters of the year-on-year growth rate were more than 50%; from January to October, the company's excavator market share increased to 23%.

Zoomlion's lifting machinery and concrete machinery maintained its first camp in the domestic product market. The operating cash flow was stable, and the increase in sales returns led to a significant improvement in cash flow, and the advance receipts reached the highest level.

Among the comparable product gross profit margins, the rankings of the three enterprise cranes were: 28.34% for Zoomlion, 24.56% for Sany Heavy Industry and 21.75% for Xugong Machinery;The order of road machinery is: 32.39% for Sany Heavy Industry and 21.98% for Xugong Machinery;The order of concrete machinery is: 23.79% of Sany Heavy Industry and 22.16% of Zoomlion;

In interaction with the Big Three, Bosch Rexroth Group's sales in 2017 increased by 6.7% compared to 2016, reaching 78 billion euros;The pre-tax profit margin increased to 6.8% and the total profit reached 5.3 billion euros.In Africa and the Asia Pacific region, sales reached 23.6 billion euros, a 14% increase from 2016.

On November 5, 2018, Zoomlion said in its relationship with investors that the company's excavator products will achieve the goal of mass production of 5,000 units in 2019. At the same time, the aerial work platform will also achieve mass production.

Parts are true winners

At present, although the number of domestic construction machinery supporting parts enterprises is large, the core technical capabilities are insufficient, which has hindered the improvement of the overall competitiveness of the industry for a long time.Many key components need to be imported, resulting in high production costs and lack of international competitiveness.

In recent years, the domestic construction machinery parts enterprises represented by Hengli Hydraulic, Tongli Slewing Bearing and Eddie Precision have not only developed very rapidly, but also have higher operating performance than the mainframe enterprises.Based on the increasingly difficult background of external advanced technology, China's industrial sector does need to create a number of national enterprises that can represent China's emerging forces and represent innovative technologies and innovation capabilities.

At the Shanghai Baoma Exhibition in 2018, the high-tech construction machinery was jointly sponsored by Xugong Group and Zhejiang University, including 54 companies and research institutes including Beijing Institute of Technology, Jilin University, Guangxi Liugong Machinery and SINOMACH Changlin Co., Ltd. And the core component industry technology innovation strategic alliance was formally established.

The China Construction Machinery Association said that looking at the global construction machinery industry competition pattern, the key technologies of high-end engineering machinery and the lack of core components such as hydraulics, transmission and control still seriously restrict the development of the domestic construction machinery industry.This is a milestone in the history of the development of China's construction machinery industry, which covers the fundamentals of engineering machinery, industry, and collaborative research and development of the entire industry chain.

As the leader of the domestic hydraulic system, Hengli Hydraulics achieved revenue of 3.16 billion yuan in the first three quarters of 2018, a year-on-year increase of 55.92%;Realized a net profit of 719 million yuan, a year-on-year increase of 160.38%;The consolidated gross profit margin was 35.87%, a significant increase year-on-year.

In 2005, the company's predecessor, Jiangsu Hengli High Pressure Cylinder, was established. In 2010, it experienced an overall change system and landed on the Shanghai Stock Exchange in 2011.At present, the company has grown into a company specializing in the production of hydraulic components and hydraulic systems. It has obvious competitive advantages in excavator-specific cylinders and shield machine cylinders.After four years, the company entered the Caterpillar supply chain system.In addition, the company develops aerial work platform customer Snorkel in the North American market, develops Liebherr in the European market, and develops customers such as Kobelco and Kubota in the Japanese market.The company currently has few competitors in China, mainly targeting companies such as Rexroth, Kawasaki, KYB and other international companies.In the field of hydraulic pump and valve business, the company's small digging pump valves have been supplied to domestic brands such as Sany, Liugong and Xugong in batches;The digging pump valve is also about to be heavy.Hydraulic pump valves are expected to successfully achieve import substitution and become the biggest expectation of the company's continued growth.

Ten years ago, in the domestic hydraulic industry, there were almost no enterprises with an annual output value exceeding 500 million yuan.Today, Hengli Hydraulics is expected to reach an annual revenue of 4 billion yuan, a substantial breakthrough for engineering machinery upstream enterprises.

Mergers and acquisitions become the norm

In recent years, in order to improve the industrial chain and increase market share, mergers and acquisitions among domestic construction machinery companies have become more frequent.In the past few years, Zoomlion acquired the Italian “CIFA”.Sany Heavy Industry acquired Germany Putzmeister and Xugong acquired Germany Shi Weiying,It has effectively promoted the influence and competitiveness of domestic concrete machinery on a global scale.