Kobelco sees $340m loss over Chinese market woes

Japan’s Kobe Steel has seen its profitability falter over the difficulties experienced by its equipment business in China

Kobelco Cranes saw a 7% rise in sales, but a drop in operating profits.
Kobelco Cranes saw a 7% rise in sales, but a drop in operating profits.

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Kobe Steel, parent of Kobelco, recorded a $340m loss for the Q3 of the fiscal year as a result of bad debt and write-downs in its excavator-focused construction equipment business in China. 

Kobelco Construction Machinery was responsible of a 12.9% decline sales in the first nine months of the year to $1.79bn compared with the same period last year, and in the business made an ordinary loss of $80m, compared to a profit of $175m a year ago.

This fall in ordinary profit $257m corresponds to the bulk of Kobe Steel’s provision for the likely scale of its bad debts in China.

“Kobe Steel posted the allowance for doubtful accounts in the construction machinery business in China,” the company stated, noting that it had taken a charge for “the loss on the valuation of investment securities of affiliate companies and provision for loss on guarantees.”

Kobelco Cranes, which makes crawler cranes, saw a 7% rise in sales over the nine month period, with revenues rising to $473m. However, its ordinary income still fell some 38% to $23.9m as a result of “higher expenses for quality maintenance and the improvement of products”.

During 2016, Kobe Steel is planning to re-merge its construction machinery and cranes divisions after a decade apart in order to reduce the organisational load of dual distribution and service overheads.

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