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KOMATSU FINANCING UNIT IN CHINA LIKELY TO TURN PROFIT IN FY09

Posted on: Thu, 19 Nov 2009 22:30:00 EST

Symbols: KMTUY

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TOKYO, Nov 20, 2009 (AsiaPulse via COMTEX) --
KMTUY | Quote | Chart | News | PowerRating -- Komatsu Ltd.'s (TSE:6301)
financing business in China is expected to post a 600 million
yen (US$6.7 million) operating profit for the year ending in
March 2010, its first black ink since launching in July 2007,
thanks to funding demand for excavator purchases.

The operation plunged 200 million yen into the red in fiscal
2008.

Slightly more than 30 per cent of customers in China tap
financing available from Komatsu, or roughly 7,500 contracts.

Many individuals who own businesses buy construction
machinery in installments amid a rush of infrastructure
projects. The loan balance at Komatsu's Chinese financing arm
is expected to grow 55 per cent, or by 26 billion yen, to 73
billion yen at the end of fiscal 2009.

The rate of delinquent loans in China stands at about 5 per
cent, far above the 2 per cent average for the firm's financing
business worldwide. Purchased construction machinery can be
tracked using the global positioning system. If loan payments
are delayed by three months, Komatsu will take the products
back. Its Chinese financing unit sets aside loan-loss reserves
equivalent to 3 per cent of installment purchases, compared
with 1-2 per cent in Japan, the U.S. and Europe.

Komatsu's excavator sales in China more than doubled on the
year in October. The Chinese market is estimated to account for
18 per cent of the firm's global sales, matching its Japanese
tally.

The company is rumbling toward a 92 per cent operating
profit gain to 4.8 billion yen at its global financing
business. But the loan business will likely suffer losses of
100-200 million yen in Japan and Europe and see a 10 per cent
profit decline to 3.3 billion yen in the U.S.

(Nikkei) bl

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