Major machinery manufacturer Guangxi Liugong Group plans to further boost its overseas business to offset the domestic industry downturn, targeting a 50 percent share from the current 43 percent within three to five years.
Senior Vice-President Luo Guobing said: "Excavators are a major product for us and we are expanding our footprint in multiple regions with various product lines. Currently, we have more than 30 overseas subsidiaries selling products to over 170 countries and regions."
According to Liugong's half-year financial report, the company's net profit in the first six months stood at 614 million yuan ($84.1 million), a 28 percent year-on-year increase. Its revenue grew 9.22 percent to over 15 billion yuan, among which 6.49 billion yuan was from overseas business, up 57.64 percent year-on-year.
The company said that the prices and profit margins of products sold to overseas markets tend to be higher than those in the domestic market. Electric products, such as electricity-powered excavators, are also performing well in overseas sales. It said a surge in overseas business performance has offset the domestic industry downturn and contributed to the company's overall growth.
"In the past two years, the improvement of China's supply chain has ensured the timely delivery of our goods despite COVID-19 challenges, making it a favorable growth opportunity in the overseas market. Liugong has seized the opportunity for rapid development," Luo said.
Expanding overseas business has become the choice for many machinery engineering companies to discover new growth points amid the downturn in the domestic industry, experts said.
According to the China Machinery Industry Federation, in the first half, the construction machinery industry saw a decline in sales of excavators and loaders by 24 percent and 13.3 percent year-on-year, respectively, due to sluggish construction of real estate and cyclical factors.
Last year, the China Construction Machinery Association's statistics on China's 26 major excavator manufacturers showed that a total of 261,346 excavators were sold, a nearly 24 percent year-on-year decrease. Among them, domestic market sales were 151,889 units, a 44.6 percent year-on-year decrease, marking the lowest point since 2018.
In this context, many companies are choosing to focus on overseas markets to offset the decline in domestic demand. According to the CCMA, in 2020 and 2021, excavator exports grew by 31 percent and 97 percent, respectively. Despite a high base, in 2022, excavator exports saw a 60 percent growth to 109,457 units. The proportion of exports to total sales doubled from 20 percent in 2021 to nearly 42 percent last year.
In the first eight months of this year, exports reached 72,717 units, a 4.42 percent year-on-year increase from a high basis point while domestic excavator sales reached 61,812 units, a 43.5 percent year-on-year decrease, said the CCMA.
According to Zheshang Securities, recent policy incentives in the real estate sector will benefit downstream demand for construction machinery, with domestic demand gradually picking up.
Wen Wu, a senior vice-president of Liugong, said: "Even with a slight increase in demand, the current amount of stock of large machinery will create a lag of time in fulfilling actual demand. We remain optimistic about the future but should not expect rapid improvements in the short term."
By LIU YUKUN
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