Companies

XCMG to buy stakes in two European firms

By Zhou Siyu (China Daily)
Updated: 2011-05-20 10:22

Products made by Xuzhou Construction Machinery Group on display at a machinery exhibition in Shanghai. The construction machinery industry in China has experienced a 30 percent expansion in annual sales during the past few years. [Photo/China Daily]

BEIJING - Xuzhou Construction Machinery Group (XCMG), China's largest machinery manufacturer by revenue, is in talks with two companies in Western Europe to acquire a 50 percent stake in each, said a senior officer from the group.

This is part of the group's strategy to extend its value chain and bring advanced technologies to key component productions, said Yang Dongsheng, vice-president of Xugong Group Construction Machinery Inc, a listed company under XCMG.

The two companies, based in Germany and the Netherlands, are advanced manufacturers of hydraulic parts, important components used in construction machineries, he said.

The annual sales of these companies stood at "several million euros", according to Yang, suggesting the offer could amount to a huge sum.

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XCMG expects to ink the deal by July, and the group is considering more acquisitions from abroad, Yang told China Daily, without disclosing further details.

Advanced technologies are what Chinese machinery companies require for further development, said Qi Jun, chairman and senior economist at the China Construction Machinery Association (CCMA).

"Chinese (machinery) companies still lag behind in key component production technologies. This is part of the reason it's difficult for Chinese products to enter the North American market," he said.

Yang also said the company has recently signed a multi-million dollar contract with Venezuela to supply machinery.

"Sales this year are expected to reach 90 billion yuan ($14 billion). We aim to become one of the world's top three in terms of sales, if sales reach 300 billion yuan in 2015," Yang said.

The group's ambition may have been encouraged by the fast expansion of the industry in China. In 2010, the country has outpaced North America, Japan and Western Europe and emerged as the world's largest market for construction machinery.

In the same year, total sales of Chinese companies in the industry surged by 52 percent year-on-year to 400 billion yuan, with exports totaling $10.3 billion, according to CCMA.

The industry in China has seen annual sales increase by 30 percent during the past few years. Over the next five to 10 years, the industry is expected to maintain sales growth of 17 percent, Qi said.

It's estimated that exports of construction machinery in 2011 will surge by 25 percent from last year, "approaching to or even exceeding" the pre-crisis level of $13.4 billion registered in 2008, Qi added.

According to the CCMA, the steady increase has been bolstered by demand generated by China's on-going process of urbanization, including the nation's effort to foster its high-end equipment manufacturing industry.

Stable growth in fixed assets investment also made a positive contribution to the machinery industry.

By 2015, the industry's sales in China are expected to reach 900 billion yuan, and exports of construction machinery may touch $26 billion, according to Qi.