* Firm rejected some H1 concrete pump orders -analysts
* Seeks up to 30 pct downpayments on new contracts -analysts
By Fang Yan and Matthew Miller
BEIJING, July 15 Chinese construction machinery
maker Zoomlion Heavy Industry Science and Technology Co Ltd
has told analysts it rejected some 15 percent of new
orders for truck-mounted concrete pumps in the first half for
fear that China's property market slowdown will hit customers'
ability to pay for them.
The company, which warned on Monday that its first-half
earnings would drop by as much as 70 percent, also told analysts
in a briefing it is now requiring larger downpayments for new
contracts. Zoomlion is trying to rein in accounts receivable
that surged 47 percent to 27.8 billion yuan ($4.48 billion) as
of the end of 2013 compared with the end of 2012.
Calls to Zoomlion officials seeking comment went unanswered
New home prices in China fell in June for a third straight
month, which hurts demand for Zoomlion's equipment. About half
of its business is directly tied to the property market, with
the rest linked to infrastructure among others.
"First-half property sales and property investment have
slowed," said CLSA analyst Alexious Lee, who took part in the
Zoomlion call. "This will remain an overhang on demand for
construction machinery. No one dares to say which way the
property market will be heading to in the next three years."
Zoomlion, like many of its rivals, offers leasing and
financing options to boost sales. While that was a successful
approach when the housing market was booming, helping it compete
against foreign players like Caterpillar Inc and Japan's
Komatsu Ltd, it has left local equipment makers like
XCMG Construction Machinery Co Ltd and Sany Heavy
Industry Co Ltd exposed to the risk of bad loans.
To rein in risk, Zoomlion has mandated 20 percent to 30
percent downpayments for new contracts, analysts said, citing
Zoomlion executives speaking during a conference call. CLSA
analyst Lee said the previous industry norm was that customers
didn't need to make any downpayment on machinery orders.
Still, there is no sign of a major turnaround of China's
overall construction machinery sector, struggling with a supply
glut in the wake of the massive Beijing stimulus program that
began in 2008. Zoomlion's same-town rival Sany, which is
expected to report first-half earnings at the end of August, saw
its January-March net income tumble 47 percent compared with the
same period a year earlier.
Zoomlion is also facing a foreign exchange headwind now that
the yuan had stopped appreciating versus the dollar. The
machinery maker has to pay dollar-denominated interest for the
dollar-denominated bonds on its cash draw, including a five-year
$400 million bond issued in April 2012 and a 10-year $600
million bond issued in December of the same year, according to
its 2013 annual report.
The company's Hong Kong traded shares closed down 3.04
percent on Tuesday, contrasting a 0.49 percent rise in the
benchmark Heng Seng Index.
($1 = 6.2075 Chinese Yuan)
(Editing by Emily Kaiser and Kenneth Maxwell)