April 12, 2013 / 10:00 AM / 5 years ago

UPDATE 1-China's Zoomlion flags 60-80 pct drop in Q1 profit on weak sales

HONG KONG, April 12 (Reuters) - China’s second-largest construction equipment maker Zoomlion Heavy Industry Science and Technology Co Ltd warned on Friday its first-quarter net profit may drop by up to 80 percent as slowing economic growth cut sales.

Zoomlion’s problems are endemic to a sector currently overwhelmed by a mountain of unsold equipment but which had boomed due to a surge in infrastructure spending during China’s massive financial stimulus programme in 2008.

Caterpillar Inc, the world’s largest maker of construction equipment, said in August it had started to export Chinese-made machinery to the Middle East and Africa to offset the dip in China’s growth.

China’s economy grew last year at its slackest pace since 1999, and demand for construction raw materials has been sluggish so far this year. Most analysts expect the economy to stage a steady recovery in 2013, driven internally by infrastructure investment and household consumption.

Zoomlion, which competes with Sany Heavy Industry Co Ltd , reported a net profit of 2.01 billion yuan in the first quarter of 2012.

Its Hong Kong shares have dropped 27 percent so far this year, lagging a 6.8 percent slide on the China Enterprises Index of the leading Chinese listings in Hong Kong.

Zoomlion’s Shenzhen-listed stock has fallen almost 13 percent this year, against a 2.4 percent loss for the CSI300 of the top Shanghai and Shenzhen listings.

Shares of the company slid in January after a report in local newspaper Ming Pao Daily News said the company’s sales figures may have been exaggerated.

Zoomlion said at the time all allegations relating to its financial information as reported in the newspaper were false, groundless and misleading.

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