April 25, 2016 / 4:55 AM / 4 years ago

UPDATE 1-China Zoomlion's record Q1 loss raises questions on Terex deal funding

* Zoomlion posts record quarterly loss

* Company should reconsider Terex takeover after loss -analyst

* Shares down as much as 2.5 pct in Hong Kong

BEIJING, April 25 (Reuters) - A record quarterly loss for China’s Zoomlion Heavy Industry Science and Technology Co has raised questions over the indebted company’s ability to finance its $3.4 billion bid for U.S. crane maker Terex Corp.

Zoomlion posted on Friday a net loss of 660.3 million yuan ($101.50 million) for the January-March quarter, compared with a year-ago loss of 383.4 million for that period. The number is at the upper end of the 600 million-680 million yuan loss range the company had warned about earlier this month.

Chinese heavy equipment makers are battling an historic glut of unsold equipment, unused factories and tumbling earnings following a massive construction boom initiated by a $644 billion government stimulus package announced in 2008.

The grim earnings for Zoomlion, which confirmed its offer for Terex in February, come as U.S. companies have grown more skeptical of Chinese companies’ ability to complete deals. Zoomlion had debt of 53.1 billion yuan as of end-2015.

“It’s possible that the results will affect the Terex deal,” said Xu Mingle, an analyst at BOC International.

Zoomlion’s Hong Kong-listed shares fell as much as 2.5 percent on Monday, lagging a 0.5 percent drop in the benchmark Hang Seng Index. Its Shenzhen-listed shares declined 0.7 percent.

Earlier this month, Zoomlion sought to provide assurances to Terex over its offer, people familiar with the matter told Reuters, saying it would cover the risk of the acquisition being approved by the Chinese authorities.

John Hu, an analyst with Morningstar, said: “I think Zoomlion’s management should reconsider the Terex deal as its Q1 earnings hit a record low. Is it worth spending so much money on Terex?”

Zoomlion declined to comment when asked if the latest earnings would impact its bid for Terex.

For Zoomlion, which was founded in 1992 by researcher-turned entrepreneur Chunxin Zhan and seven other partners, a deal with Terex would give immediate access to the North America market, which is holding up better than the Chinese company’s home market.

It would also enable Zoomlion to better compete with rival Sany Heavy Industry Co, which already has an assembly plant in the United States.

In March, Zoomlion reported its lowest annual profit in 15 years and the fourth consecutive year of profit decline. ($1 = 6.5052 Chinese yuan renminbi) (Reporting by Fang Yan in BEIJING and Donny Kwok in HONG KONG; Editing by Anne Marie Roantree and Muralikumar Anantharaman)

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