Komatsu rules out plan of pulling out from Indonesia
Komatsu rules out plan of pulling out from Indonesia
TOKYO (Reuters): Komatsu Ltd , a top Japanese maker of construction machinery, yesterday played down worries in the financial markets that the accelerating currency crisis in Asia would deal a heavy blow to its business.
A Komatsu spokesman told Reuters that the Asian woes would not have a major impact on its group earnings and that it will cope with the situation by expanding the role of its production plants in Indonesia and Thailand as bases for exports.
"There will be no major impact on our group earnings," he said, adding that the company had no plans at present to change its recent group earnings estimates for the year to March.
On the Tokyo Stock Exchange (TSE), worries about Komatsu's business spurred a sharp slide in the company's stock price.
Komatsu shares sagged over 14 percent to 552 yen by the day's close, the third-biggest percentage drop in the TSE's first section, amid aggressive sales by foreign investors.
The company said in November it expected a rise of about 27 percent in its group net profit to 23 billion yen ($174 million) for 1997/98 based on U.S. accounting rules.
The Komatsu spokesman also ruled out the chance of it cutting jobs or pulling out investment from its ailing joint venture in Indonesia, PT Komatsu Indonesia.
"We have never had such an idea," he said. "The joint venture is listed in Indonesia and we have to take job security into consideration. Even though there were some temporary drops, we believe the region has the potential to grow in the future on infrastructure projects," he added.
With Indonesia stuck in its worst financial crisis in decades, there were also growing fears that its mountain of overseas debt would become unmanageable following the meltdown in the rupiah and a plunging stock market.
PT Komatsu Indonesia, in which Komatsu Ltd holds the biggest stake of 38.24 percent, announced last month that its net profit would likely suffer a painful dive of 60 percent in 1998 due to falling demand amid the region's currency crisis.
Komatsu has already halted production at its plants in Indonesia and Thailand for January and February and a decision on when to resume production would depend on future developments in the regional situation, the spokesman said.
Fumihiko Nakazawa, an analyst at Merrill Lynch, said stagnant sales of construction machinery at home would make it hard for the company to meet its parent sales forecast of 550 billion yen for 1997/98.
The effect of the weak yen would help support the company's profits for the year, but it would not be enough to offset the damage resulting from a domestic sales slump, Nakazawa said.
Robust sales in U.S. and European markets would also fail to offset a drop in its sales in the Asian region, he added.