The layout of construction machinery overseas or trapped in the "no rice" predicament

Xugong Machinery announced a few days ago that the company plans to publicly issue total corporate bonds of no more than RMB 5.6 billion to repay bank loans and replenish liquidity, which has now been approved by the China Securities Regulatory Commission. The industry speculated that the company's refinancing was for "blood". According to a survey conducted by the reporter, due to the weak overall demand in the domestic market, the liquidity of major companies in the construction machinery industry has become tight. Industry experts said that the rapid growth of overseas markets will become the main growth support for domestic companies in the future.

According to the data of Xugong Machinery's third quarter report, the company's accounts receivable have increased significantly, and the cash flow pressure is not optimistic. The balance of accounts receivable in the first three quarters of the company was RMB 9,043 million, which represented an increase of 127.83% as compared with the beginning of the year, mainly due to the increase in the company’s sales scale and the increase in installment payment business; due to the increase in the company’s overseas customers’ large prepayments for purchases, the company’s advance receipts The balance was 1.321 billion yuan, an increase of 128.56% from the beginning of the year.

From January to September, the company's operating cash flow was -579 million yuan, compared with 2.248 billion yuan in the same period last year. According to Essence Securities, due to the fact that the national credit tightening policy has not shown any signs of relaxation, there is a potential risk of bad debts in product sales, and the company’s cash pressure is very prominent.

Although the company had previously planned to land in Hong Kong stocks to “buy blood,” due to the sluggish foreign capital market, the H share issuance plan has been approved but it has not yet completed.

The capital status of other leading enterprises in the industry also appeared relatively tight.

At the end of the third quarter, the accounts receivable of Sany Heavy Industry amounted to RMB14.887 billion, a substantial increase of 159.92% from the beginning of the year. At the same time, in response to the impact of Japan’s earthquake and nuclear crisis, the company increased the purchase and storage of key imported components. Inventory reached 9.12 billion yuan, an increase of 60.36% from the beginning of the year; in the third quarter, the company's operating activities had a net cash flow of 1.766 billion yuan, and the company's capital circulation pressure increased.

The balance of accounts receivable of Liugong in the first three quarters was 2.337 billion yuan, an increase of 66.6% from the beginning of the year; operating cash flow during the same period was 2.318 billion yuan, compared with 915 million yuan in the same period of last year. At the same time, despite the positive operating cash flow of Zoomlion in the third quarter, accounts receivable during the reporting period increased by 67% year-on-year.

Su Zimeng, secretary general of the China Construction Machinery Industry Association, said that due to the increase in accounts receivable and inventory growth since the third quarter, some companies in the construction machinery industry are experiencing tight liquidity. Some companies have also adopted refinancing measures such as issuing corporate bonds. However, he emphasized that the main purpose of refinancing is to invest in the redevelopment of the company's R&D and overseas expansion.

Su Zimeng pointed out that the growth of the international construction machinery market has doubled and will continue to expand. From January to October 2011, the overseas export of construction machinery in China has increased by 51%. In the same period, the sales growth in the domestic market was only about 30%, which was significantly lower than the growth rate of overseas markets.

An expert from the General Academy of Mechanical Science also told this newspaper that in the next five to ten years, the development of domestic construction machinery companies will rely more on the growth of the international market.