Standard & Poor's released a report on Monday saying that slowing domestic demand and increased competition in China may encourage more Chinese construction machinery manufacturers to seek overseas expansion. It is expected that this year will see larger-scale, bolder overseas M&A, and more companies will be established overseas. First location such as R&D center.
Standard & Poor's estimates that in the next three to four years, the proportion of overseas large-scale construction machinery vendors in China will increase from 10% in the first half of 2011 to around 30%.
Standard & Poor's credit analysts said, “We expect the demand growth of the construction machinery industry in 2012 will be significantly lower than the average growth rate in the next few years. The slowdown in the domestic market may also test the construction machinery manufacturers to manage its Profitability and profitability."
At the same time, he said, the choice of installments and financing leases that companies provide to customers in order to drive sales has made credit risk control critical.
The report believes that the rapid development of China's construction machinery industry in the past few years has enhanced the revenue base and reduced the difficulty of financing overseas capital markets. A large amount of capital reserves makes the possibility of successful mergers and acquisitions more likely.
The report points out the risks in overseas expansion. In the first 12-18 months or so, the profitability of some companies that implement mergers and acquisitions may fluctuate more than other companies, and for companies that face larger eurozone risk exposures or rely on debt financing for mergers and acquisitions, There is also a high implementation risk.
However, on the other hand, M&A activities can also improve regional diversification and increase R&D capacity. This is a positive factor for the credit status, but it may not be realized for at least two or three years.
China's construction machinery business has accelerated its pace of going out in the past two years. At the beginning of this year, Sany Heavy Industry Union’s Handan Fund jointly acquired 100% of the shares of Putzmeister, Germany, with a total transaction amount of 360 million euros. Guangxi Liugong spent RMB335 million to acquire the engineering machinery division of Polish company HSW.
Xugong Group’s parent company, XCMG Group, later stated that it is actively seeking a larger-scale overseas merger and acquisition.
Standard & Poor's estimates that in the next three to four years, the proportion of overseas large-scale construction machinery vendors in China will increase from 10% in the first half of 2011 to around 30%.
Standard & Poor's credit analysts said, “We expect the demand growth of the construction machinery industry in 2012 will be significantly lower than the average growth rate in the next few years. The slowdown in the domestic market may also test the construction machinery manufacturers to manage its Profitability and profitability."
At the same time, he said, the choice of installments and financing leases that companies provide to customers in order to drive sales has made credit risk control critical.
The report believes that the rapid development of China's construction machinery industry in the past few years has enhanced the revenue base and reduced the difficulty of financing overseas capital markets. A large amount of capital reserves makes the possibility of successful mergers and acquisitions more likely.
The report points out the risks in overseas expansion. In the first 12-18 months or so, the profitability of some companies that implement mergers and acquisitions may fluctuate more than other companies, and for companies that face larger eurozone risk exposures or rely on debt financing for mergers and acquisitions, There is also a high implementation risk.
However, on the other hand, M&A activities can also improve regional diversification and increase R&D capacity. This is a positive factor for the credit status, but it may not be realized for at least two or three years.
China's construction machinery business has accelerated its pace of going out in the past two years. At the beginning of this year, Sany Heavy Industry Union’s Handan Fund jointly acquired 100% of the shares of Putzmeister, Germany, with a total transaction amount of 360 million euros. Guangxi Liugong spent RMB335 million to acquire the engineering machinery division of Polish company HSW.
Xugong Group’s parent company, XCMG Group, later stated that it is actively seeking a larger-scale overseas merger and acquisition.
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