Zoomlion sets focus on 'strategic' M&A targets

A workshop of Zoomlion Heavy Industry Science & Technology Development Co Ltd in Changsha, capital of Hunan province. The construction equipment maker will explore strategic merger and acquisition opportunities to boost exports. [Photo / Xinhua]

Expansion intooverseas markets, diversification also feature in long-term plans

Construction equipment maker Zoomlion Heavy Industry Science & Technology Development Co Ltd said on Tuesday that it will explore strategic merger and acquisition opportunities, rather than large purchases, to boost its exports amid an industry downturn.

"We are open to various acquisition opportunities to complement our existing product lines, but large deals are not under consideration at the moment," said Zhang Jianjun, a senior official at the company.

He made the remarks on the sidelines of Bauma China 2014, a trade fair for construction machinery in Shanghai.

Zhang said the company expects that overseas operations will increase to 30 to 40 percent of its business in the next three to five years, against 10 percent this year.

Hit hard by an industry downturn in the past three years, Zoomlion is shifting its emphasis to overseas markets to offset domestic overcapacity.

The Shenzhen-listed company has struck several deals outside China to expand its product portfolio. Those include taking a stake in Raxtar, a Dutch hoist maker, and the acquisition of Germany's leading dry mortar producer, M-TEC.

But the main motive for further purchases will be global sales networks, Zhang said.

Seeking to profit from the government's "One Belt One Road" initiative, Zoomlion has a long-term strategy of global expansion in regions such as Southeast Asia, the Middle East, Africa and South America. The initiative refers to President Xi Jinping's proposal to build the Silk Road Economic Belt on the Eurasian continent and a Maritime Silk Road connecting China with Southeast Asia.

Sun Changjun, a spokesman for the company, said that it will follow large domestic construction companies abroad to meet their demand around the world.

The firm, based in Changsha, the capital of Hunan province, has also explored deals beyond its core business of construction machinery, including the acquisition of a stake in farm equipment producer Chery Heavy Industry Co Ltd.

Chinese machinery producers have been fighting shrinking domestic demand for machines and tools to construct high-rise buildings, roads and other infrastructure projects. This demand has waned amid a weak economy and sluggish property market.

Zoomlion's first-half net profit was flat at about 1 billion yuan ($163 million).

China's machinery industry will continue to recover in the first half of 2015, given an improved economic outlook and potential growth in the real estate market, according to Zoomlion.

Sun warned of the potential risks of high inventories, low utilization rates and high financing cost, all of which have burdened the industry.

"The golden years of high growth seen in 2009 and 2010 will never come back," he said. "In future, strong companies will become stronger, and small and weak ones will be left out in the market."