HD Construction Equipment (267270.KS) lifted its core earnings in the third quarter on growth in its engine business and improved profitability in construction equipment. Net profit plunged, however, after the company booked large foreign exchange losses.
HD Construction Equipment reported consolidated third-quarter revenue of 2.09 trillion won ($1.46 billion) and operating profit of 157.7 billion won ($110 million), the company said in a regulatory filing on the 26th. Revenue rose 6.1% and operating profit climbed 23.9% from a year earlier. "Higher sales of generator and industrial engines drove the revenue growth," the company said. "Operating profit improved sharply as better profitability in the construction equipment business was coupled with strong engine sales."
Foreign exchange results, meanwhile, swung to a loss of 146 billion won from a gain of 35.4 billion won a year earlier, pushing pretax income to a loss of 4 billion won. Net profit came to just 1.8 billion won, down 98.2% from a year earlier and 99.0% from the previous quarter.
By business, the construction equipment division posted revenue of 1.62 trillion won and operating profit of 109.9 billion won. Its operating margin rose to 6.8% from 5.5% in the third quarter of last year. The Middle East and Africa remained weak amid continued geopolitical uncertainty, but sales of mid- and large-size machines held steady elsewhere on infrastructure and mining investment demand, while a stronger aftermarket business boosted higher-margin parts sales.
By region, revenue from the Commonwealth of Independent States, Southeast Asia and Oceania grew 30.2% from a year earlier. Sales of ultra-large construction machinery increased in the CIS, while small machines sold more in Australia and New Zealand. Revenue in India jumped 26.6% on government-led infrastructure investment, and Latin America grew 26.8% as demand for mining equipment picked up. Revenue from developed markets including North America and Europe rose 4%. Sales fell in Europe amid a housing construction downturn, but that was offset by higher sales of next-generation models and truck products in North America.
The engine division posted revenue of 394 billion won and operating profit of 55.2 billion won. Sales of generator engines rose on expanding data center power demand, and industrial engine sales also increased as the global construction equipment market recovered.
HD Construction Equipment plans to produce megawatt-class diesel engines for generators from next year at its new Gunsan plant, which is set for completion at the end of this month. The company will also expand its large gas engine lines at its Incheon plant to meet surging demand for data center generator engines, centered on North America.
"We will strengthen our next-generation models and locally tailored construction equipment lineup, while expanding our push into the data center generator engine market based on the new Gunsan plant to sustain growth," an HD Construction Equipment official said.