XUZHOU, Jiangsu – China’s XCMG Construction Machinery Co. is close to investing in Germany’s private concrete machinery maker Schwing, reported China Business News, citing foreign media and persons close to the two companies.
The two sides are expected to sign an acquisition contract in one or two weeks. An insider close to the company said the exact equities to be acquired are uncertain, and both sides have declined to comment on the issue.
XCMG, China’s largest equipment manufacturer and the seventh largest worldwide, is busy consolidating its position in China’s concrete machinery industry as Sany Heavy Industry Co., Ltd. and Zoomlion Heavy Industry Science and Technology Development Co., Ltd., two of its rivals are dominating the industry via merging overseas companies. Zoomline purchased a 60 percent stake of the Italian concrete manufacturer CIFA by ¥1.6 billion ($254 million) in 2008. And Sany acquired Schwing peer Putzmeister in a €360 million ($475 million) deal in January.
China’s concrete machinery sector is predicted to rank atop in market size with ¥105.3 billion in the engineering machinery sector in 2011, accounting for about one-fifth of total income made by engineering machinery sector.
Therein, Sany is predicted to make over ¥32 billion sales incomes, and Zoomlion’s operating revenues in the sector reached ¥21.21 billion in. In the first half of 2011, XCMG achieved only ¥1.15 billion in income in concrete machinery, which accounted for barely 5.88 percent of its total operating revenues. What is more, profit margin of 30 percent in concrete machinery sector is much higher than the average level of the construction machinery sector.
Schwing posted sales of €1 billion in 2008 and the number decreased to around €400 million in 2010. Although the company realized profits last year, it still struggles in finding a way out.
“We hope that with Chinese help, new investments will be possible,” a person close to Schwing said.