Komatsu confident of a comeback despite cuts

Feb 8 2010 by Chris Knox, The Journal

A COMPANY which makes hydraulic excavators is confident that it can stage a turnaround after axing almost 500 staff and seeing its pre-tax profits plummet from £37m to £3.4m.

Bosses at the Komatsu UK site in Birtley, Gateshead, were forced to make the cuts over a 22-month period after European demand for its medium-sized excavators collapsed in the face of the economic downturn.

In the year ending March 31, 2009, the firm sold 1,572 of the distinctive yellow earth-moving machines achieving revenues of £150m. That was well down on the previous year’s 4,830 unit sales and revenues of £379m.

The plant has since cut back its manufacturing output and has introduced part time working hours for its remaining 300 workers for the rest of February and March.

Komatsu which was established in Birtley in 1985, has also struggled to keep up with intensified price competition as manufacturers and distributors seek to dispose of large amounts of stock.

The short-term outlook for the business is difficult with bosses expecting a further drop in turnover by the end of March 2010 as a result of further de-stocking and a lack of investment in large scale private construction and public infrastructure projects.

Peter Howe, managing director of Komatsu UK, said: “Trading conditions have been extremely difficult over the last two years as a result of the collapse of our markets in the UK and mainland Europe.

“Sales in Eastern Europe have been particularly hit as the global downturn has hit hard in that part of the world.

“As a result we have had to make some pretty tough decisions. However, I believe that this was the right step to take in order to help get the business back on a more stable footing.”