POTSDAM, Germany (Reuters) - China, the world’s biggest manufacturer of construction machinery, is facing a number of problems in sourcing components for products produced by UK-based JCB, such as which weight they contain.
FILE PHOTO: A logo of JCB is seen at the company's technical centre in Potters Bar, Britain, February 24, 2016. REUTERS/Dylan Martinez/File Photo
China has no spare parts for mining equipment, forcing JCB (JCB.L) to make adjustments in planning for its factories based in Britain and Asia.
“It’s really going to impact production for about the next six months to a year,” Chief Executive Anthony Bamford told Reuters.
“We’re having to make adjustments to our factories in the next 12 months. We’re making the shift of our factories to south-east Asia so that we can make more to build a combination of diggers, earthmovers and other (dehumidifiers).”
Production of JCB’s Dutco and Purdy machines - which in some cases weigh almost four tonnes - are affected by the shortage of parts.
In addition, alternative suppliers of air compressors, which distribute moisture from the head of machinery, have not been able to meet demands due to the Chinese government’s drive to clear the city of Beijing of unclean air and to fulfill output targets at private smelters.
The effect of these issues were clear from the company’s preliminary sales and earnings report on Wednesday, which revealed a fall in revenue at the group’s mining equipment division.
JCB, which competes with Caterpillar (CAT.N) and Deere & Co (DE.N), which was based in Wuxi before moving to Hampshire, Britain, had warned on industrial production in China at its last trading update, in November.
The company had also expressed concern about the prospects for a recovery in the mining market in the short-term, due to a gradual but sustained slowdown in Chinese demand for commodities such as iron ore.
JCB’s results for the second half of 2018 are due to be published on March 6.