Doosan Bobcat and HD Construction Equipment, the representative corporations in Korea's construction machinery market, showed diverging second-quarter results depending on the markets they focused on. Doosan Bobcat, which has a large share in the North American market, posted operating profit that fell short of expectations due to a recent slowdown in the U.S. dwellings market, while HD Construction Equipment, which has targeted emerging markets such as Africa and Latin America, saw a marked improvement in results.
According to the Financial Supervisory Service's electronic disclosure on the 7th, Doosan Bobcat's operating profit in the second quarter of this year was 291.7 billion won, a sharp increase of 42.9% from the same period a year earlier. However, excluding one-off revenue from U.S. tariff refunds, operating profit was 163.1 billion won, down 21% on-year.
Doosan Bobcat is a corporations launched after Doosan Group acquired Bobcat, a North American construction equipment company, in 2007. The share of sales by region is also highest in North America. According to last year's Doosan Bobcat business report, North America accounted for 73% of sales by region, the highest share, Europe and the Middle East and Africa (EMA) accounted for 15%, and Asia and South America and Oceania (ASE) accounted for 11%.
The majority of the EMA market institutional sector is Europe. Doosan Bobcat has nine subsidiaries in Europe, including the Czech Republic and the United Kingdom, in charge of construction machinery sales. In contrast, there are no factories or subsidiaries in the Middle East and Africa.
The reason Doosan Bobcat focuses on developed markets is that its main products are small construction machines such as mini excavators. Small construction machinery is in greater demand in developed countries, where dwellings construction accounts for a higher share, than in emerging countries carrying out large-scale infrastructure projects.
A Doosan Bobcat official said, "Small heavy equipment tends to sell well in regions with high labor costs," and noted, "Because of the equipment's characteristics, the market is formed mainly in developed countries."
The United States, Doosan Bobcat's largest target market, is facing sluggish construction activity due to a recent slowdown in the dwellings market. The Housing Market Index (HMI) of the National Association of Home Builders (NAHB), announced in the previous month, was 34, staying below 40 for the 15th straight month. When the NAHB index is above 50, it means the share of those recognizing construction conditions as favorable is higher than those viewing them as sluggish. Conversely, below 50 means the share viewing conditions as sluggish is higher.
Unlike Doosan Bobcat, HD Construction Equipment, which has evenly targeted overseas markets centered on emerging economies, saw improved results. Excluding tariff refunds (6.7 billion won), HD Construction Equipment's second-quarter operating profit was 242.2 billion won, up 54% from a year earlier.
An HD Construction Equipment official said, "Before acquiring Doosan Infracore in 2021, China had the largest share, but after the merger we expanded into developed markets such as North America and Europe, and we are now widening our stride into Africa and Latin America, where resource development is active, and into India, a massive market."
By region, sales in Africa surged 51% on-year as more countries, including Ethiopia, launched gold mine development projects. Sales in Latin America also rose 29% from the same period last year due to increased mining investment.
In a second-quarter earnings conference call held on the 29th of the previous month, HD Construction Equipment explained, "In the first half, a growth trend emerged in the Middle East, Africa and Latin America, centered on resource-rich countries," and added, "In the second half, demand for mining and government-led infrastructure investment is expected to drive construction machinery market growth."
Doosan Bobcat is also ramping up investment to target emerging markets. Entering the Indian market in 2019, Doosan Bobcat installed a new excavator production building last year at its 85,000-square-meter plant in Chennai, India. Doosan Bobcat plans to use this plant not only to target the Indian market but also as an export hub.
HD Construction Equipment said it will continue to target emerging markets while also expanding new businesses such as the engine institutional sector. An HD Construction Equipment official said, "Starting in the second half of this year, we will begin mass production of defense engines at the Gunsan plant, and from next year we plan to start mass production of 37-liter (L) class ultra-large engines."