China Business News: Sany Heavy Industry CFO Duan Dawei: Construction machinery is still a sunrise industry

Source: China Business News Reporter: Wang Yongqiang
 
In the process of China's economic "soft landing", the construction machinery industry is also experiencing severe challenges for more than 20 years. After the national "four trillion" economic stimulus plan in 2008, this industry is not only closely related to national infrastructure investment, but also a considerable proportion of products are sold through financial leasing.
In the view of Duan Dawei, CFO of Sany Heavy Industry (hereinafter referred to as "Sany"), China's urbanization and industrialization will continue and deepen for at least 10~15 years, and construction machinery enterprises with independent technical property rights will still be one of the few industries with international competitiveness in China.
 

The long-term overall trend is upward

Reporter: What do you think about the macroeconomic trend? How does Sany view its impact on the company's business development?
Duan Dawei: In general, China's construction machinery industry and national infrastructure construction are relatively highly correlated. Over the past decade, we have also experienced periods of peaks and troughs. But the overall trend is upward, and the overall growth rate is also very fast. This shows two problems, one is that at the macro level, the country's urbanization is still developing. At present, China is entering a critical period of industrialization and urbanization. Industrialization has transformed the agricultural population into an urban population, but the two to three hundred million people who are currently working in the cities are still oscillating back and forth between the cities and the countryside.
Industrialization requires population stability, and to turn the agricultural population into an industrial population, it is necessary to invest heavily in infrastructure and provide public resource services.
On the other hand, our infrastructure itself is in arrears, and the total amount is still insufficient. The country is still in the process of urbanization, which basically needs 10~15 years, to adapt to the basic level of national development, the total amount of infrastructure investment is still very large. Combined with the historical stage that the country is currently in, in fact, we are full of confidence in the medium- and long-term development.
In the international market, China's construction machinery enterprises have also begun to participate in international competition, including Sany and other leading enterprises in the industry, are accelerating their way outward. Many emerging market countries have worse infrastructure than China, such as South Asian countries such as India and South American countries such as Brazil.
China's construction machinery enterprises have approached the level of developed countries, in the international opportunities and China's medium and long-term development, the key is to see how to grasp their own technology, product cost performance is very competitive advantages. How to do it better, instead of being trapped in the environment.
Caterpillar, the world's 5655 construction machinery company, has a very good saying, "It is normal for the economy to have peaks and troughs, but in the next economic cycle, Caterpillar must occupy a better position than the last time." "This is very worthy of reference, thinking and learning, the development of enterprises can not completely rely on the general trend, the external is good, the enterprise is good; The external is not good, the enterprise is not good, this is not the way for the enterprise to operate for a long time.
Reporter: Sany still maintained a slight growth in the first half of the year, but for the company's original target of exceeding 100 billion yuan in sales in 2012, is it a big challenge? As a corporate CFO, how can you maintain growth from a financial management perspective?
Duan Dawei: The overall annual revenue target of 100 billion yuan may have to be postponed for a while, but this goal will definitely be achieved. Caterpillar's sales this year are expected to be close to 70 billion US dollars, equivalent to more than 400 billion yuan. Komatsu, who ranks second in the industry, is also close to $30 billion, indicating that the ceiling of this industry is still very high.
Sany's goal is to learn and catch up with Komatsu and Caterpillar, so 100 billion yuan is not the *5661 goal. To this end, we have also made some adjustments in our business strategy, focusing on improving our management level, and the combination of informatization and industrialization is also an important path for Sany to accelerate the catch-up with the leading enterprises.
 

To prevent risks, we must seize opportunities

Reporter: What changes may be brought about by the internationalization of product sales and the globalization of procurement?
Duan Dawei: In Sany, the proposal and practice of global procurement ideas have been carried out for at least 10~15 years. For example, for some automobile chassis, Sany will use German and Japanese components; The hydraulic parts are from Germany. With global procurement, Sany got rid of the influence of the Chinese market very early; On the other hand, Sany continues to increase independent research and development, research and development of high-end products, aiming at high-end positioning, rather than low cost and low price, focusing on differentiation. Sany profitability is very strong, and the marginal cost is relatively small. It can be said that Sany's differentiated development strategy has gotten rid of the problem of cost very early and is more personalized.
Indeed, international procurement, international influence is key, we have the euro area, the yen area, the dollar area procurement. When the yen rises, purchases are expensive; When the euro falls, the cost is low. Last year's earthquake in Japan affected upstream supply, so we increased our procurement reserves from Europe. Construction machinery industry, unlike the IT industry, the overall price of products and spare parts is relatively stable, and the phased increase in reserves of components will be used up with production and sales, and will not bring backlog or depreciation.
And because in the face of the global supply chain, Sany also pays attention to more international factors, such as exchange rates, political and economic factors. In view of the problems that some emergencies may have an impact on the supply capacity, Sany has flexible response plans and measures.
Reporter: After the acquisition of "Elephant" (Putzmeister, Germany) at the beginning of the year, Sany needs to optimize the allocation of its overseas bases on a global scale. In the process of promoting internationalization, how will the company not only ensure the speed of development, but also reasonably control risks?
Duan Dawei: First of all, there are several points that need to be clarified. The acquisition of this "elephant" does not mean a change in Sany's internationalization strategy.
"Elephant" used to be a concrete enterprise in the world*5656, Sany started from the development of concrete, and today concrete is also the main business. The other party is not only the learning object of Sany, but also the competitor. So once the "elephant" appears in the M&A market, in some cases, Sany is determined to win, and this example is very special.
In the future, Sany's internationalization will still focus on independent development, but it will not exclude or give up mergers and acquisitions, and at the same time, it will be cautious about mergers and acquisitions opportunities, and treat specific situations on a case-by-case basis. After mergers and acquisitions, corporate integration is still relatively good. From the perspective of the overall management team of Sany, whether it is the chairman, CEO, or CFO, everyone looks at the problem dialectically and unifiedly, neither simply looking at the opportunities, nor overemphasizing the risks. In the face of various problems, to consider things more comprehensively, the first thing is to seize the opportunity and prevent risks under this premise. This question is not a difference between different positions, but a question of opinions, attitudes, and thinking methods.
The key to judging and controlling risks is to look at the customer's own business and quality. If you are not a good customer, you are at risk. Paying attention to customers is one thing, and it is more important to pay attention to their qualifications, business, and development, rather than to pursue sales one-sidedly and lower the sales threshold, which is irrational.
The more fundamental method is to do a good job in products and services, there will be better conditions to attract quality customers, so as to naturally reduce the risk as a business operation, finance is only one of the aspects. Some of Sany's ideas have been adhered to for a long time. R&D technology and innovation drive are the basic characteristics.