US Housing Market Recovery... Will Doosan Bobcat Smile in Q3 Earnings?

[Asia Economy Reporter Ki-min Lee] The U.S. housing market, which was directly impacted by the novel coronavirus disease (COVID-19), showed signs of recovery in the third quarter, raising expectations for improved performance among domestic small construction equipment companies operating in the U.S.

According to the construction equipment industry on the 29th, the U.S. construction market, which had been contracted due to the spread of COVID-19, has been recovering to last year's levels around June and July.

Financial institutions and industry experts analyze that this is because the acceleration of untact (non-face-to-face) due to COVID-19, combined with liquidity secured by interest rate cuts, has shifted the U.S. real estate market trend from urban housing rentals to suburban housing sales and construction.

According to the National Association of Home Builders (NAHB), the U.S. Housing Market Index in July this year rose 14 points from 58 in June to 72. The NAHB Housing Market Index is a key indicator used by U.S. home builders to evaluate the housing construction market, with values above 50 indicating a positive market sentiment. The index fell to 30 in April, when the spread of COVID-19 began to intensify in the U.S., and recorded 38 in May.

Additionally, the 30-year fixed mortgage average rate announced by Freddie Mac, a U.S. federal government-sponsored mortgage institution, dropped to 2.88%, marking the lowest level since mortgage rate statistics began in 1971.

With the recovery of the U.S. housing construction market, the performance of small construction equipment companies is expected to improve compared to the first and second quarters. While large-scale infrastructure construction mainly demands large equipment, small-sized equipment is primarily used in small-scale construction sites such as housing and urban workspaces with limited space.

Among domestic small construction equipment companies benefiting the most from the housing construction market recovery is Doosan Bobcat. Approximately 70% of Doosan Bobcat's total sales are generated in the North American region. Doosan Bobcat's sales and operating profit in the second quarter declined by 19.1% and 59.1% year-on-year, recording 963.8 billion KRW and 64.3 billion KRW, respectively. Securities firms had predicted that Doosan Bobcat's sales would decrease by more than 30%, but sales of compact tractors and mini track loaders (MTL), small equipment for landscaping and agriculture (GME), nearly doubled, helping the company to hold its ground.

A Doosan Bobcat official stated, "With recently released housing indicators rebounding, expectations for the North American construction market are high," adding, "In the second half of the year, we expect higher growth compared to the first half due to the rebound of existing products and the effect of new product launches."

This content was produced with the assistance of AI translation services.