Sales of equipment expected to close year with drop of 19%

Survey shows drops in sales in several sectors of the economy, but also provides optimistic outlook associated with PPPs and economic stimulus measures.

One of the main points presented in the 6th edition of the Sobratema Study of the Brazilian Market for Construction Equipment - released last November - shows that, compared to last year, sales of equipment used in the sector of construction should report a drop of 19% in 2012 in a significant step backward associated with the sharp drop in sales of on-highway trucks which traditionally account for 40% to 50% of the final tally in sales of equipment to the sector of construction.

The study highlights the main results in the equipment sector’s sales for years 2012-2013, in addition to making a projection for the next five years. Furthermore, the study also positions the Brazilian market for construction equipment within the international scenario, associating the behavior of domestic demand to the global crisis and to the new scenarios for the equipment industry.

Providing parameters that are important to the sector’s businesses, government and the media, the study covers the main equipment in the heavy-construction lineup known as the ‘yellow’ line (i.e. earthmoving/grading and compacting equipment), as well as gantries, cranes, portable compressors, aerial work platforms, telehandlers, agricultural tractors and trucks used by construction companies.

According to Afonso Mamede, President of Sobratema, this is the first time that the study also shows the evolution of the equipment market in five other South American countries: Argentina, Chile, Colombia, Peru and Venezuela.

Reduction
According to the study, the decline in truck sales was already expected since the area set records in sales in 2011 with the anticipation of purchases by users due to the introduction of Proconve 7 (Program for Control of Air Pollution from Motor Vehicles - comparable to Euro 5) in early 2012.

Specifically regarding sales of heavy construction equipment, referred to as the ‘yellow’ line, the study shows that there should be a reduction of 3% in the year compared to 2011. However, the national result for Brazil is better than what we see abroad where the average decline was 9%.

In 2011, the segment reached a record high with over 30,500 units of equipment sold. For this year, the expectation is that the number of machines sold will reach approximately 29,700. Therefore, according to the president of Sobratema, despite the reduction in the number of units sold in the country, the performance of the heavy construction equipment line can be considered significant.

This scenario is the result of a reduction in the pace of infrastructure works, revealing further declines in sales of motor graders (minus 27%) and roller compactors (minus 30%) which are categories of equipment that are used in highway works. According to Rubens Sawaya - Professor of the Department of Economics at the University of São Paulo (USP), the context is explained by the lack of investment in the country’s infrastructure. “The problem is not associated with the global crisis alone,” he says.

As regards imports, which had accelerated in the past year, there was a decrease in pace in 2012 and a drop of 14% in the comparison between January to August of this year and the same period in 2011.

Brian Nicholson, consultant to Sobratema, concludes that certain specific aspects have prevented growth in 2012, especially: the lack of well-defined projects, lack of proper planning and the pending definition of the race for government (elections), as well as the halt in the construction of works for urban mobility, which were the great hope to bolster the market in Brazil, especially the market for construction.

Projections
Despite these negative results, the Sobratema study shows that as of August sales of construction equipment manufactured in Brazil grew more rapidly than imports, specifically with the establishment of a special policy of credit for the acquisition of machines under the Program for Sustaining of Investment (PSI) managed by the Brazil’s National Development Bank (BNDES - Banco Nacional do Desenvolvimento).

These results foretell an improvement in the last few months of 2012, projecting good prospects for 2013 when growth could reach 13%.

For 2013, incidentally, the result of the study shows that, according to projections made by various manufacturers, growth in the sales of heavy construction “yellow line” equipment will be between 5% and 20%. Considering all the categories of equipment, the projections indicate a rise of 11.8%, for a total of 76,000 machines sold - indicating significant growth in the segments of infrastructure and building construction.

These positive expectations among leaders in the construction sector are mainly due to the recent announcement by Brazil’s federal government of measures to stimulate the economy, including the program for concessions of highways, railways and other infrastructure projects to private enterprise - some of which performed under public-private partnership agreements. Such perspectives evidently depend on the combination of various factors such as the overall economic situation, foreign exchange rate policy, rates of interest on loans and progress in infrastructure projects.

Besides the results for 2012-2013, the Sobratema Study of the Brazilian Market for Construction Equipment provides projections for sales of equipment until 2017, with the prospect of 10.42% average annual growth. According to the study, until 2014 the rate of growth will be higher due to the resumption of work that is included in the government’s Program for Acceleration of Growth (PAC), and the scheduled concessions. However, as of 2014 (a period marked by presidential elections) it is estimated that average growth will drop to 8% until 2017.

Players
According to Marco Borba, Sales and Marketing Director at New Holland, the company’s expectation for growth in the Brazilian market for construction equipment in 2013 is positive, “due to the need for various infrastructure works that were scheduled for 2012 and that ended up being postponed to 2013”.

In the opinion of Paulo Lancerotti - Managing Director of the BMC company, Brazil needs to grow at any cost and, to achieve this, the company has been investing continuously in the expansion of its operations - “without great delusions, but with a positive attitude and confidence in the country”.

Sobratema Guide covers 41% more machines
On November 13th Sobratema launched the ‘Sobratema Guide to Equipment 2012-2014’ in the city of São Paulo. The new edition brings technical specifications for 1,674 models of domestic and imported equipment, manufactured by 108 different companies and divided into 35 families of equipment.

Compared to the previous edition, there was an increase of 41% in the total number of machines covered plus growth of 20% in the number of brands, while equipment families now also bring new additions, such as tower cranes, shotcrete pumps and dumpers.

The Guide to Equipment is divided into two volumes: the first devoted to earthmoving and grading equipment, and the second to machines for concreting, paving and handling of cargo. To enhance accessibility (in addition to the print edition) the Guide is now also available for tablets and smartphones, and can also be found on digital media and in the Sobratema web portal for members of the association. One more thing that’s new as of this edition is that the Guide will now be published biennially.

With the support of Caterpillar, BMC, John Deere and New Holland, the event was attended by businesspeople, journalists and professionals in the area of construction.

Cranes
According to Sobratema consultant Norwil Veloso, the next edition of the Sobratema Guide to Equipment will bring an update on the area of cargo handling covering, specifically, models of cranes for up to 70 tons.