JCB, the maker of yellow diggers found on building sites around the world, piled up a more than one-third increase in core profits last year despite a dwindling global market for construction equipment.
The privately owned UK company said its earnings were £287m before interest, tax, depreciation and amortisation in 2016, up 34 per cent on the year before, while revenue rose nearly 12 per cent to £2.62bn.
Graeme Macdonald, chief executive, put the strong financial results partly down to JCB’s performance in India, the brand’s single biggest country by sales, as well as a return to growth in Russia.
“The [global] market was actually down slightly [by] 1 per cent, so we grew our market share,” he said.
Manufacturers of heavy-duty machinery such as bulldozers and dump trucks have struggled with a protracted downturn in demand for their gear in recent years as construction activity in wealthy countries has faltered and the pace of economic growth in many developing nations cooled.
The malaise has weighed on profits at companies such as Caterpillar and Japan’s Komatsu, leading to job cuts and factory closures.
A big factor is the building slowdown in China, where sales of construction machines have plummeted since touching a peak in 2011. Another is the reduced level of investments in energy projects due to lower oil prices.
However, there are growing signs of a rebound. The consultancy Off-Highway Research has forecast a 9 per cent jump in unit sales of construction equipment in 2017.
“The start of this year is showing fairly robust market growth overall. We’re still seeing further declines in places like Brazil and the Middle East, but nearly every [other] market in the world is showing some growth,” said Mr Macdonald.
A driving force of the anticipated growth this year is the replacement of ageing machines bought six to seven years ago that are now coming to the end of their working lives.
Lord Bamford, JCB chairman, said: “The UK market has got off to a particularly buoyant start this year, with housebuilding driving demand . . . In addition, there are some key infrastructure projects such as HS2 and Hinkley Point and Thames Tideway, which are in the early stages of implementation”.
JCB enjoyed a “small benefit” from the weaker pound, said Mr Macdonald, although he added that the company buys raw materials and components in other currencies.