Caixin
Feb 08, 2021 08:19 PM
BUSINESS & TECH

Machinery-Maker Raises Billions as Investors Bet on Infrastructure Demand

Nearly half of the funds raised will be used by Zoomlion for an ongoing capacity expansion project expected to produce 33,000 excavators per year starting in 2021. Photo: VCG
Nearly half of the funds raised will be used by Zoomlion for an ongoing capacity expansion project expected to produce 33,000 excavators per year starting in 2021. Photo: VCG

Chinese construction equipment giant Zoomlion Heavy Industry Science and Technology Co. Ltd. raised 5.19 billion yuan ($804 million) through a private placement by major domestic and international investors betting on a rising infrastructure boom, sending its shares up 10%.

Zoomlion, China’s third largest maker of earth movers and other heavy construction gear, issued 511 million new shares at 10.17 yuan apiece to eight domestic and overseas investors, according to a statement filed to the Shenzhen Stock Exchange on Sunday.

Under the new funding plan, JP Morgan took 14.4% of the stock issuance, while UBS and Morgan Stanley and Co. International PLC each bought around 8%.

Sales of construction equipment in China boomed during 2020 as the country’s economy began to rebound from the pandemic lockdown earlier in the year, with excavator sales enjoying a 39% annual increase to 328,000 units, according to the China Construction Machinery Association.

A report by Soochow Securities on Sunday expects the robust demand for excavators to continue this year, with a yearly sales growth of up to 15%.

Capitalizing on rising demand, Zoomlion estimated profits last year jumped 71.6% over 2019 to 7.5 billion yuan. BOC International (China) Co. Ltd. estimated Zoomlion made up 2% of the digging equipment market, selling more than 7,000 units.

“The A-share financing … fully demonstrates investors’ confidence in Zoomlion’s future development and their firm recognition of the company’s investment value,” the Changsha-based company said via social media Friday.

Zoomlion’s share surged 10% higher to its daily limit on Monday, triggering a trading suspension. The new shares will begin circulating on the Shenzhen market on Wednesday and are subject to a six-month lock-up period before investors can choose to sell.

Nearly half of the funds raised will be used by Zoomlion for an ongoing capacity expansion project expected to produce 33,000 excavators per year starting in 2021, the company said in a statement. Another 30% will be allocated to two smart manufacturing projects to build key components and mixers, while the remainder will be earmarked to replenish the company’s cash flow.

In addition, Zoomlion, which is also listed in Hong Kong, raised a total of HK$1.14 billion ($147,000) on Feb. 3 through a separate private placement to purchase key components, explore overseas markets and replenish its cash flow.

Contact reporter Lu Yutong (yutonglu@caixin.com)

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