TOKYO, July 28 (Reuters) - Japan's Komatsu Ltd, the world's No. 2 construction machinery maker, said its April-June profit plunged to one-tenth the level of a year ago as the global downturn hit construction and mining demand.
The sector has been under pressure since late last year as stalled housing and infrastructure projects and the cancellation of mining field development work hurt sales and led to a buildup of unsold excavators, wheel loaders and dump trucks.
Komatsu, which ranks behind U.S. rival Caterpillar Inc, maintained its full-year earnings forecast, but it cut its global demand outlook, citing weakness in Japan and the United States.
Komatsu and local rival Hitachi Construction tumbled into the red in the January-March quarter amid a sudden collapse in demand. Both warned in April that their profits would roughly halve this financial year.
"The results were not so bad, apparently due to the effects of cost cuts. We may now say that Komatsu's earnings bottomed out in the January-March quarter," said Hidehiko Hoshino, analyst at UBS Securities.
"Looking ahead, however, the lower demand outlook leaves us wonder whether the company will downgrade full-year earnings forecasts later or expand cost cuts," he said.
Komatsu said on Tuesday its revenues nearly halved in the first quarter, though it mitigated some of the pressure from the revenue plunge on its profits by rationalising production and cutting fixed costs.
For the first quarter of the year to March 2010, the company reported an operating profit of 8.27 billion yen, down 90.1 percent from the same period a year ago.
Demand for construction equipment has been falling more sharply than expected in Japan and the United States, while the outlook remains cloudy for Europe and the Middle East, with Chinese demand only showing patchy signs of recovery, the company said.
Komatsu now expects global demand for its main construction machinery products to drop 30-35 percent in the full year to March 2010 compared with a year ago, more sharply than its original forecast made in April for a 26 percent drop.
Even so, it kept its operating profit forecast for the full business year at 72 billion yen.
That exceeded a consensus forecast of 57.5 billion yen in a poll of 23 analysts by Thomson Reuters.
Hitachi Construction on Monday cut its full-year operating profit forecast to 24 billion yen from 27 billion yen. However, that still beat a consensus forecast of 13 billion yen in a poll of 12 analysts by Thomson Reuters.
U.S. rival Caterpillar reported stronger-than-expected earnings last week and raised its full-year forecast due to factors including a lower-than-expected tax rate and favourable foreign currency fluctuations.
In the last three months, Komatsu shares gained 27 percent, while the benchmark Nikkei edged up 15 percent. (Reporting by Yumiko Nishitani; Editing by Hugh Lawson)