Jan. 23 (Bloomberg) — Komatsu Ltd., the world’s second- biggest maker of earthmoving equipment, cut its profit forecast 42 percent, citing slowing demand from emerging markets.

Net income will probably be 110 billion yen ($1.2 billion) in the year ending March 31, compared with its Oct. 29 outlook of 190 billion yen, the Tokyo-based company said in a statement today. That’s a 47 percent drop from last year’s results.

The effects of the financial crisis have spread to the global construction market, triggering sudden declines in sales in China and other emerging markets, where Komatsu was previously expecting growth would be strong enough to offset declines in the U.S., Europe and Japan. Chief Executive Officer Kunio Noji, 62, is freezing spending on Asian expansion, cutting contract jobs and slashing output to adjust inventories.

The sales forecast was cut 15 percent to 2.03 trillion yen from the previous estimate of 2.38 trillion yen, the company said. Operating profit, or sales minus the cost of goods sold and administrative expenses, will be 200 billion yen instead of the forecast 300 billion yen.

Komatsu based its full-year forecasts on an average exchange rate of 90 yen to the dollar, and 120 yen to the euro. The company had used 95 yen to the dollar in its October forecast.

Industrywide sales in China are likely to have fallen between 30 percent and 50 percent in December from a year earlier after a 50 percent drop in November and 30 percent decline in October, Noji said on Dec. 19.

Link to original release

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