The top three remain in a slump, but Zoomlion's cash flow turns positive first

　　As can be seen below, compared with the same period in 2012, the semi-annual reports of the top three show significant declines in operating revenue and net profit; accounts receivable, compared with the end of 2012, are still increasing substantially; cash flow all increased, but Sany Heavy Industry's cash flow remains negative.

　　Regarding the reasons for the performance decline, the reasons given by the top three are basically consistent: the domestic macroeconomic situation is poor, growth is slowing, fixed asset investment growth is declining, and market demand for construction machinery is weak.

　　XCMG even stated in its board report that this is "the most severe situation the industry has seen in a decade."

　　However, in addition to the overall economic environment factors, the three companies also have reasons for "active contraction."

　　For example, Zoomlion stated in its board report that the decline in first-half performance was due to its active efforts to "control operational risks and improve the quality of sales contracts."

　　XCMG stated that it pursues business philosophies such as "paying more attention to the quality and efficiency of economic growth," and among Sany Heavy Industry's twelve-character business focus, the first is also "risk control."

　　Industry-wide strict risk control, yet accounts receivable remain high

　　One of the results of "risk control" and improving operational "quality" is also reflected in the improvement of cash flow, among which Zoomlion's cash flow reached 1.157 billion yuan, relatively ample; while Sany Heavy Industry's remained negative at -1.397 billion yuan.

　　The continued increase in accounts receivable seems to be a paradox of "risk control"; and the accounts receivable of all three exceeded operating revenue. Moreover, their proportions of total assets are all significant: Sany Heavy Industry at 33%; Zoomlion at 27%; XCMG at 42%.

　　Some commentators therefore believe that "all three companies have adopted overly lenient bad debt provision standards" and that "asset quality is deteriorating." This has some merit, but the "seasonal pattern" of sales collections should be considered, because the fourth quarter is often the peak for debt collection.

　　Sany Heavy Industry specifically emphasized that in the first half of 2013, its "growth in accounts receivable narrowed significantly compared with the same period last year"—in the first half of 2012, its accounts receivable surged 102.78% compared with the end of 2011; while in the first half of 2013, the increase was 55.3%.

　　For Zoomlion, in the same period of 2012, the increase in accounts receivable was 64.50%, also far higher than the 29.9% in the first half of 2013.

　　Gross profit margins mixed, Zoomlion achieves "quality growth"

　　The gross profit margin situation is also quite critical. Although the top three had mixed changes, the magnitude was small, and overall they maintained a relatively high level, which also ensured that the three companies had good profitability.

　　In summary, among the top three in construction machinery, Zoomlion's operational quality performed the best in the first half of 2013. Although its operating revenue was 9.52% less than Sany Heavy Industry's, its net profit was 9.62% higher. Its accounts receivable as a proportion of total assets was also relatively the lowest; and its cash flow led its peers by a considerable margin.

　　In addition, in the first half of 2013, Zoomlion was also the one with the most "negative news" among the top three. The company's ability to deliver such an interim report can, to some extent, be considered the "best answer." After all, ultimately everything must be judged by "performance," especially in an industry like construction machinery that should be far from the public opinion arena.