* Komatsu, Hitachi Construction book Q4 operating losses
* Komatsu sees 53 pct drop in 2009/10 profit
* Hitachi Construction forecasts 45 pct profit fall
* Both firms see double-digit sales growth in China
By Yuko Inoue
TOKYO, April 27 (Reuters) - Japanese construction machinery makers Komatsu (6301.T) and Hitachi Construction (6305.T) warned their profits would roughly halve this financial year after swinging into losses in the latest quarter.
A sudden collapse in demand for construction machinery and mining equipment late last year battered the sector as housing and infrastructure projects stalled and miners cancelled development plans amid global economic turmoil, leading to a buildup of unsold excavators, wheel loaders and dumpster trucks.
The two firms are cutting costs and production to shrink bloated inventory, with a view that global demand will fall by around a fifth in the 2009 financial year, after a contraction of more than 15 percent last year.
"It would be hard to see earnings recover at the two firms until the global economy shows a clear sign of recovery, accompanied by demand growth in the big U.S. and European markets," said Tomomi Yamashita, fund manager at Shinkin Asset Management Co.
Ahead of the earnings, shares of Komatsu fell 0.7 percent, and Hitachi Construction rose 0.9 percent, while the benchmark Nikkei average .N225 edged up 0.2 percent.
Both Komatsu and Hitachi Construction, which compete with Caterpillar Inc (CAT.N) of the United States, expect sales to decline in every region, except China, where they see double-digit sales growth on the back of Beijing's stimulus package.
But the two firms' sales in China account for only about 15 percent of their total sales, although they have a bigger presence in China's hydraulic excavator market than Caterpillar.
Komatsu expects its China sales to increase 11.6 percent to 200 billion yen in the year to end-March, while Hitachi Construction sees a 27 percent increase to 152 billion yen.
"There have been clear signs of recovery in China since around February," Komatsu Chief Financial Officer Kenji Kinoshita told a news conference.
Caterpillar this month reported its first quarterly loss in 17 years, dragged into the red by over $500 million in charges from a wave of recession-triggered layoffs. [ID:nN21451172]
Komatsu forecast its operating profit would fall 53 percent to 72 billion yen in the year to next March, above a market consensus for 62.8 billion yen in a poll of 19 analysts by Thomson Reuters.
The company swung to an operating loss of 48.2 billion yen ($498 million) in January-March from a 91.4 billion yen profit a year earlier.
Hitachi, Japan's No.2 construction machinery maker, predicted a 45 percent fall in profits to 27 billion yen in the current financial year after booking a January-March operating loss of 7.9 billion yen. That loss compared with a year-ago quarterly profit of 37.5 billion yen.
Both firms plan to start increasing production in the second-half by completing inventory adjustments by September.
Hitachi Construction said it would halt major production lines at home in April and May. CFO Nobuhiko Kuwahara said there were signs of recovery in China, Malaysia, Indonesia and Vietnam. (Editing by Ian Geoghegan)