Hitachi Construction Machinery Co. needs three more months to shed excess inventory after demand fell more than anticipated.

"We have said we aimed to complete inventory adjustments in June with adjustments in some regions possibly dragging out until September," Chief Executive Officer Michijiro Kikawa said. "Now, it's more likely that it will take until September for adjustments in all our markets."

Stockpiles of excavators totaled 8,200 units as of the end of April, exceeding the company's target of 7,800, Kikawa said. The company's largest factory in Tsuchiura, Ibaraki Prefecture, has reduced operations of its assembly line to five days a month from the usual 20 days.

Hitachi Construction is the world's largest maker of giant excavators.

Demand in Europe, Japan and the United States plummeted after the financial crisis, and the expected benefits from China's 4 trillion yuan ($586 billion) stimulus plan aren't coming as quickly as the company expected, Kikawa said.

About 1,000 workers at Hitachi Construction's Tsuchiura factory will stay home for two extra days a week until the end of September to allow the company to restore production to normal levels.

"Demand from the entire market is severe," Kikawa, 61, said. "Even demand in China is not as strong as I expected."

Hitachi Construction, which competes with Komatsu Ltd. and U.S.-based Caterpillar Inc., will need to cut production further to meet a target set in April to reduce inventory of excavators to 4,800 units by the end of September, the CEO said. In some cases, the company is disassembling unsold machines and remodeling them with new parts to reduce inventory, Kikawa said.

Inventory cutbacks by Hitachi Construction and rival Komatsu "are being delayed as global demand for construction machinery is weaker than forecast by the market and the companies," said Shinji Kuroda, a Tokyo-based analyst at Credit Suisse Group. "There is a risk that earnings will fall short of their estimates."

Japan's shipments of construction machinery including excavators, tractors and cranes tumbled by a record 65 percent in April, led by declines in Europe and North America, the Japan Construction Equipment Manufacturers Association said.

Industry demand for excavators will probably fall 20 percent to 133,700 units for the next year, according to an April 27 estimate by Hitachi Construction. The excavator market will contract 36 percent in the first half before beginning a recovery with a 6 percent gain in the second half, Kikawa said.

Hitachi Construction expects to break even on an operating basis in the first half, Kikawa said."It won't be easy, but somehow we'll be able to meet it," he said.

The company's earnings prospects have been helped by the weakening yen, which boosts the value of overseas earnings when profit is repatriated. The company is also forecasting it will swing to a net loss of ¥12 billion for the six-month period.