Komatsu Ltd S/Adr

This is Horikoshi CFO. I present the business results for the first quarter FY2023. Page 4 shows the highlights of business results for the first quarter FY2023. Exchange rates were 136.4 yen per dollar, 147.7 yen to euro, and 89.9 yen to an Australian dollar, and yen depreciated against US dollar and euro and appreciated against Australian dollar year-on-year. Consolidated net sales increased by 17.8% year-on-year to 899.6 billion yen. Operating profit increased 57.1% year-on-year to 147 billion yen, and operating profit ratio increased 4.1 point to 16.3%. Both of net sales and operating profit increased due to increased volume, improved selling prices, and positive effects of foreign exchange rates. Net sales were the record high for the first quarter, and operating profit and operating profit ratio marked the quarterly record high, including those for the first quarter. Other income decreased 17.8 billion yen year-on-year due to the foreign exchange rate and interest payment. Net income attributable to Komatsu Limited increased 31.0% to 105.4 billion yen, and it was a quarterly record high, including one for the first quarter. Page 5 shows the sales and profit by segment. Construction, mining, and utility equipment sales increased 18.4% year-on-year to 846.9 billion yen, and its segment profit increased 66.1% to 138.4 billion yen, and segment profit ratio improved 4.7 points to 16.3%. Retail finance sales increased 14.8% year-on-year to 22.9 billion yen and its segment profit decreased 17.7% to 6.3 billion yen. Industrial machinery and other sales increased 17.1% a year to 40.5 billion yen, and its segment profit decreased 45.4% to 1.9 billion yen. I will explain the causes of difference by segment later. Page 6 shows the sales of construction, mining, and utility equipment by region. Sales of construction, mining, and utility equipment increased 18.0% year-on-year to 842.2 billion yen. Sales increased in all regions, including North America, Latin America, and Oceania, except China and CIS. The ratio of sales in strategic markets was 54%, and in traditional markets it was 46%.

Phase 7 shows the causes of difference in sales and segment profit in the construction, mining, and utility equipment segment. Sales increased by 131.5 billion yen year-on-year due to the increase in volume, improved selling prices, and the positive effects of foreign exchange rates. Segment profit increased by 55.1 billion yen year-on-year as higher procurement prices and fixed costs were absorbed by increased product volume, improved selling prices, and the positive impact of foreign exchange rates. Segment profit ratio was 16.3% up 4.7 points from the same period last year. Page 8 shows the status of retail finance. Assets and new contracts went up both from previous fiscal year-end and year-over-year mainly due to the foreign exchange rate. Revenues increased by 3 billion yen year-on-year due to the impact of foreign exchange as well as higher interest rates. Segment profit decreased by 1.4 billion yen year-on-year mainly due to the absence of a gain on reversal of allowance for doubtful accounts recorded in North America in the previous year. Page 9 shows sales and segment profit of the industrial machinery and others segment. Sales increased 17.1% from the previous year to 40.5 billion yen. Segment profit declined by 45.4% year-over-year to 1.9 billion yen. Segment profit margin declined 5.4 percentage points to 4.8%. Sales to the automotive industry increased for large presses and transfer machines, but sales to the semiconductor industry decreased due to a decline in global demand for semiconductors and a decrease in maintenance sales at XML Lasers, a high-margin business. As a result, sales increased but profit declined. On page 10, I will explain the consolidated balance sheet. Total assets were 5,298.1 billion yen, up 422.2 billion yen from the end of the previous fiscal year, partly due to the weaker yen. Inventories increased by 167.4 billion yen from the end of the previous fiscal year, mainly due to the impact of yen depreciation as well as the response to increased demand for mining equipment. Shareholders' equity ratio decreased by 0.8 percentage points from the end of the previous fiscal year to 51.3%. Net equity ratio was 0.32. That's all from me.

Next, Mr. Hishinuma will explain the projection of FY2023. I am Hishinuma, General Manager of Business Coordination Department. I will explain the projection of FY2023 business results and the major market condition. Page 12 shows the outline of projection for FY2023. On-air projection for FY2023 remains unchanged. I will explain the assumption, actual, and projected demand for seven major products on the next page onward. From page 13, I explained the actual and projected demand for seven major products. It shows the demand dynamics of seven major products, including mining equipment. The figure of the first quarter FY2023 is our preliminary assumption. Demand in the first quarter FY2023 was down 9% year-on-year, and excluding China, it was down by 5%. China dropped significantly year-on-year due to the economic slowdown triggered by the sluggish real estate market condition. In traditional markets, demand in North America and Japan was robust, but in Europe it was down year on year, and in strategic markets except China, demand went down year on year in Latin America due to the future economic uncertainty and import restriction, and in CIS affected by the Russian invasion into Ukraine. Demand projection for FY 2023 was revised from 1 in April, and the overall demand is from minus 5 to minus 10 percent. And excluding China, it is minus 5 to minus 10 percent. Mining equipment is generally robust, but in construction equipment, some negative factors are observed, including the impact of Chinese economic slowdown and interest hike and inflation in many regions. We will monitor the trend carefully. On the next page onward, I will explain the condition of major markets. On page 14, I will explain the demand in Japanese market. In the first quarter FY2023, demanding units increased by 2% a year. Boosted by steady public works and private sector construction, demand increased. Demand projection for FY2023 is flat year-on-year, remaining unchanged from April projection. We expect that investment for public and private sector construction will continue to be solid. Average monthly operating hours of contracts was down 3% year-on-year in June. On page 15, I will explain demand in North American market. In the first quarter FY2023, demand increased by 3% year-on-year. Demand increased in rental, infrastructure, and energy industry, while that in residential construction declined affected by the interest rate hikes. Demand projection for FY2023 will decrease between 0% and minus 5% year-on-year, remaining unchanged from April projection. while decline in residential construction will be offset by the strong demand in rental infrastructure and energy industry, remonitored operating condition of machineries and demand in future closely. Average monthly operating hours of Comtrax was down 5% year-on-year in June. On page 16, I explain demanding European market. In the first quarter FY2023, demand decreased by 5% year-on-year. Demand decreased, centering on major markets of Germany, the UK and France affected by the rapid interest rate hikes and sustained high inflation. Demand projection for FY2023 is revised from the projection in April to minus 5 to minus 10% year-on-year. Economic downside pressure by the tightening monetary policy might be sustained in the second quarter onward, and as demand decline is expected to continue, we monitor the situation closely. Average monthly operating hours of contracts was up 4% year-on-year in June. On page 17, I will explain demand in Chinese market. This page shows the demand of hydraulic excavator except mini shovels. Demand, including Chinese makers, are also shown for reference. Demand growth is that of the foreign makers. In the first quarter FY2023, demand decreased by 55% year-on-year, and including Chinese makers, total demand was down by 39% year-on-year. Demand plummeted due to economic slowdown triggered by sluggish real estate market. Demand projection for FY 2023 is revised from the projection in April to between minus 30 and minus 40 percent year-on-year, and including Chinese makers, it is between minus 20 and minus 30 percent year-on-year. Any factor for the improvement in demand environment is not observed, and for the time being, we assume that the negative trend will continue. Average monthly operating hours of contracts was down 3% year-on-year in June.