Komatsu Ltd S/Adr

Hello, this is Takeshi Horikoshi, CFO. Before going into our financial results, we would like to express our deepest sympathies to all those who were affected by the Noto Peninsula earthquake on January 1, 2024. In terms of production, damage to our production bases in the Hokuriku area was minor, and after confirming safety and quality, we have been resuming operations as usual from the beginning of the year after year-end holidays. There have been some suppliers that were hit hard, but by making use of inventory and sourcing from alternative channels, production has not been obstructed. Komatsu has also dispatched maintenance personnel to the effective partner companies to support their restoration. Furthermore, the impact of the earthquake on our consolidated business performance is negligible. For reconstruction assistance, we've donated a total of 600 million yen as emergency relief funds. 500 million yen went to Ishikawa Prefecture and 100 million yen to Toyama Prefecture. In addition, we're cooperating with our distributors to meet the requests of the disaster-stricken areas by providing water and food supplies, lending construction equipment and forklifts, etc., free of charge, and offering maintenance services for machinery. Now, I would like to go into fiscal 23 Q3 business results. On page 4, I will explain the highlights for fiscal 23 Q3 quarterly results. The exchange rates are 149.7 yen to the dollar, 159.9 yen to the euro, and 96.7 yen to the Australian dollar. Compared to the same period last year, the yen depreciated against the U.S. dollar, euro, and Australian dollar. Net sales increased 5.6% year-on-year to 972 billion yen. Operating income increased 15.9% to 156.4 billion. The operating income-to-net sales ratio rose 1.4 percentage points to 16.1%. Net income increased 42.4% to 98.7 billion yen. Net sales and operating income increased due to the improvement of selling prices and the positive impact of FX rates. Net sales, operating income ratio, and the net income reached third-quarter record highs. In addition, segment profit and operating income reached all-time quarterly record highs. On page 5, I'll explain segment sales and profits. Net sales for the construction, mining, and utility equipment segment increased by 6.3% from the corresponding period a year ago to 918.2 billion yen. Segment profit advanced by 22.2% to 149.1 billion. The segment profit ratio improved to 16.2%, up 2.1 points. Retail finance revenues increased by 23.2% from the corresponding period a year ago to 27.2 billion yen. Segment profit decreased by 10.6% to 5.7 billion. Net sales for industrial machinery and others increased 7.7% from the corresponding period a year ago to 46.5 billion yen, while segment profit declined 72.8% to 1.3 billion. I'll talk about the factors impacting the changes in each segment later. Page 6 shows sales by region in the construction, mining, and utility equipment segment. Sales to outside customers increased 5.1% from the corresponding period a year ago to 904.7 billion yen. By region, sales increased in North America, Latin America, and the Middle East, but decreased in Asia, CIS, and Europe.

On page 7, I will explain the highlights for 9 months. Foreign exchange rates were 143.4 yen to a dollar, 155.0 yen to euro, and 94.0 yen to Australian dollar. Yen depreciated against dollar, euro, and Australian dollar year-on-year. Net sales in three quarters of nine months FY2023 increased by 10.1% year-on-year to 2,795,000,000 yen. Operating income increased by 30.8% to 453.4,000,000 yen and operating income ratio was 16.2% up 2.6 points. Net income attributable to Komatsu Limited increased by 31.2% to 304.3 billion yen. Due to improvement in selling prices and positive impacts by foreign exchange, both sales and profit increased. All net sales, segment profit, operating income, income ratio, and net income for three quarters of nine months marked the record highs. On page 8, I will explain segment sales and profit. Sales in construction, mining and utility equipment increased by 10.8% a year to 2,625.8 billion yen and segment profit increased by 38.9% to 429.9 billion yen. Sales in retail finance increased by 17.5% year-on-year to 74.7 billion yen and segment profit decreased by 12.0% to 18.7 billion yen. Sales in industrial machinery and others increased by 3.7% year-on-year to 131.5 billion yen and segment profit decreased by 63.7% to 5.7 billion yen. I will elaborate on causes of difference later. Page 9 shows the sales by region of construction, mining and utility equipment. Sales increased by 10.3% a year to 2,607.5 yuan. By region, sales increased in North America, Latin America and Oceania. but decreased in CIS, China, etc. Page 10 shows causes of difference in sales and segment profit in construction, mining and utility equipment. Sales increased by 256.2 billion yen year-on-year due to the positive effects of foreign exchange rates and improved selling prices. Segment profit increased by 120.3 billion yen year-on-year, supported by the positive effects of foreign exchange rates and improved selling prices, which more than offset the increased production and fixed cost. Segment profit ratio was 16.4%, up 3.3 points year-on-year. Page 11 shows retail finance. Assets increased, mainly affected by foreign exchange rates and an increase of new contract. New contract increased year on year due to foreign exchange rates and increased sales in the construction equipment business. Revenues increased by 11.1 billion yen year on year due to the positive effects of interest rate hikes and foreign exchange rates. Segment profit decreased by 2.5 billion yen year-on-year mainly due to the absence of a gain on reversal of allowance for doubtful accounts recorded in North America for the corresponding period in the previous year. Page 12 shows sales and segment profit of industrial machinery and others. Sales increased by 3.7% year-on-year to 131.5 billion yen. Segment profit decreased by 63.7% to 5.7 billion yen, and segment profit ratio decreased 8.0 points to 4.3%. Sales increased mainly due to the increased sales of large purchases for automobile manufacturing industry, but profit decreased due to a decline in high-margin maintenance revenues for eczema lasers and others, against the backdrop of declining global demand in semiconductors. On page 13, I will explain the consolidated balance sheets. Total assets increased by 493.6 billion yen year-on-year to 5,369.4 billion yen affected by the depreciation of yen. Inventories increased by 232.5 billion yen due to the depreciation of yen and increased demand for mining equipment and parts. Shareholders' equity ratio was 52.8%, up by 0 points. and net debt-to-equity ratio was 0.30. This concludes my presentation.

Next, Hishinuma, General Manager of the Business Coordination Department, will explain the business projection for Fiscal 23 and demand trends. I'm Hishinuma from the Business Coordination Department. I'll now explain the business projection for Fiscal 23 and key market trends. Page 15 shows an outline of the fiscal 23 projection. The annual forecast has not been changed from the October projection. The following pages explain the demand trends and forecasts for the seven major products, which are the assumptions used in the projection. On page 16, we will explain the demand trends and outlook for the seven major products. Fiscal Q3 numbers are preliminary estimates by the company. Demand in the third quarter of fiscal 23 was down by 6% year-on-year. Excluding China, demand appears to have decreased by 3% from the corresponding period a year ago. Fiscal 23 full-year demand is expected to decrease between 10% to 15%. Even when excluding China, demand is expected to decrease between 10% to 15%, which is unchanged from the October projection. I will address the key markets in the subsequent pages. On page 17, I will explain demand trends in Japan. In Q3, demand apparently increased by 8% from the corresponding period a year ago. Demand remained steady in public works and private sector construction. The outlook for fiscal 23 demand is broadly flat year-on-year, which remains unchanged from the April projection. On page 18 are the demand trends in North America. Demand in fiscal 23 Q3 appears to have increased by 4% from the corresponding period a year ago. Although there are signs of the rental market coming to a pause, residential construction as a market has bottomed out and the infrastructure and energy-related sectors have remained steady. The demand projection for fiscal 23 is unchanged from the April projection at 0% to minus 5% year-on-year. On page 19 are the demand trends for Europe. Demand in Q3 fiscal 23 apparently decreased by 15% from the corresponding period a year ago. Due to higher interest rates and energy prices, construction equipment demand decreased, mainly in major markets like the UK, Germany and Italy. Demand for the full year is expected to decline between minus 10% to minus 15% year-on-year, unchanged from the October projection. On page 20 are the demand trends of the Chinese market. This page shows demand trends for hydraulic excavators, excluding mini-excavators. For reference, Demand trends including Chinese manufacturers are also shown here. The growth rate of demand represents foreign manufacturers. Fiscal 23 Q3 demand appears to have decreased by 51% from the corresponding period a year ago. Total demand including Chinese manufacturers appears to have decreased by 34% year-on-year. Demand continues to decline significantly due to stagnant economic activity caused by the sluggish real estate market conditions, etc. The outlook for full-year demand is minus 40% to minus 50% year-on-year, and total demand including Chinese manufacturers is expected to decline by minus 30% to minus 40% year-on-year, unchanged from the October projection. On page 21 are the demand trends in Southeast Asia. Demand in fiscal 2023 Q3 appears to have decreased by 11% from the corresponding period a year ago. While demand for mining equipment remained steady in Indonesia, Demand for construction equipment dropped in Indonesia, Thailand, and Vietnam, etc., due to delayed execution of public works budgets and uncertainty over the economic outlook. The demand outlook for the full year is expected to decline between minus 15 to minus 20 percent year-on-year, which is unchanged from the October projection.