Komatsu Ltd S/Adr

Thank you. I am Horiko Shi, the CFO. Let me present the business results for FY2024. Page 4 shows the highlights of FY2024 business results. Exchange rates were ¥152.8 to the dollar, ¥163.5 to the euro, ¥99.5 to the Australian dollar. Yen has weakened against these three currencies year on year. Net sales grew 6.2% year-on-year to 4,104.4 billion yen. Operating income grew 8.2% to 655.1 billion yen. Operating income ratio went up by 0.3 points to 16%. Positive FX impact, improved selling prices, and others led to higher sales and profits. Net income increased by 11.7% and reached 439.6 billion yen. Net sales, segment profit, profit ratio, and operating income and its ratio, net income, all of them were record high numbers. Also, net sales, segment profit, operating income, and net income were record high three years in a row since FY2022. ROE increased by 0.1 point year-on-year to 14.2%. We plan to increase the dividend per share for FY24 from 167 yen per share that we announced in October to 190 yen. Consolidated payout ratio will be 40.1%. Including the 100 billion share buyback that we implemented in 2024, the total shareholder return will be 62.7%. Page 5 shows the net sales of construction, mining, and utility equipment. The sales were 3,798.2 bn up 5.1% year-on-year. Segment profit was 598.9 bn up 4.3% year-on-year. The retail finance net sales were 123.2 bn up 19% year-on-year. Segment profit was 29.4 bn up 21.4% year-on-year. Net sales of the industrial machinery and others were ¥223.6 billion, up 14.3% year-on-year. Segment profit grew about 2.7 times year-on-year to ¥27.4 billion. I will explain the causes of the differences by segment later on. Page 6 shows the net sales of construction mining utility equipment by region. Net sales were ¥3,787.5 billion, up 5.5% year-on-year. Excluding FX impact, the overall number slightly increased year-on-year. By region, Oceania and Asia net sales increased in real terms excluding FX impact, but declined in North and Latin America and Africa. Page 7 shows the causes of the differences for construction, mining, and utility equipment, showing the net sales and segment profit. Negative impact of the lower volume was more than offset by the positive impact of the weaker yen and improved selling prices. Net sales increased by 183.1 billion yen year-on-year. The positive impact of the weaker yen and improved selling prices was bigger than the negative impact of lower volume and higher costs. Segment profit grew by 24.9 billion yen year-on-year. Segment profit ratio was 15.8%, 0.1 point lower than the year before. Page 8 shows the retail finance. Assets increased from previous fiscal year end mainly with the increase in new contracts. New contracts grew mainly due to the yen's depreciation. With rise of the interest income ratio, the positive impact of the weaker yen, increase of the financing receivables and others, net sales grew by ¥19.7 billion year-on-year. Segment profit grew by ¥5.2 billion year-on-year. Page 9 shows the net sales and segment profit of industrial machinery and others. Net sales were 223.6 bn yen, up 14.3% year-on-year. Segment profit was 27.4 bn yen, about 2.7 times that of the year before. Segment profit increased by 7.0 to 12.3%. As for sales and segment profit, For the presses, sheet metal machines, and machine tools for the automobile industry, sales segment profit increased mainly due to higher sales of large press machines and machine tools. And for the semiconductor industry, sales profit increased with the recovery in the maintenance revenue of Exima lasers. Page 10 shows the consolidated balance sheet and free cash flows. Total assets increased by 136.9 billion yen from the previous year end to 5,773.5 billion yen. Inventories decreased by 32 billion yen from the previous fiscal year, mainly due to the higher account receivables. to 1 trillion 406.7 billion yen. Shareholder's equity ratio was 55% up 1.2 point. Free cash flow increased by 76.1 billion yen year-on-year to 306.5 billion yen. Page 11 shows the status of the achievements of management targets of the mid-term management plan. The management targets of the previous mid-term plan for FY22-24 were largely achieved. In FY2024, despite lower volume, higher raw materials costs, and fixed costs, selling prices were improved. With weaker yen and effects of degrowth strategy and structural reform, sales and profit increased year on year. Both net sales and operating income were record high three years in a row from 22 to 24. As for the profitability, in FY24, the operating income ratio was 16%, 0.3 points improvement year-on-year, and the record high. As for the efficiency, ROE was 14.2%, exceeding the target of 10%. Shareholders' return, the consolidated payout ratio of 40% or higher was maintained. External evaluation of the ESG, We were selected to the Dow Jones Best in Class World Index, and we made CDP-A list in climate change and water security. As for CO2 emission reduction and the increase of the renewable energy use, we made steady progress toward 2030 targets. As for the retail finance, ROE, net debt equity ratio, we achieved the targets. That concludes my part of presentation. Next, for the projection for FY25, Mr. Hishinuma will present. Thank you. I am General Manager of the Business Coordination Department. I'd like to now present the projection for FY25 and condition of the major markets. Page 13 shows the projection for FY2025. FX Assumptions 135 yen to the USD, 150 yen to the EUR, and 84 yen to the AUD. Net sales projection 3,745,000,000 down 8.8% year-on-year. Operating income 478,000,000,000 down 27.3% year-on-year. Net income projection is 309 billion yen, down 29.7% year-on-year. At the BOD today, we resolved the share buyback up to 100 billion yen or 40 million shares and cancellation of the old acquired shares within FY25. FY25 ROE is expected to be 10%. As for the dividend per share, we plan to pay 190 yen, same as the year before. Consolidated payout ratio, 56.7%. And total shareholder return, including the 100 billion yen share buyback that we announced today, will be 89%. Page 14 shows for the construction mining and utility equipment. Sales projection is 3 trillion and 440 billion yen down 9.4% year-on-year. Segment profit 428 billion yen down 28.5%. Retail finance sales projection is 107.5 billion yen down 12.8% year-on-year. Segment profit 24 billion yen down 18.4%. For industrial machinery and others, sales projection is 231.5 billion yen up 3.5% year-on-year. Segment profit projection is 31 billion yen up 13.2% year-on-year. I will explain the causes of the difference by segment later on. To explain the impact of the US additional tariffs factored into the projection, page 15 shows the structure of our construction and mining business in the United States. Komatsu's export of products and parts from the United States is more than the import from overseas. So we are exporting company About 50% of the products sold in the United States are manufactured outside of the United States and imported mainly as finished construction equipment and parts. The other 50% are manufactured locally. Construction equipment are mainly supplied to the US and Canada and mining equipment are supplied worldwide. Among locally manufactured products, construction equipment has a high proportion of imported parts, while mining equipment has a high proportion of U.S.-made parts. Page 16 shows the impact of the additional U.S. tariffs factored into the projection for FY 2025 on sales and segment profit. Decline in demand, higher tariff costs, are incorporated into the projection. This is based on what we know as of April 24, Japan time. So, if the situation changes, we will revisit them. Page 17 shows the sales projection by region for construction, mining, and utility equipment. Sales will decrease in almost all regions due to the stronger yen. The total sales projection is 3 trillion and 430 billion yen, down 9.4% year-on-year. Excluding the impact of the forex, sales will increase in real terms in the regions except in North America, Oceania, and Asia, where there was a high volume of sales of mining equipment in FY2024. Page 18 shows the causes of the difference in projected sales and segment profit for FY 2025. Expected lower volume due to the additional U.S. tariffs can be offset by the improved selling prices. However, mainly because of the yen's appreciation, sales are expected to decline by 358.2 billion yen year-on-year. Expected lower volume tariff cost and higher fixed cost due to the impact of the U.S. additional tariffs will be partially offset by improvements of the selling price and cost, but due mainly to the stronger yen segment profit is expected to decrease by 1%. 170.29 billion yen year-on-year. Segment profit ratio projection is 12.4% down 3.4 point year-on-year. Page 19 is a retail finance projection. Assets in real terms excluding FX will slightly increase, but with yen's appreciation, assets are expected to decrease ¥72.3 billion from the previous fiscal year end. With yen's appreciation and absence of the large-scale project of the year before, new contracts projection is down by ¥192.9 billion year-on-year. Due mainly to the stronger yen, net sales are expected to decline by 15.7 billion yen. The segment profit is expected to decline by about 5.4 billion yen. ROI is expected to come down by 0.3 point year-on-year to 1.9%. Page 20 shows the sales and segment profit projection for industrial machinery and others. For concerning presses, sheet metal machines, and machine tools for the auto industry, sales will increase due to higher sales of the large press machines and services. For semiconductor industry, the sales will increase due to an increase of the sales primary in maintenance with the market recovery. Net sales projection is 231.5 billion yen, up 3.5% year-on-year. Segment profit, 31 billion yen, up 13.2% year-on-year.

Now I'll work you through the demand trends and forecasts for the seven major construction equipments on page 21. We revise the definition of demand for the seven major construction equipment. The demand for the seven major construction equipment in China and other regions have been retroactively adjusted to include the demand of Chinese manufacturers. The demand volume for the seven major construction equipment includes mining equipment, The figures for the fourth quarter of FY24 are our preliminary estimates. FY24 unit demand appears to have been almost flat year-on-year. We expect year-on-year decline in demand of ±0% to 5% in FY25. According to the Global Economic Outlook released by the IMF in April, GDP growth in each country is expected to slow down due to the impact of trade frictions. the overestimated impact on demand and factor it in. On the next page, I will give you an overview of our key markets. Page 22 shows the demand trend and forecasts for the North American market. The demand volume for AFI24 decreased 7% from the previous year. Due to a drop in housing starts and other factors, demand for construction equipment decreased in the rental and energy sectors. We estimate the demand in AFI25 will be down 5% to 10% versus the previous year's level. Demand for rental equipment is expected to continue to weaken. The impact of U.S. tariff policy on demand in the North American market is unclear, but we will continue to closely watch the developments. This page gives you demand trend and forecast for the European market in page 23. In A524, demand fell 19% from the previous year. Our key markets, Germany, the UK, and France saw less demand for construction equipment. Demand in A525 is expected to range from being stable to decline 5% year-over-year. Despite positive changes such as consecutive interest rate cuts by the ECB and Germany's massive fiscal expansion measures, business confidence in the region remains sluggish. Therefore, we closely monitor the situation. Page 24 shows the demand trend and forecast for the Southeast Asia market. The unit demand in AFI24 increased by 2% year-on-year. Our largest market in the region, Indonesia, has recovered demand for construction equipment since the second quarter of A524 and beat the previous year's level for the four-year performance. The regional demand except Indonesia was almost on a par with the previous year. In a mining equipment market, demand in Indonesia remained strong. Its demand in A525 is expected to range from being stable to decline by 5%. In Indonesia, coal price has been slowly declining, but we expect a recovery due to power generation demand during the summer season. Back in last October, following the presidential election, demand for construction equipment recovered, and we expect the level to be consistent in the current fiscal year. Page 25 now indicates how Japan market will trend in demand and our outlook. FI24 demand dropped 7% year-on-year, primarily due to a decrease in demand for rental equipment. We expect this demand for FI25 to be ±0% to fall by 5%. Page 26 shows a trend in its outlook for prices of key minerals as it's related to demand for mining equipment. The key mineral prices have remained high over the long term, though it's been widely fluctuating recently due to UBS tire policy and moves in demand. On this page 27, it highlights the demand trend for mining equipment. The number of units in demand in FI24 appears to have been almost the same as the previous year. Demand remained firm overall, although it decreased in North America, Indonesia, and other regions. FI25 demand is expected to range from being stable to fall 5% from the previous year's level. We expect the demand in North America and Oceania to decrease, but are expected to remain firm overall. In page 28, here are mining equipment sales. In FY24, sales increased 12% year-on-year to ¥1,916.2 billion. Excluding impact of FX impact, sales would have increased 6%. Net sales for FY25 are projected to be ¥1,727.9 billion, a decrease of 10% from the previous year. Excluding FX impact, sales are expected to increase. On page 29, you see the forecast of sales of a construction, mining, and utility equipment segment with equipment, parts, and services. In FY2024, parts sales are expected to increase 8% year-over-year to 1 trillion and 51.4 billion yen, and overall aftermarket including services is expected to be 51% of total aftermarket sales, and its sales were up 2% year-over-year excluding FX impact. In FY25, part sales are expected to decrease 6% from the previous year to 987 billion yen. Aftermarket sales portion including service and others are estimated 53%. And overall aftermarket sales excluding FX impact are expected to increase 4% year-on-year. Here on page 30. is our outlook on capital expenditures and others. Capital investment excluding investment in rental assets on the left-hand side is expected to remain flat year-on-year primarily due to continued investment in production facilities, sales offices, and solution businesses. R&D expenses in the middle are expected to increase from the previous year primarily due to focused investments in electrification and automation and others. Fixed costs on the right are expected to increase from the previous year, mainly due to increase in labor costs resulting from wage hikes and investments in mid-term management plan projects while incorporating the effects of structural reforms. Now, the following is the main topics. Komatsu exhibited at the International Construction and Trade Fair, BOMA 2025, held in Munich, Germany, from April 7 to 13. At BOMA 2025, we presented its latest initiative to realize smart and clean construction and mining sites of the future under the themes of innovation, sustainability, and digitalization. On this page, again, on Obama 2025, as a new generation construction equipment, we presented PC220LCI-12 equipped with the latest ICT functions such as 3D machine control. This is a PC220LCI-12, a new generation hydraulic excavator tailored to European market, which was originally launched in Japan in December 2024. The flagship model PC220LCI-12 will be launched in Europe, North America, and Australia in A525. We demonstrated the PC7000-11E, a wired ultra-large electric hydraulic excalibur as electrified construction equipment, and a megawatt-class quick-charging vehicle manufactured by DMAG Inc. as a charging and energy storage solution. Komatsu is only exhibiting with Aoki Asanaro Construction under the theme of Underwater Construction of the Future at Osaka Kansai Expo, which started on April 13. The exhibition is at the City of the Future Pavilion until October 13. Please come and visit us. That's all from me. Now, new midterm management plan will be presented by the CEO, Mr. Imayoshi. Thank you. I'm Imayoshi, CEO. My presentation discusses a new strategic growth plan announced today. My comments will mirror the details of today's announcement. Our new plan, as shown here, is titled Driving Value with Ambition. As I will discuss in detail later, the external environment surrounding Komatsu is growing increasingly complex. In response, we'll focus on ambition, which is one of our corporate values. The title of this plan indicates our commitment to working closely with our customer stakeholders to create new value and achieve growth across the Komatsu group. This title also expresses our expectation of every Komatsu Group employee to take on issues and pursue change, thinking outside the box of the past successes and conventional wisdom. This slide describes what I plan to cover today. Now, before working you through the strategic growth plan, I want to talk about the role of the plan in our company and recap our previous Mitra Management Plan. First, let's look at the role of a strategic growth plan. We revisited our purpose, values, and brand promise on occasion of our 100th anniversary in 2021 to put our values into words. We formulated the strategic growth plan based on our purpose, values, building on the management principles of a commitment to quality and reliability, and our drive to maximize corporate value. Our growth plan also reflects the Komatsu corporate social responsibility as described in our sustainability policy. Built on this foundation, the growth plan will guide us as we create a sustainable positive cycle of social issues solutions and improve profitability. This strategic growth plan covers three years from FY2025 through FY2027. At the same time, we create this plan in conservation of the next six years through FY2030. Now, I'll provide a review of our previous midterm plan. Under the previous plan, we pursued a number of different initiatives toward a vision to create the safe, highly productive, smart, and clean workplaces of the future with our customers. As you see on the right-hand side of the slide, our efforts created customer value in terms of innovative products and solutions and putting us well on the road to achieving workplaces of the future.

Now, let's take a look at the new strategic growth plan. Based on the achievements of our previous midterm plan, we redefined our vision, becoming a collaborative partner committed to optimizing safe, productive, and clean workplaces. As a collaborative partner with our customers, we promise to create safe, highly productive, and clean workplaces throughout the world. We create advancement in products and solutions through innovation. digital transformation and the growing value chain business, investing in our people and forging greater partnership at the same time. Specifically, we offer an expanding scope of solutions that include advancements in the global deployment of smart construction as well as open technology platform and the wider adoption of our app in the mining industry. At the same time, we pursue advancements in automation, remote control, and support for the variety of the power sources. aimed at decarbonization, offering a growing lineup of the SDB machinery highly compatible with the solution's affinity. Next, I will address the view of the external issues we identified when drafting the strategic growth plan. As shown here, we expect the external business environment to become increasingly complex and uncertain due to the complex interrelationship of the political, economic, and other risks, not to mention the drive toward carbon neutrality and rapid advancement in technology. We identify the implications for our businesses based on our forecast of the changes in the external environment. These implications are as you see here. First, in mining, we must respond quickly to growing customer needs for the decarbonization and automation. While preparing for the reduced coal demand in the longer term, construction method changes with deeper mining should be taken as a growth opportunity. Next, we must take a more detailed approach in construction business by region and country to meet the needs of customers in the growing markets of Asia, Africa, and elsewhere. In other areas, we must mitigate the impact of the geopolitical risks and heighten economic security across the supply chain. Here, we must change the sources and reassess the procurement ratio to build a more robust supply network. We see an opportunity for medium to long-term growth through solutions for customers in the forestry machinery and other sectors, fostering efficiencies amid shrinking labor force. Keeping an eye on the growth trend of the EV market will be important for our industrial machinery business for auto industry, where we see opportunities through GigaCast and other new technologies. We must also respond to long-term market growth and technological innovations in semiconductor equipment sector, all while considering measures for economic security. Thus, we understand the importance of the compliance with increasingly diverse regulations across the countries and regions. We must invest in the human capital to attract and retain talent. We must make decisions Quickly, on the global scale, these elements are all essential to Komatsu Group business growth. Our new strategic growth plan properly identifies the aspect of the changes in the external environment, not only for the group as a whole, but also for the individual businesses such as mining, construction, forestry machinery, and industrial machinery. The plan also identifies the risks and opportunities by region. We have incorporated these considerations into our strategy. Now let's look at solving the social issues through our business activities. We conducted a new analysis from the perspective of double materiality, identifying challenges according to the aspects of the business impact and environmental social impact. From these challenges, we highlighted those particular importance. Given the diversifying interest of our stakeholders, our aim is to achieve the sustainable growth through the positive cycle of the social issue solutions, improving profitability. We accomplished this aim by incorporating materialities in six areas, namely the employees, human rights, customers, ethics and governance, and local communities and environment. This summarizes the key business challenges reflecting our analysis of the external environment and materiality, as well as demand forecasts for the construction and mining equipment. We project moderate growth for mainstay construction and mining equipment business over medium to long term amid the population growth and urbanization in emerging economies. However, external risks over the short term will mean ongoing volatility. Given these assumptions and backcasting for our vision, we conducted scenario planning toward sustainable growth in light of risks and opportunities. We established the main scenario for the future, as well as several sub-scenarios. Through this process, we identified three important management issues. Sustained investment for the future growth, strengthening profitability, and enhancing management resilience. We incorporated detailed efforts related to these important management issues into the growth strategy of our new plan. Our aim is to achieve the growth above that of the market average, even in the event of the downside scenario.