Komatsu Ltd S/Adr

This is Horikoshi, the CFO. I'll explain the overview of Komatsu's business results for Fiscal 25 Q2. Page 4 shows highlights for the three months ended September 30, 2025. Exchange rates were 147.3 yen to the USD, 171.3 yen to the euro, and 96 yen to the Australian dollar. Compared with the same period last year, the yen appreciated against the dollar and Australian dollar while depreciating against the euro. Net sales decreased by 2.6% year-on-year to 982.1 billion yen. Operating income decreased by 6.7% to 136.7 billion yen. The operating income ratio was 13.9%, down 0.6 percentage points from the previous year. Net income attributable to Komatsu Limited decreased by 8.1% year-on-year to 84.5 billion. Page 5 presents the sales and segment profit of each business segment for Q2 on a 3-month basis. In the construction, mining, and utility equipment segment, net sales decreased by 4.1% year-on-year to 897.3 billion, while segment profit decreased by 11.8% to 119.7 billion yen. The segment profit ratio declined by 1.2 points to 13.3%. The retail finance segment recorded net sales of 30.5 billion, down 2.5% year-on-year, while segment profit increased by 4.9% to 7.5 billion. The industrial machinery and other segment achieved net sales of 63.5 billion yen, up 23.9% year-on-year, and segment profit increased approximately 3.3 times to 9.4 billion. I will explain the factors behind these changes in each segment later. Page 6 presents sales by region for the construction mining and utility equipment segment in the second quarter of fiscal 25. Net sales in the construction mining and utility equipment segment decreased by 4.1% year-on-year to 895 billion yen. In Asia, both mining and construction equipment sales declined due to falling coal prices and reduced public investment in Indonesia, although sales increased in Latin America, Africa, and the Middle East on an underlying basis excluding For an exchange rate impact, total sales decreased by 1.6% year-on-year. Page 7 presents the highlights for the first six months, from April to September of fiscal 25. Exchange rates were 146.4 yen to the U.S. dollar, 166.9 yen to the euro, and 94.3 yen to the Australian dollar. Compared to the same period last year, the yen appreciated against the U.S. dollar and Australian dollar, while depreciating against the euro. Net sales decreased by 3.9% year-on-year to 1,891.6 billion. And operating income decreased by 8.7% to 277.1 billion yen. The operating income ratio declined by 0.8 percentage points to 14.6%. Net income attributable to Komatsu Limited decreased by 12.9% year-on-year to 175.7 billion yen. Page 8 shows the sales and profits by segment for the first half of fiscal year 2025. Sales of the construction mining and utility equipment segment decreased by 4.8% year-on-year to $1,742.2 billion, and segment profit decreased by 13% to $242 billion. The segment profit ratio declined by 1.3 percentage points to 13.9%. Sales of the retail finance segment decreased by 1.3% year-on-year to 61 billion yen, while segment profit increased by 13.9% to 16.9 billion yen. Sales of the industrial machinery and other segment increased by 10.5% year-on-year to 106.9 billion yen, and segment profit rose approximately 2.1 times year-on-year to 16.6 billion. The factors behind the increase and decreases in each segment will be explained later. Page 9 presents sales by region for the construction, mining, and utility equipment segment in the first half of fiscal 25. Net sales in the segment decreased by 4.8% year-on-year to 1,737.2 billion yen. While sales increased in Europe, Africa, and the Middle East, it declined in Asia, particularly in Indonesia, as well as in North America and in Japan. Excluding the impact of FX, Sales decreased by 0.8% year-on-year on an underlying basis. Page 10 shows the factors behind changes in sales and segment profit for the construction, mining, and utility equipment segment in the first half of fiscal 25. Although improved selling prices had a positive effect, the negative impact of FX and lower sales volume outweighed it, resulting in a $88 billion year-on-year decrease in net sales. Despite the positive effect of higher selling prices, the negative effects of FX, reduced volume, and higher costs predominated, leading to a 36 billion yen year-on-year decrease in segment profit. The impact of tariffs for the first half, including mitigation measures, was 7.7 billion. The segment profit ratio declined by 1.3 percentage points year-on-year to 13.9%. Page 11 presents the results for the retail finance segment in the first half of fiscal 25. Assets increased from the end of the previous fiscal year as new contract volume exceeded collections. However, new contract volume decreased year-on-year, mainly due to FX impact. Net sales decreased by $0.8 billion year-on-year, mainly due to FX impact. impact while segment profit increased by 2.1 billion yen year-on-year, primarily owing to lower funding costs. Page 12 presents sales and profit, segment profit for the industrial machinery and other segment in the first half of fiscal 25. Net sales increased by 10.5% year-on-year to 106.9 billion yen. Segment profit was approximately 2.1 times higher than the previous year at 16.6 billion yen, and the segment profit ratio rose by 7.4 percentage points to 15.5%. The increase in both sales and profit was driven by higher sales of large presses for the automotive industry and increased maintenance revenue from high-margin XMR lasers for the semiconductor industry. Page 13 presents the consolidated balance sheet. Total assets amounted to $5,922.5 billion, up $149 billion from the end of the previous fiscal year, mainly due to an increase in inventories. Inventories totaled $1,579.4 billion, an increase of $172.7 billion from the previous year end. The shareholders' equity ratio declined by 0.7 percentage points from the previous year end to 54.3%, and the net DE ratio was 0.29 times. Free cash flow for the first half of fiscal 25 was an inflow of 33.5 billion, limited by an increase in working capital, primarily in inventories. That concludes my explanation.

Next, Ishinoma is going to explain fiscal 2025 business resource projection. This is Hishinuma, GM of Business Coordination Department. Now I'm going to explain the projection for fiscal 2025 business results and the major market overview. Page 15 presents out one projection for fiscal 2025. So we have revised the full year projection. Net sales was revised upward by 143 billion yen from the April 2025 projection and will decrease by 5.3% to 3,808 billion from FY2022. OP was revised upward by 22 billion and will decrease by 23.9% to 500 billion year-on-year. And net income is projected to decrease 27.2% to 320 billion. It was revised upward by 11 billion year-on-year. And there are partial changes in demand outlook, which I will touch upon later. For construction, mining, and utility equipment segment, against the April outlook, due to the demand decline, Mainly in Indonesia, it is projected that there will be a negative impact on both sales and profit. Against that, we are going to partially absorb it by adding sales, applies improvement and the cost improvement from tariff mitigation measures. And fully exchange of major currencies has been moving toward yen depreciation more than originally expected. So taking that into consideration, we have revised four-year business result projection for fiscal 2025. Regarding foreign exchange rates, the sense of third quarter, 140 yen to one US dollar, 163 yen to one euro, and also 91 yen to Australian dollar. And for the four-year ability of X, the 143.2 yen to US dollar, 164.9 yen to euro, and the 22.7 yen to Australian dollar. And the fiscal 25-hour E is projected to be 10.3%. And the cash dividend per share, it is planned to be the same as the previous year, 190 yen, which is unchanged from April outlook. And the consolidated payout ratio is projected to be 54%. Page 16 presents latest estimate of the impact of additional U.S. tariff incorporated into projection of business result revised this time. So based on the U.S. tariff policies and rates that have been disclosed as of October 24, the latest forecast for TALIF, the costs in fiscal 25 is as follows. This does not take into account the impact of additional tariff policy on China announced by US government officials in October. Payment basis is 90 billion yen, which is a decrease of 50 billion yen from the April 25 projection, including cost reduction measures implemented during the period. The impact of the profit and loss is 55 billion yen, which is an improvement of 13.5 billion from the April fiscal 25 projection. So the actual impact on profit and loss, including cost reduction measures for the first half of the year was 7.7 billion yen. The impact is expected to increase progressively toward the end of the fiscal year. Page 17 presents projection of segment sales and profit for fiscal 25. Consumption mining and utility equipment sales will decrease by 6% from fiscal 24 to 3,571,000,000 and segment profit will decrease by 26.4% to 441,000,000. Detail finance sales will decrease by 5% to 117 billion yen and segment profit will increase by 0.3% to 29.5 billion yen. Industrial machinery and others sales will increase by The 6% from FY24 to 237 billion segments profitably increased by 20.5% to 33 billion yen. I will touch upon lesion for increase and decrease for each segment later. Page 18 presents projection for sales by lesion for construction, mining and utility equipment in Asia, core places in Indonesia. continue to sluggish and it is expected that it will not recover for the time being, leading to a significant decline in sales for both mining and construction equipment. Profits expected to increase in the Central and the South Asia, Europe and Asia. due to FX impact, but it will decrease by 6% to 3,559.6 billion in total year-on-year. So on the... The currency basis accruing affects impact. It will decrease by one point year-on-year. Page 19 presents construction mining utility equipment. The causes of difference in projected sales and segment profit for FY2025. Sales will decrease by 227.2 billion yen from FY24 despite the positive effects of improved selling prices due to the negative effects of foreign exchange rates. and decrease the volume of sales. Segment profit will decrease by 157.9 billion from FY24, despite the positive impact of the improved selling prices due to the negative impact from the factory, such as exchange rates, decreased volume of sales, and the increased cost, including the impact of U.S. tariff. And the segment profit ratio will be 12.3%, down 3.5 points from FY24. So page 20 represents retail finance projection. Assets will increase by 42.2 billion yen from the previous fiscal year and due to new investments exceeding recoveries. New contract will decrease by 45.7 billion yen from FY24, mainly due to fully exchange rates. And sales will decrease by 6.2 billion yen from FY24, mainly due to a fully exchange rate. And the segment profit will increase by 0.1 billion from FY24, mainly due to lower procurement cost. And ROA will be 2.1%, 0.1%. point down from the previous year. Page 21 presents industrial machinery and others projections. For the automotive industry, sales of large plus will increase. For the semiconductor industry, sales of the high-margin XM leather maintenance will increase. Sales will increase by 6% to $233 billion year-on-year, and segment profit will increase by 20.5% to $33 billion year-on-year. From page 22, I will explain actual and the projection demand for seven major products under construction, mining, and utility equipment. So demand for mining and machinery is included into demand of the seven unit major products. And the number of FY25Q2 are preliminary based on our estimate. In the second quarter, fiscal 25 demand increased by the 1% year-on-year. This time, we have reviewed FY25 full-year forecast. As of April, taking into a direct impact of a US tariff to put demand downwards, we estimate the impact of 2.7% globally. So, however... As of now, excluding some countries such as Brazil, we do not see clear tariff impact on demand. So for this outlook, we do not have a global day figures. And for that reason, we do have the projection by region. Overall demand is 0.25% negative, which is same as the April projection. However, there is some fluctuation in regional demand. From next page onwards, I will touch upon each region. Page 23 presents demand in North American market. In fiscal 25 second quarter, demand increased by 5% year-on-year. The impact of U.S. tariff policies on demand is unclear, and rental demand, which has been struggling, shows signs of reversal. In FY25, a full year demand will decrease by between 0% to 5% from FY24. It will change from the April 25 projection. So during the first half, North American demand has been stable, but we will be closely monitoring the impact of the increased U.S. tariff costs on demand. Page 24 presents demand in Europe. In fiscal 25 second quarter, demand increased by 1% year-on-year. In fiscal 2025, full-year demand will remain about the same from FY24, which was changed from the April 2025 projection. Economy has been improved due to ECV interest rate cut and the fiscal expansion measure announcement. Also, demand hit the bottom. However, we will closely monitor the situation. Page 25 presents demand in Southeast Asia. In fiscal 25 second quarter, demand decreased by 4% year-on-year. In fiscal 25, four-year demand will decrease by between 5% to 10%, which is changed from the April 25 projection. In Indonesia, which is the biggest market, we see huge demand decrease for both mining and construction equipment due to oil price decline and public works budget cut. We do not expect demand in Indonesia to recover for the time being, so we are going to closely monitor the situation. Page 26 presents demand in Japan market. In fiscal 25 the second quarter, demand decreased by 19% year-on-year. In FY 2025, full-year demand will decrease by between 10% and 15% from FY24, which was changed from the April 25 projection. Demand for Lentol is low. and there is surplus in market population, which brings down the new machine demand. There are negative impact on construction industry due to the lack of manpower, material price hike, demand will sluggish for the time being. However, we are going to closely monitor the situation. Page 27 presents price trends and a projection for major minerals for mining equipment. So as for low-glade coal from Indonesia, its price is on downward trend, but other minerals are expected to be high or stable. Page 28 presents actual and projected demand for mining equipment. In fiscal 25, the second quarter, demand decreased by 13% year-on-year. Coal plies dropped in Indonesia, and demand has decreased significantly. In fiscal 25, full-year demand will decrease by between 10% to 15% from FY24, which was changed from the April 25 projection. We do not expect demand in Indonesia to recover for the time being. However, the demand elsewhere remains steady. Page 29 presents actual and projected sales of mining. In fiscal 25 second quarter, sales decreased by 7.1% year-on-year to 461.9 billion yen, excluding effects on the impact, and sales decreased by 3.9%. In FY25, four-year sales will decrease by 7.5% from FY24 to $1,773.2 billion, excluding foreign exchange impact. sales decreased by 1.6%. For mining equipment, Indonesia has dropped due to oil price drop, but the exclude in Indonesia against April outbreak, sales increased excluding of foreign exchange impact. So for mining equipment and services, in addition to decline in parts in Indonesia, BC customers were gone cost reduction for cost and it will decrease excluding foreign exchange against APO outlook. Page 30 presents construction, mining and utility equipment, actual and projected sales of mining. In fiscal 2025, the second quarter, parts sales decreased by 2.5% year-on-year to ¥260.6 billion. The ratio of aftermarket including service was 53%, excluding fully exchanged aftermarket sales increased by 0.4% year-on-year. FY 2025 part sales will decrease by 4.8% year-on-year to 1 trillion 1.1 billion yen, and aftermarket ratio, including service, is 52%. Excluding foreign exchange impact, the total aftermarket sales will increase by 1.1% year-on-year. So thank you very much. And now I would like to touch upon the second quarter topics starting from page 47. Page 47. Komatsu will establish a new training center in Kodiroa for construction equipment mechanics and operators. This was announced at the ninth etiquette, which was held from 20th to 22nd August. and the completion is scheduled in 2026. Komatsu aims to expand its function to include equipment, stock and parts at depot, as well as marketing capabilities, positioning itself as the core facility for West Africa, and it's going to be expanded to West African customers and distributors and local communities. Page 48. Komatsu and U.S.-based Applied Intuition will co-develop a unified software-defined BeCo, which is STB, an autonomy platform. With Applied Intuition's proven capabilities across BeCo operating system, autonomy, stacks, and tooling, Komatsu's extensive expertise in off-highway autonomy and mining applications The collaboration represents a bold step toward the future of increasingly autonomous software-driven mining operations. By having an autonomous platform leveraging SDV architecture, AI, and machine learning, the productivity of the mining field can be dramatically improved, and we can provide higher values to the customers, including equipment downtime reduction and also the highly precise and efficient operation. Page 49. Komatsu and its subsidiary, Earthplane, have entered into a collaboration with Tier4, a pioneer in open-source software for autonomous driving, to develop autonomous technology for construction equipment. These three companies allow the The collaboration of three companies will focus on autonomous operation Komatsu articulated and rigid dump trucks for CBO engineering and quarry sites in Japan aiming for practice use by fiscal year 2027. Page 50. On September 19, Komatsu issued the integrated report Komatsu Report 2025. So this report introduces our management policies and corporate activities aimed at sustainable enhancement of corporate value over the mid to long term with a focus on the new three-year medium-term management plan, LEANAME, strategic growth plan with the title of Driving Value with Ambition. Please take a look at it. That's it from myself.

Now, from here on, we would like to take any questions that you may have. Thank you very much for that presentation. This is Sasaki from UBS Securities. I have two questions. My first question is regarding numbers, regarding volume mix and cost impact. Do you have more detailed plans for this in the new plan, the revised plan, compared to the beginning of year plan for volume and mix, it was revised down substantially by $78.5 billion. But what was the reason why it was revised down so substantially? That's my first question. This is Horikoshi. Thank you for your question. First, looking at page 10 and first half results, For a volume and mix, $27.8 billion is what you see here. And for pure volume, it's $19.3 billion. And other than that, for a product or an area mix impact, it's $6.4 billion, and it's likely to deteriorate. And there's one-off cost worth $2.1 billion. which adds up to 27.8 billion. For area and product mix, the reason why it's deteriorating by 6.4 billion, and it's about half and half of a breakdown, but for area mix, it's because of Indonesia and its sales has been falling and it's a high margin market. And conversely, margins are not as good in Europe, but its mixed contribution is increasing. That's the reason why area mixes deteriorating. For product mix, especially regarding mining equipment, the parts ratio has been falling and out of equipment, the low margin products have sold more in the first half of the year, which was also a negative factor. So that was the first half. Regarding our expectations, Looking at page 19, on an year-over-year basis, $82.8 billion is the negative impact from volume and product mix, et cetera. Period volume impact is minus $40.8 billion. Product mix, area mix are going to be are in total $36.5 billion negative and also one-off costs $5.4 billion, which adds up to $82.8 billion. For product and area mix, which is a large number, the reason is attributed to the same reasons as the first half and is likely to expand. And compared to the April PA, the public announcement, we're talking about our projection on an annual basis, right? On an annual basis. Compared to the difference between the public announcement in April for sales, it's about $130 billion of a difference. It's worse by $130 billion, out of which fx is better second half assumptions are now 140 yen so it's a positive factor by 220 billion but conversely for volume we are expecting a decline in the order of 100 billion so that amounts up to 130 billion of a sales improvement compared to the April public announcement but for the P&L for the P&L compared to the April public announcement it's better by 13 billion out of which FX impact is about 75 billion and pure volume impact is about 36 billion of a negative which is equivalent to that $100 billion. And for mixed difference, for product and area, this is big, $42.5 billion. And tariff measures, price increase impact is about $10 billion positive. And for costs, it's about 12.5 billion positive. This is mainly due to tariffs have increased, therefore we were able to incorporate strong countermeasures. So net-net is $13.5 billion, and other costs are $11 billion. So on a net-net basis, it's $12.5 billion better. For fixed costs, compared to the beginning of the year, it's going to be less. So it's $13 billion better than the April public announcement, therefore. Indonesia, which is relatively higher margin, it has deteriorated. So it's not just sales volume decline, but it has also led to mix deterioration as well. Is that the right way to look at it? Yes. Area mix has deteriorated. This is attributed pretty much solely to Indonesia and also Europe conversely improved. So net-net area mix deteriorated. Thank you very much. Then let me move on to my second question regarding Indonesia. For mining and construction equipment, what kind of things are happening on the ground? Can you give me more detail on that? For example, what are the conditions of the customer? What are they saying to you? And for mining, the idle rate, I believe, is increasing. So can you talk about the background as to why sales is deteriorating by explaining about what's happening on the ground there? That's my second question. This is speaking. Regarding Indonesia, starting off with construction equipment for forestry. It hasn't really deteriorated demand-wise in agriculture, but construction equipment demand has been deteriorating. Public works budgets, compared to our initial assumptions, have become lower and stricter. It's probably due to policy. They are actually allocating more to making school lunches free. And that is why they decided to cut public work project budgets, which has had, in turn, an impact on our construction equipment demand. As for mining, like we've been communicating from before, the 4,200 kilocalorie thermal coal prices, there is a strong correlation in the market. That's what we've been explaining from before. And prices are quite sluggish, as explained, at $42 or $43 a ton. about a year ago. It used to be about $52 or $53. So price levels have been coming down quite substantially. So customer profitability has been deteriorating. So that's hard, but we may have communicated this at Q1 results, but regarding cost for biodiesel policies, B35 has been revised up to B40. So that has been leading to higher prices and worsening fuel efficiency. So operation cost is increasing. Also, regarding royalties that you need to pay to the government has been increasing as well. Therefore, profitability for the customer has been deteriorating. And that is why mining Japan is likely to be sluggish for a while going forward. How about the idle rate? Do you have any numbers on that? Well, we only have numbers up until August, but it was 9.6%. So compared to before, it has been deteriorating. It used to be about 8% in Q1, I believe. Got it, thank you very much.