Komatsu Ltd.

I'm Hosotani, the CFO. First of all, I'd like to address what happened the other day, which was the earthquake that originated in Kumamoto Prefecture. And I would like to explain, extend my condolences to the people who were affected. We have been able to confirm the safety of our people. Regarding the operations of our facilities and so forth, we are currently in the midst of the confirmation process. We would like to extend our prayers for early recovery. Now, I'd like to explain the first quarter business results for the first three months ended June 30, 2026. Page 4 shows the highlights for the first quarter of fiscal 26. FX rates were 158.5 yen to the U.S. dollar. 184.6 yen to the euro and 112.6 yen to the Australian dollar. Compared to the same period of the previous year, the yen depreciated against the US dollar, the euro, and the Australian dollar. Net sales increased by 14.7% year-on-year to 1,043,000,000,000 yen. Operating income increased by 8% to 151.6 billion yen. The operating income ratio was 14.5%, down 0.9 percentage points year-on-year. Net income increased by 5.4% year-on-year to 96.2 billion yen. Net sales reached a record high for a first quarter. Page 5 shows segment sales and profits for the first quarter of fiscal 26. Net sales of construction, mining, and utility equipment increased by 14.4% year-on-year to 966.9 billion yen. Segment profits increased by 6.4% to 130.1 billion yen. and the segment profit ratio decreased by 1% to 13.5%. Sales of retail finance increased by 7.4% year-on-year to 32.7 billion yen and segment profits increased by 2.8% to 9.6 billion yen. Sales of industrial machinery and others increased by 21.7% year-on-year to 52.9 billion yen and segment profit increased by 25.1% to 9 billion yen. I will explain the factors behind changes for each segment later. Page 6 shows sales by region for the construction, mining, and utility equipment segment in the first quarter of fiscal 26. Sales of construction, mining, and utility equipment increased by 14.6% year-on-year to 965 billion yen. Excluding FX impact, sales increased by 3.7% year-on-year. Details of changes by region will be explained on the following pages, divided into mining and construction equipment. Page 7 shows sales by region for mining equipment within the construction mining and utility equipment segment for Fiscal 26 Q1. Sales of mining equipment increased by 13.8% year-on-year to 462.4 billion yen. Excluding FX impact, sales increased by 2% year-on-year. In Asia, sales decreased significantly in Indonesia due to sluggish demand for coal, but in Latin America, sales increased sharply due to solid demand for copper mines, and sales for oil sands in North America also increased, resulting in an overall increase in sales. Page 8 shows sales by region for construction equipment within the construction, mining, and utility equipment segment for the first quarter of fiscal 26. Sales of construction equipment increased by 15.3% year-on-year to 502.6 billion yen. Excluding foreign exchange effects, sales increased by 5.3% year-on-year. Sales decreased in Japan due to a decline in public works and in the Middle East affected by the situation in the region. Overall sales increased as non-residential demand such as data centers and rental demand remained solid in North America and demand expanded in Latin America, driven by public investment. Page 9 shows the factor behind changes in sales and segment profit for the construction, mining, and utility equipment segment in the first quarter of fiscal 26. Sales increased by 122 billion yen year-on-year, driven by positive FX impacts from the weaker yen, higher sales volume, and improved selling prices. Segment profit increased by 7.9 billion yen year-on-year as positive impacts from the weaker yen, higher volume, and improved selling prices outweighed negative factors such as product mix changes and cost increases. The segment profit ratio decreased by 1 percentage point year-on-year to 13.5%. The tariff impact for Q1 of FY26, including refunds, was a negative impact of 11.7 billion yen, included in production costs. Page 10 shows the situation for retail finance in the first quarter of FY26. Assets increased from the previous fiscal year end due to an increase in new contracts and the impact of the weaker yen. New contracts increased year-on-year, mainly due to higher finance penetration in North America, Europe, Oceania, and Africa. Sales and segment profit increased by ¥2.3 billion and ¥300 million year-on-year, respectively, primarily due to the weaker yen and an expansion in assets. Page 11 shows sales and segment profit for the industrial machinery and other segment in the first quarter of fiscal 26. Sales increased by 21.7% year-on-year to 52.9 billion yen. Segment profit increased by 25.1% to 9 billion yen. The segment profit ratio increased by 0.4 percentage points year-on-year to 17%. Both sales and segment profit increased overall, mainly due to higher sales of large presses for the automotive industry and increased maintenance sales of Eximer lasers for the semiconductor industry. Page 12 shows the consolidated balance sheet and free cash flow. Total assets stood at 6,782,000,000 yen, an increase of 358.6 billion yen from the previous fiscal year end, mainly due to increases in cash and deposits and inventories. Inventories were 1,715,000,000,000 yen, up 113.3 billion yen from the end of the previous fiscal year, partly affected by the weaker yen. Thank you for watching. This concludes my presentation.

Next, Hishinuma, General Manager of Business Coordination Department will explain the FY26 business results projection. This is Hishinuma. I will explain the projection for fiscal 2026 business results and the status of major markets. Page 14 outlines the projection for FY2026. We have made upward revisions to the April 28 sales and profit projection, reflecting revised assumptions of the Middle East situation and U.S. tariffs, and the latest market outlook. Thank you for watching. Ltd. Demand projection has been partially revised. This will be explained later. Exchange rate from the second quarter will be ¥150 to the U.S. dollar, ¥174 to the euro, and ¥106 to the Australian dollar unchanged from the April projection. Full year average rates are 152.1 yen to the US dollar, 176.6 yen to the euro, and 107.6 yen to the Australian dollar. FY26 ROE is expected to be 10.1%. Cash dividend per share, 190 yen unchanged from the April projection. Consolidated payout ratio is projected to be 48.6%. Page 15 summarizes the Middle East situation and U.S. tariffs impact incorporated into the fiscal 26 projection, along with the underlying assumptions. First, the impact of the situation in the Middle East. At this time, regarding the impact of the Strait of Hormuz blockade, we are using alternative shipping routes, although some delays are observed in local projects. Delivery is expected to continue. and the impact on sales is projected to be less than initially anticipated. Additionally, the impact of declining demand in certain African countries and Southeast Asia due to soaring crude oil prices remains limited at this time. On the cost front, there have been no significant changes from initial assumptions regarding the rising procurement costs of petroleum-based materials. However, due to factors not factored in the previous forecast, such as increased shipping costs from Japan and additional expenses associated with changes in shipping routes, the impact on cost increases is expected to exceed initial projections. We revised our Middle East-related sales decline projection to 40% and a cost increase of ¥23.2 billion. Next, regarding the impact of U.S. tariffs. We have revised the tariff rate on steel and aluminum from 25% to 15%. We have also factored in the impact of the additional Section 301 tariffs that took effect in July. As a result, we have revised the impact of cost increase due to U.S. tariffs to plus 25.8 billion yen. Please note that these projections are estimates based on the current situation, as the impact amounts may fluctuate significantly depending on future developments. We will continue to closely monitor the situation. Page 16 represents the segment sales and profit projection. Construction, mining, and utility equipment is projected to increase by 4.3% year-on-year to 3.97 trillion yen. Segment profit is expected to decrease by 2.1% to 481 billion yen. Retail finance sales is projected to increase by 1.9% year-on-year to 128.5 billion yen. Segment profit will decrease by 0.2% to 36.5 billion yen. Industrial machinery and other sales will increase by 5.5% year-on-year to 252 billion yen. Segment profit is expected to increase by 9.4% to 41.5 billion yen. I'll explain the factors contributing to the changes in each segment later. Page 17 shows projection for sales by region for the construction, mining, and utility equipment for FY2026. Sales are projected to increase by 4.0% year-on-year to 3,949,400,000,000 yen. Excluding the impact of foreign exchange rates, sales are expected to increase by 2.1% year-on-year. Details of gains and losses by region will be explained on the following pages broken down by mining and construction equipment. Page 18 shows the mining projection for sales by region for FY in 2026. Sales of mining equipment are projected to increase by 2.1% year-on-year to ¥1,944.7 billion. Declines in sales in Asia due to sluggish coal demand and the Middle East due to regional situation will be offset by increases in sales in Latin America where copper mining demand is strong and in Africa where gold mining demand is strong. Excluding the foreign exchange impact, sales are projected to be virtually unchanged at minus 0.3%. Page 19 shows the construction equipment projections for sale by region for fiscal 2026. Sales is projected to increase by 6.0% year-on-year to 2.047 trillion yen. Excluding foreign exchange effects, sales are expected to rise by 4.5% year-on-year. Despite expected sales decline in the Middle East and Asia, Due to the situation in the region, sales is projected to increase, supported by solid non-residential and rental demand in North America, public investment in Latin America, and solid demand for medium-sized construction equipment for gold mining in Africa. Page 20 outlines the factors behind changes in sales and segment profit for construction, mining, and utility equipment. Sales are expected to increase by ¥164.0 billion year-on-year, driven by the positive effects of the weaker yen. Higher sales volume improves selling prices. Segment profit is expected to decrease by ¥10.1 billion year-on-year despite the positive effects of the weaker yen, higher sales volume, and improved selling prices due to the negative impact of factors such as impact of higher tariffs and rising procurement costs. The segment profit ratio is projected to decline by 0.8 percentage points year-on-year to 12.1%. Page 21 presents the outlook for retail finance. Assets are projected to increase by 46.4 billion yen compared to the end of the previous fiscal year driven by growth in new contracts. New contracts will increase by 63.3 billion yen year-on-year driven by higher utilization of financing in North America, Europe, Oceania, and Africa. Sales will increase by ¥2.4 billion year-on-year, primarily due to the expansion of assets. Segment profit is expected to remain at the previous year's level, primarily due to higher costs. ROA is projected to decline by 0.1 percentage points over year-on-year to 2.3%. Page 22 shows segment sales and profit projection for industrial machinery and others. A sales will increase by 5.5% year-on-year to ¥252 billion, while segment profit is projected to rise by 9.4% year-on-year to ¥41.5 billion. While automotive industry sales are expected to decline primarily due to lower Large-press sales to the semiconductor industry are expected to increase due to customers' increased production. As a result, overall sales and profit are projected to rise. The segment profit ratio is projected to rise by 0.6 percentage points year-on-year to 16.5%. Starting on page 23, we will explain the demand, trends, and outlook for the seven major projects. The unit demand figures for the seven major projects include mining. The figures for FY26 first quarter are preliminary estimates from the company. Unit demand for FY26 Q1 appears to have increased by 12% year-on-year. Thank you very much. While our demand forecast as of April had factored in a decline in demand in the Middle East and neighboring countries due to the situation in the region, demand in these areas is currently exceeding initial expectations. Taking these circumstances into account, we have revised our full-year demand forecast for FY26 to a year-on-year range of 0 to plus 5%. Page 24 shows demand trends and forecasts for North America market. Demand volume for FY26Q1 appears to have increased by 11% year-on-year. Demand from non-residential sectors such as data centers and the rental market remain robust. We have revised our full-year demand forecast for FY2026 from the April forecast to a range of 0 to plus 5% year-on-year. We expect non-residential and rental sectors centered on data centers to continue driving demand. Page 25 shows demand trends and forecasts for the European market. Demand for FY26 Q1 appears to have increased by plus 4% year-on-year. We have not revised the full-year demand forecast at this time, but we will closely monitor future developments, including the impact of the ECB's interest rate hike in June on construction equipment demand. FH26 shows demand trends and forecasts for the Asian market. Demand for the first quarter of the fiscal year 2026 appears to have increased by 4% year-on-year. In Indonesia, while demand from the coal mining sector remains sluggish due to future uncertainty, demand from the agricultural sector including food estate projects have increased. and furthermore, regarding other Asian countries, we have anticipated that rising energy prices caused by the situation in the Middle East would trigger economic slowdowns and lead to a decline in construction equipment demand. However, the actual decline in demand has not been as significant as expected. In India, demand for construction equipment remains robust, supported by public works projects and economic growth. Taking these circumstances into account, we have revised our full-year demand forecast FY26 from the April projection to a range of 0-5% year-on-year. Page 27 shows demand trends and forecasts for the Japanese market. Demand volume for the first quarter of fiscal year 26 appears to have decreased by 11% compared to the same period last year. Although we have not revised the full-year demand forecast, the number of public works projects continues to fall below last year's level, and we will closely monitor future developments. Page 28 shows trends and forecasts for the prices of major minerals related to mining equipment demand. Copper prices remain high, supported by robust demand, while gold is currently undergoing a temporary correction and is expected to remain at high levels going forward. Fuel coal prices for both low-grade and high-grade coal are currently trending upward, partly due to soaring energy prices caused by the Middle East situation, will continue to closely monitor developments. Page 29 shows the transient demand for mining equipment. Unit demand for the first quarter of FY26 appears to have decreased by 12% year-on-year. Thank you for watching. Taking these circumstances into account, we have revised our full-year FY26 demand forecast from April projection to a year-on-year decline of 5% to 10%. Page 30 shows the sales forecast for the construction, mining, and utility equipment, including equipment, parts, and services. In the first quarter of FY26, parts sales increased by 18.4% year-on-year to 286.5 billion yen. The aftermarket including services accounted for 54% of total sales, and total aftermarket sales including the impact of foreign exchange rates increased by 5% year-on-year. For fiscal year 2026, parts sales are projected to increase by 4.2% year-on-year to ¥1,099,900,000. The aftermarket segment, including parts, services, and other items, is expected to account for 52% of total sales and aftermarket sales excluding foreign exchange effects are projected to increase by 2.9% year-on-year. Next, I will explain the main topics.

I am on page 43. Over many years, Komatsu has accumulated equipment operating data, construction data, and job site expertise through contracts, smart construction, and other solutions. Based on these assets, we have gradually advanced AI usage across regions and businesses, and we have now strengthened our organization to accelerate global AI adoption, launching full-scale deployment across the entire value chain, from R&D and manufacturing to sales and service. Going forward, we will further accelerate these initiatives to drive operational transformation and customer value creation across our global value chain. Next, turning to page 44. Komatsu has begun deploying its smart construction digital jobsite management solution for Changi Airport Terminal 5 construction project, a major national infrastructure development in Singapore. By introducing advanced solutions, we enable real-time tracking of construction volume, smooth data sharing between machines, and project management utilizing construction data, contributing to improved job site efficiency and prompt decision making. Next on page 45, Komatsu and the Atlassian Williams F1 team launched the Komatsu Williams Engineering Academy in 2024 to nurture next-generation engineers. We have now launched the third term and will strengthen collaboration with Formula Student, a premier engineering competition for university students. Komatsu has issued green bonds through a public offering in the domestic market. Proceeds raised from this issuance are planned to be allocated toward expenditures related to the rebuilding of Komatsu's new headquarters building currently underway. From an environmental performance standpoint, the building adopts a design that reduces CO2 emissions, obtaining ZEB-ready certification in April 26th. Relocation to the new headquarters building is scheduled for January 2027. That concludes my presentation. Now we would like to move on to the Q&A session. Now we would like to take the first question. This is Michael from Nomura Securities. Thank you very much for the presentation. I have two questions. Regarding your demand outlook, as well as your full year, volume, expectations, you have revised it up. Regarding this, in the last three months, what kind of changes were observed? Originally, the risk related to the Middle East was accounted for, and I think you were a little bit conservative in your sales and demand expectations. I guess the risks didn't materialize as much. Is that the case? Or, for North America and Latin America, inclusive of mining, This is Ahishi Numa speaking. Regarding the impact from the Middle East, as you rightly said, the impact wasn't as substantial. So that has been accounted for. And also by geography, we talked about it in the presentation, but North America was solid due to demand from data centers and rental demand was brisk as well. By geography, we talked about this in the presentation, but for North America, Q1 alone, Demand increased exceeding 10%. And other regions, there were a lot of regions that grew positively. There were some regions like Japan that went down substantially, but all in all, there were many regions that trended positively. And for Asia, we were expecting some impact from the Middle Eastern circumstances. I wouldn't say it was zero, but for the Philippines as well as Malaysia, there were some regions that were affected by fuel or oil prices. However, there were some offsets that led to the updated guidance or results. And for the mining business, it is hard to predict by demand. So when we talk about the overall picture, we talk about trends in commodity prices, and also we look at capex plans by mining measures. We often explain in that regard. So for when it comes to sales impact, It's about when the deliveries are going to materialize, and there are some timing changes. So it's really hard to explain the mining business just based off demand. However, copper continues to be strong, as we have been communicating from before. But what was positive on sales actually came from gold. In Africa, that is. That positively affected our mining business as well as some middle-sized construction equipment that are utilized at gold mines. Thank you very much. I have two follow-up questions. For North America in Q1, apparently demand was quite strong and I think sales grew as well for the full year. The growth rates apparently is a little bit smaller, but was it by chance that Q1 was good for North America and for Asia? I might be looking at the wrong slide, but when you look at demand, you have been revising it up, but for sales expectations, I think you have been revising it down instead. So for Asia, are there some differences in how you view demand and sales? You were saying some regions performed well, So can you give us more flavor on North America as well as Asia? So for North America, year over year, when you do the comparisons, as you can see on the screen, comparing against 22Q1 and benchmarking against that year, You could see how 2026 was, and we were at 103. But in the previous year, as well as the year before last, which was in 24 and 25, it was quite low. Percentage-wise, it trended high somewhat. However, it is true that the business continues to be brisk, so we are expecting a positive projection. And for Asia, Indonesia accounts for a large part of sales, but in Indonesia, coal demand continues to be sluggish. Therefore, we are expecting further deterioration, and that has led to these projections. I see. Thank you very much. My second follow-up question is about the impact on profits from a tariff point of view. In Q1 this year, you were able to see some refunds coming from mutual tariffs, and the $30 billion, did that all materialize in the first quarter? And for refunds, I think it's going to be an absence leading to a reactionary fall. But for steel and aluminum, compared to your original expectations, it went down to $88.3 billion instead. and it's effective from June the 8th. So due to inventory impact, I guess the impact is not accounted for for the full year. So there should be some lower impact from steel and aluminum going forward for next fiscal year. So the reactionary fall from 30 billion, is it going to be mitigated for next fiscal year? So I might be jumping to conclusion talking about next year, but can you talk about Q1 refunds as well as steel and aluminum impact for next fiscal year? Thank you. This is Hosotani, CFO. For tariffs, as of April, we were saying $30 billion. For refunds, it is steadily underway right now. And in reality, for the refunds that have materialized in the U.S., The full amount received doesn't hit the P&L, but demand continues to be solid, and this time around, for Q1, approximately close to $10 billion has already been refunded. That directly has affected the P&L. On the other hand, there has been some changes in tariff rates, but still a little minimum. 25% especially for Japan has been reduced to 15% so this gain has been accounted for in the guidance. On the other hand for the increases as of April Section 122 at 10% in the latter half of July It was something that expired, but when we were making the guidance in April, we weren't sure what was going to happen after 1-22, so we assumed 10% tariff rates. And due to the announcements by the US, it was replaced by 3-0-1, and 10% became 15% instead. That led to higher tariff costs. But the impact is not material. That's what we are viewing. and in our updated outlook, we have accounted for all the impact we're expecting from tariffs. Thank you. If that's the case, for refunds, you're planning for $30 billion and that hasn't changed, but in the Q1, it was $10 billion and for the second and third quarters, the remaining $20 billion or more should accordingly hit your performance. And for steel and aluminum, for that part, The 25% to 15% for next fiscal year. Is that going to be a positive impact? Because there are some parts that are at 25% for this fiscal year, right? Or is that not the case? Can you please confirm? This is Hosotani again. The first question was about refunds, but compared to the initial pace that we were assuming, actually the refunds are being carried out faster than expected. So we are expecting $30 billion for the full year. Also, on the other hand, for steel and aluminum, We were assuming 25% in April, which went down to 15%. And that inventory where we were assuming at 25%, we weren't really assuming that this inventory was going to be outstanding next fiscal year. So, no. Half of the impact for 25% is this year, and the other half is for next fiscal year. The fact that 25% went down to 15%, excuse me, let me correct myself. You mean the gain portion, when that's going to hit. Regarding how much is going to be carried over to next fiscal year, unfortunately, I'm not able to give you clear guidance at this moment. Thank you. I see.