KOMATSU LTD. Q4 FY2026 earnings call

• Strategic Growth Plan: Three pillars - create customer value through innovation (e.g., operating power agnostics truck, POC test of hydrogen fuel cell powered hydraulic excavator, advancing SDV development for mining equipment, promoting autonomous driving for construction equipment), drive growth and profitability (e.g., receiving first major mining equipment order in Middle East, deploying AHS in US, acquiring SRC of Lexington's remanufacturing business, establishing training center in Cote d'Ivoire), transform business foundation (e.g., embedding risk management, strengthening supply chain, accelerating human resource development for innovation and business transformation). • Achievement of Management Targets: Net sales increased but profit decreased due to volume decline and cost increases; ROE achieved target of 10% or higher; retail finance business achieved ROA and net DE ratio targets; shareholder returns expected to maintain consolidated payout ratio of 40% or higher; executed share repurchase; made progress in social issue resolution with 30 KPIs and some targets achieved ahead of schedule.

Construction Mining and Utility Equipment Segment: Net sales increased by 0.2% to 3,806,000,000 yen, segment profit decreased by 18% to 491.1 billion yen, segment profit ratio 12.9% (down 2.9 points). Retail Finance Segment: Sales increased by 2.4% to 126.1 billion yen, segment profit increased by 24.4% to 36.6 billion yen. Industrial Machinery and Other Segment: Sales increased by 6.8% to 238.8 billion yen, segment profit increased by 38.5% to 37.9 billion yen, segment profit ratio 15.9% (up 3.6 points)

• Fiscal Year 2026 Forecast: Anticipates exchange rates of 150 yen to US dollar, 170 yen to euro, 106 yen to Australian dollar. Projected net sales 4,118,000,000 yen (0.4% decrease y - o - y), operating income 508,000,000,000 yen (10.5% decrease y - o - y), net income 318 billion yen (15.5% decrease y - o - y). ROE projected at 9.1%. Dividend per share planned at 190 yen same as previous year. Segment - wise: Construction, Machinery, Mining Equipment and Utility segment revenue expected to decrease 0.4% y - o - y to 3.79 trillion yen, segment profit decrease 10.4% to 440 billion yen; Retail Finance segment revenue increase 1.1% y - o - y to 127.5 billion yen, segment profit decrease 1.6% to 36 billion yen; Industrial Machinery and Others segment revenue increase 0.1% y - o - y to 239 billion yen, segment profit decrease 2.5% to 37 billion yen.

• Middle East Situation: Turmoil in Middle Eastern countries may continue, causing sales decrease of 90.1 billion yen and cost increase of 18.8 billion yen, though impact on production due to crude oil derived materials shortage is unclear. • U.S. Tariffs: Section 122 additional tariffs and revised steel and aluminum tariffs apply, factoring in additional costs of 67.8 billion yen and refunds of 30 billion yen, resulting in net cost increase of 37.8 billion yen. • Market and Demand Uncertainties: Uncertainties in demand trends in various regions like Indonesia, Middle East, North America, Europe; potential impact of coal prices, diesel shortages, replacement cycles on mining equipment demand; challenges in mitigating tariff impacts and maintaining profitability.

Q: Regarding tariff impact and price increases, how did fiscal 25 results differ from expectations and what's accounted for in fiscal 26?

A: Fiscal 25 tariff impact was 64.2 billion yen. For fiscal 26, impact materializes on full year basis, with factors like FX impact, reciprocal tariffs, and refunds considered. On price increases, global price increases needed as Caterpillar not raising prices and tariff increases can't be absorbed completely.

Q: Regarding volume in light of Middle Eastern conflict, what are the assumptions behind the $90.1 billion sales reduction?

A: Expecting 60% decline in Middle East demand, impact from Strait of Hormuz, higher idle standby rate of equipment in Indonesia despite higher coal prices, and accounted for 90 billion impact on sales and 18.8 billion on cost increase.

Q: Details around volume mix and product mix negatively contributing to performance?

A: Volume difference was 25.8 billion yen negative, product mix 25.1 billion yen negative, with factors like electric dump truck mix, Chile contract business margin decline, and significant sales volume decrease in Indonesia market contributing.

Q: CFO's commitment as CFO?

A: Be mindful of shareholders, contribute to running the business, support better top line and capital efficiency improvement, and secure net profit size despite impacts like Middle East conflicts and U.S. tariffs.

Q: Mining equipment metal prices rising, but aftermarket growth assumption conservative?

A: Mining equipment replacement cycle is long, with varying demand by region, and aftermarket growth may not look dynamic due to drop - offs in Indonesia and Middle East.

Q: Replacement cycle for mining equipment?

A: Not about 2011 cycle, but about big deals in recent years, with less large deals in 2025 and 2026 expected, but sheer volume of general deals increasing.

Q: Impact from U.S. tariffs on P&L and industrial machinery?

A: Fiscal 25 tariff impact on construction equipment was 64.2 billion yen, industrial machinery has a small impact of several hundred million yen.

Q: Middle East impact on production?

A: Uncertainties in production, try to secure works and components, but potential impacts from material shortages in NAFTA and others not incorporated into guidance yet.

Q: North America demand guidance and margins?

A: North America demand projected flattish, but trends in rental, energy, infrastructure are positive; margins in North America not the highest due to procurement cost and tariffs.

Q: Electric dump trucks and product mix?

A: Product mix - wise, rigid dump trucks went down while electric dump truck composition increased, causing average margins to come down slightly.

Q: AHS units and future targets?

A: Reached 1,000 units, original target was 1,000 units in fiscal 27, now thinking of raising target to 1,200 units with new customer implementation likely increasing.