Komatsu retail finance revenue slides more than 20% in 2023

Japanese equipment manufacturer Komatsu posted a decline in retail finance profits for fiscal 2023, in part because it used its allowance for doubtful accounts, or losses, in North America.  

Profits in the retail financing sector decreased “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,” Chief Financial Officer Takeshi Horikoshi said today on Komatsu’s fiscal year 2023 earnings call.  

The company also cited unfavorable exchange rates between the yen and the U.S. dollar as a reason for its decline in profits.  

BY THE NUMBERS:

In fiscal year 2023:  

• Retail finance originations were 1.02 billion yen ($6.5 million);  
• Retail finance managed assets totaled $8.4 million;  
• Retail finance revenues increased 20.9% year over year to $656.1 million;  
• Profits in retail finance decreased 11% YoY to $153.4 million; and  
• North American construction, mining and utility sales increased 9.7% YoY to $22.9 million. 

Construction remains strong  

Concurrent with the decrease in returns from Komatsu’s retail finance sector, the company continues to pay close attention to interest rates as they pertain to rental growth.  

“Rental season is now in a slow season,” Kiyoshi Hishinuma, general manager of business coordination, said during the earnings call. “Also, interest rates are currently high. But if they are expected to fall in the future, there is no need to rush to replenish rental equipment of a third quarter before the rental season starts in early spring and that is why rental growth has come to a standstill,” he added.  

Returns from Komatsu’s construction, mining and utility equipment business remained steady in 2023.  

The company stated in its earnings presentation that the increase in construction, mining and utility returns was driven by an uptick in selling prices.  

“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,” Hishinuma said. Komatsu expects sales to decrease in its construction, mining and utility segment in the next fiscal year, stating in the earnings report that “the negative impact of lower volumes, foreign exchange rates, and an increase in fixed costs and production costs will outweigh improving selling prices.”  

Acquisition advances  

Komatsu made acquisitions throughout fiscal 2023, including purchasing Australian mining and quarry fleet operations firm iVolve Holdings. The value of the deal was not disclosed.  

Komatsu also bought Detroit-based American Battery Solutions in November 2023. The purchase allowed Komatsu to begin developing its own batteries for mining and construction equipment. The company said at the time of the deal that it expects to begin using those batteries first in North and South America.  

The Japanese OEM is also increasingly investing in alternative energies. It signed an agreement in December 2023 to collaborate with General Motors to develop hydrogen fuel cells for its 930E electric-drive mining trucks. Komatsu also created and began proof-of-concept tests last year on a medium-duty hydraulic excavator powered by hydrogen fuel cells. GM and Komatsu expects to test their prototypes in the Arizona desert in the “middle of the 2020s,” Hishinuma said on the call.  

Komatsu’s stock gained about 18.7% this year, while its competitors in the industrial products sector have gained on average 6.7%, analysts at Zacks Investment Research noted today 

Shares of Komatsu Ltd. (OTCS: KMTUY) were up 2.27% from market open to $27.98 as of market close today. Komatsu has a market capitalization of $27 billion.   

Editor’s note: All amounts have been converted to U.S. dollars.  

Registration is now open for Equipment Finance Connect, the nation’s only dealer-centric equipment lending and leasing event, which will take place May 5-7 in Nashville, Tenn. Learn about the event and free dealer registration at EquipmentFinanceConnect.com.