Japanese equipment manufacturer Komatsu saw declines in originations, managed assets and revenue in the first quarter as yen appreciation and lower regional demand added to tariff impacts.
The yen appreciated by 10 yen relative to the U.S. dollar between the first quarter of Komatsu’s fiscal 2024 and the first quarter of fiscal 2025, ending June 30. That appreciation, in conjunction with 14.6% year over year decline in North American construction, mining and utility sales, led to a decline in retail finance performance, Chief Financial Officer Takeshi Horikoshi said during the firm’s July 29 earnings call.
Komatsu, along with its fellow Big 3 Japanese construction OEMs Kubota and Hitachi, continue to face challenges related to production and economic headwinds despite last week’s trade deal between the U.S. and Japan.
One such challenge comes from the 50% steel and aluminum tariffs, which represent the largest tariff the company faces, with an expected 30 billion yen ($202.1 million) in steel and aluminum tariff costs, Horikoshi said.
Read more about the challenges facing Japan’s Big 3 Construction OEMs here
BY THE NUMBERS: Komatsu reported the following Q1 results for its fiscal 2025, which ended June 30:
- Retail finance originations totaled $1.8 billion, down 15% YoY;
- Retail finance revenue landed at $208.9 million, down 0.3% YoY;
- Retail finance’s managed assets declined to $9.4 billion, down 6.4% YoY;
- North American construction, mining and utility sales to outside customers decreased 14.6% YoY to $1.5 billion.
- North American construction, mining and utility sales represented 27% of total sales, down 2 percentage points YoY;
- Total construction, mining and utility sales fell 5.5% YoY to $5.8 billion;
- Net income was $626.8 million, down 16.9% YoY.
Komatsu tariff plan post trade-deal
For Komatsu, the North American market did not see last-minute demand related to tariffs and uncertainty remains. But there appears to be an effort to attract investment into the region, Kiyoshi Hishinuma, general manager of the business coordination department, said during the call.
“If investments increase, that may have a positive impact on our business. There’s both negatives and positives in what we’re expecting, but we need to closely watch what unfolds going forward.” — Kiyoshi Hishinuma, general manager of the business coordination department, Komatsu
Read more about the U.S.-Japan trade deal here
Still, Komatsu estimates a $206.8 million reduction in tariff costs on a payment basis following the announcement of the U.S.-Japan trade deal, according to the company’s earnings presentation.
MARKET REACTION: Shares of Komatsu (OTCS: KMTUY) were down XX% to $XX as of market close today. It has a market capitalization of $XX.
Editor’s note: All amounts have been converted to U.S. dollars.
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