Japanese equipment manufacturer Komatsu’s retail finance originations and revenues increased in its fiscal first quarter due to the impact of foreign exchange rates and rising interest rates.
Komatsu’s new retail finance contracts increased 10.1% year over year in Q1 to $1.8 billion in part due to increased conversion rates, according to the company’s earnings presentation. Komatsu’s foreign exchange rate for Q1, which began April 1 and ended June 30, was 136.4 yen to $1, up compared with 127.1 yen to $1 in Q1 2022.
The company’s revenues from retail financing activities increased 15.1% YoY to $167.9 million, based on the same foreign exchange rate, according to the presentation.
Retail finance assets for Q1 totaled $8.5 billion, up 9.5% YoY. The foreign exchange rate for retail finance assets was 145 yen to $1 at the end of Komatsu’s first quarter.
The increase in assets, originations and revenues was the result of increased exchange and interest rates, Takeshi Horikoshi, Komatsu’s senior executive officer and chief financial officer, said during the company’s earnings call Friday.
Construction, mining, utility sales up 26%
Komatsu’s construction, mining and utility equipment sales in North America landed at $1.7 billion, up 26.3% YoY, according to the presentation. North American construction, mining and utility equipment sales represented 28% of Komatsu’s total sales in the market, up 2 percentage points YoY.
The increase in sales compared with the previous year resulted from improved prices and positive effects of foreign exchange rates, according to the presentation.
Rebuilt dealer inventory levels in Q1 also boosted sales volumes and selling prices, said Kiyoshi Hishinuma, Komatsu’s executive officer and general manager of the business coordination department, during the call.
“In North America, dealer inventory was built up, so they contributed positively to sales,” he said. “As for the product mix, since mining was robust … it worked positively for sales.”
Still, Komatsu forecasts demand for its construction, mining and utility equipment to decline 5% to 10% for fiscal 2023, according to the presentation.
“In terms of our performance, as we have been saying, the overall demand is dropping, so we think that the construction equipment business may decelerate,” Hishinuma said. “Having said that, the mining business is steadily growing, so that is the thinking behind our demand outlook based on the Q1 results and the change in the situation thereafter.”