Mid-range Management Plan

The Komatsu Group has been conducting business in tune with the “Together We Innovate GEMBA Worldwide” three-year management plan, which started in April 2013 and will continue through March 2016.

Market Environment

Demand for construction and mining equipment is growing, supported by the business cycle, in some regions of the world. However, we need to anticipate that it will remain at a standstill into the near future, due to a delay in demand recovery in emerging countries and a drop in demand for mining equipment against the backdrop of sluggish prices of commodities. In light of dynamic changes in the market, the number of uncertain factors is growing in the short- and medium-term projections.

In the long term, however, we are in a growth industry, as we project an increase in demand for construction and mining equipment, supported by growing population and urbanization on a global scale.

Demand for Construction and Mining Equipment: 7 Major Products

Figure

Outline of the Plan

The Komatsu Group will continue to focus efforts on the core businesses of construction and mining equipment as well as industrial machinery, promote two growth strategies by capitalizing on the Group's strengths and structural reforms designed to reinforce its business foundation, and improve the level of profit redistribution to shareholders.

Effective engagement in focused activities necessarily calls for teamwork of employees with Gemba (workplace) capability, i.e., the vitality of all our employees and organizations plus our ability to continuously improve the workplace. Based on The KOMATSU Way, all of us in the Komatsu Group will advance improvement efforts at our respective workplaces around the world.

We are also going to put more efforts on brand management activities, through which we strive to have a thorough understanding of our customers' workplaces and become indispensable to them. By making all these efforts, we are aiming at developing human resources needed for global business expansion.

 Target figures for FY2015FY2013 results
Operating income ratio18 - 20%12.3%
ROE*¹18 - 20%12.4%
Net debt-to-equity ratio*²0.3 or below0.37
Consolidated payout ratio30 - 50% stably35%
*1 ROE = Net income attributable to Komatsu Ltd. for the year / [(Komatsu Ltd. shareholders' equity at the beginning + Komatsu Ltd. shareholders' equity at the end of the fiscal year) / 2]
*2 Net debt-to-equity ratio = (Interest-bearing debt - Cash and cash equivalents - Time deposits) / Komatsu Ltd. shareholders' equity

<Premises>

 Target figure for FY2015FY2013 results
Guideline on salesJPY2,300 bn +/- JPY200 bnJPY1,953.6 bn
Guidelines for exchange ratesPer USDJPY 90-95JPY99.6
Per EURJPY120-125JPY132.8
Per RMBJPY15.0-15.3JPY16.3

Focused Activities

(1) Growth Strategies Based on Innovation

We will continue to advance our strengths we have built on, such as ICT(Information and Communication Technology), development and production of key components, global sales and service networks, as well as flexible procurement and production, step up our efforts in technology development, and create DANTOTSU(unrivaled) products, DANTOTSU services, and DANTOTSU solutions. Together with our customers and through these DANTOTSU strides, we will speedily innovate their jobsite operations and generate innovation designed to create new value.

•Activities

  • Figure

    D39PXi iMC dozer
    We are developing solutions by using information transmitted from the machines in use and are making customers' jobsite operations “visible” through a construction management system and the like.

    Related page: Machine Control Constraction equipment

  • Figure

    Establishment of joint-ownership company for next-generation underground mining equipment
    Jointly with General Electric Company of the United States, we established Komatsu GE Mining Systems in April 2014 to develop next-generation underground mining equipment.

(2) Growth Strategies of Existing Businesses

In our existing businesses, we are taking the fullest advantage of ICT to “visualize” customers' jobsite operations and are implementing quicker delivery of spare parts and service. This is done while expanding businesses throughout the value chain, including the rental-to-used equipment and retail finance businesses, thereby further improving customer satisfaction. In the spare parts business, we will not only continue to reform ordering/receiving operations and logistics, but also work to accelerate sales in Strategic Markets as well as sales of strategic parts, such as buckets, teeth and track shoes, in order to expand profits.

In response to new emission control regulations (e.g., Tier 4 Final in the United States) which have been effective in the United States, Europe and Japan since 2014, we are well prepared to combine our strengths of in-house development and production of key components, such as engines, hydraulic equipment and control systems, and cutting-edge technologies, thereby ensuring the smooth development and market introduction of new products.

• Activities

  • Figure

    PC200/220-8M0 medium-sized hydraulic excavator for use in emerging countries
    Having analyzed how hydraulic excavators are being used in China, we have incorporated optimal specs into these modesls to reduce lifecycle costs.

  • Figure

    New FE25-1 battery-powered forklift truck
    Launched in Japan in May 2014, this new model features prolonged hours of daily use, thanks to rapid charging, as well as enhanced water and dust resistance. As a result, it can operate on jobsites where conventional electric forklift trucks haven't been able to do so.

(3) Structural Reforms to Reinforce Our Business Foundation

While we have almost doubled consolidated sales for the last 10 years, we have kept fixed costs about flat. Based on our policy of separating costs from growth, we will continue to sustain an appropriate level of fixed costs into the future. Towards the target of cutting down the purchase of electricity to half at all our plants in Japan, we are promoting manufacturing reforms and consolidating or renewing factory buildings, thereby working to achieve a substantial reduction of production-related fixed costs.

Fixed Costs

Figure

Centering on the Global HANSEI Operation Center, we are also working to improve the levels of planning of sales, production and inventories worldwide. At the same time, we are applying the Zero Inventory program to more distributors in order to achieve an appropriate level of inventories of products and parts on a global scale.

To facilitate direct linkages between our plants and our customers' jobsites, we are going to reassess our human resources and organizations to secure human and other resources needed for investment for our future growth.

• Activities

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