I am Hiroshi Hosotani, CFO. I will now provide an overview of the business results for the fiscal year 2025.

Page 4 shows the highlights of business results for Fiscal '25. Foreign exchange rates were 150.5 yen to the US dollar, 173.8 yen to the euro, and 99.2 yen to the Australian dollar.

Compared to the previous fiscal year, the Japanese yen appreciated against the US dollar and Australian dollar, but depreciated against the euro. Net sales increased by 0.7% to ¥4,132.8 billion.

Operating income decreased by 13.7% to ¥567.3 billion. The operating income ratio was 13.7%, down 2.3 points.

Net income attributable to Komatsu decreased by 14.4% to ¥376.4 billion. Net sales reached a record high for the fifth consecutive year.

ROE was 11.3%, down 2.9 points from the previous year. We plan to pay an annual cash dividend of ¥190 per share, the same as the previous year, resulting in a consolidated payout ratio of 45.9%.

Page 5 shows segment sales and profits for Fiscal '25. Net sales in the Construction, Mining and Utility Equipment segment increased by 0.2% to ¥3,806 billion.

Sales exceeded the projection announced in October as demand was higher than expected. Segment profit decreased by 18% to ¥491.1 billion.

The segment profit ratio was 12.9%, down 2.9 points. Retail finance sales increased by 2.4% to ¥126.1 billion.

Segment profit increased by 24.4% to ¥36.6 billion. Industrial machinery and others sales increased by 6.8% to ¥238.8 billion.

Segment profit increased by 38.5% to ¥37.9 billion. I will explain the factors behind the changes in each segment later.

Page 6 shows the sales by region for the Construction, Mining and Utility Equipment segment for Fiscal '25. Sales to outside customers for the segment increased by 0.2% to ¥3,796.1 billion.

Details of regional changes will be explained by mining and construction equipment respectively on the following pages. Page 7 shows the sales by region for mining equipment within the segment for Fiscal '25.

Mining equipment sales decreased by 0.6% to ¥1,904.4 billion. In Asia, sales decreased due to a decline in demand following low coal prices in Indonesia and demand decline.

However, sales increased in Africa and Latin America, where demand for copper mines remains strong, keeping overall sales flat. Page 8 shows the sales by region for construction equipment within the segment for Fiscal '25.

Construction equipment sales increased by 1.1% to ¥1,891.7 billion. In real terms, excluding FX impact, sales increased by 0.2%.

In Asia, sales decreased as it took time to adjust distributor inventories in Indonesia. Sales increased in North America driven by demand for infrastructure, rental, and energy, and in Europe where infrastructure investment is on a recovery trend.

Page 9 shows the causes of difference in sales and segment profit for the Construction, Mining and Utility Equipment segment for Fiscal '25. Sales increased by ¥7.8 billion as price improvement effects outweighed the negative impact of decreased volume.

Although we focused on improving selling prices, segment profit decreased. The negative effects of decreased volume, product mix, and higher costs due to US tariffs and production costs outweighed the price improvements, resulting in a ¥107.8 billion decrease in profits.

The segment profit ratio was 12.9%, down 2.9 points from the previous year. The impact of tariffs in Fiscal '25 amounted to ¥64.2 billion.

Page 10 shows the performance of the retail finance segment for Fiscal '25. Assets increased by ¥238.3 billion from the previous fiscal year-end due to an increase in new contracts and the depreciation of the yen.

New contracts increased by ¥75.8 billion mainly due to higher finance penetration in North America and Europe. Revenues increased by ¥2.9 billion mainly due to an increase in outstanding receivables.

Segment profit increased by ¥7.2 billion mainly due to lower funding costs. Page 11 shows the sales and segment profit for the Industrial Machinery and Others segment for Fiscal '25.

Sales increased by 6.8% to ¥238.8 billion. Segment profit increased by 38.5% to ¥37.9 billion.

The segment profit ratio was 15.9%, up 3.6 points. For the automotive industry, sales of large presses increased.

For the semiconductor industry, sales and profits increased due to higher maintenance sales of excimer lasers with high profit margins. Page 12 shows the consolidated balance sheet and free cash flow.

Total assets reached ¥6,423.9 billion, an increase of ¥650.4 billion, primarily due to the impact of the yen's depreciation. Inventories increased by ¥195.2 billion to ¥1,601.9 billion, affected by both the weak yen and US tariffs.

The shareholders' equity ratio was 54.7%, down 0.3 points, and the net D/E ratio was 0.26 times. Free cash flow for Fiscal '25 was an inflow of ¥249.7 billion, a decrease of ¥56.8 billion from the previous year.

From page 13, I will explain the progress of the strategic growth plan. The current strategic growth plan, Driving Value with Ambition, which started in Fiscal '25, set three pillars of growth strategy: create customer value through innovation, drive growth and profitability, and transform our business foundation.

Under create customer value through innovation, we began operating a power-agnostic truck at a copper mine in Sweden as part of our efforts to address various power sources. We also conducted a PoC test of a hydrogen fuel cell powered hydraulic excavator at a highway construction site in Japan.

As part of our efforts for advanced automation and remote control, we are advancing the development of SDVs for next-generation mining equipment in collaboration with Applied Intuition. We are also promoting the practical use of autonomous driving technology for construction equipment through collaboration with TIER IV.

Next, under drive growth and profitability, we received the first major mining equipment order in the Middle East for the Reko Diq copper-gold project in Pakistan. We began deploying AHS in the US and delivered the 1,000th unit globally.

We will also strengthen our remanufacturing business through the acquisition of SRC of Lexington in the US. We have initiated the establishment of a training center in Côte d'Ivoire and will work to strengthen our marketing and service capabilities in the Africa region.

Lastly, regarding transform our business foundation, in addition to embedding risk management through ERM and strengthening our supply chain through cross-sourcing and multi-sourcing, we accelerated human resource development for innovation and business transformation through utilization of AI and digital transformation. We succeeded in improving scores in our employee engagement survey.

Also, our global brand campaign led to high recognition at international creative awards. Page 14 shows the achievement of management targets in the strategic growth plan.

Net sales for Fiscal '25 increased by 0.7% year on year as improvement in selling prices offset the decline in sales volume. On the other hand, profit decreased year on year as the negative impacts of volume reduction and cost increases outweighed the effects of price improvements.

Regarding management targets, in terms of profitability, the operating income ratio for Fiscal '25 was 13.7%, a 2.3-point decrease from the previous year. Despite efforts to improve selling prices, the results were significantly impacted by volume decline, inflation-related cost increases, and higher costs due to US tariffs.

In terms of efficiency, ROE was 11.3%, achieving our target of 10% or higher. For the retail finance business, we achieved our targets for both ROA as well as the net D/E ratio.

Regarding shareholder returns, we expect to maintain a consolidated payout ratio of 40% or higher. Also, we executed a repurchase of ¥100 billion of our own shares.

Regarding the resolution of social issues, we have set 30 KPIs, and progress in Fiscal '25 has been broadly in line. Among these, for the reduction of environmental impact, we achieved our target for CO2 reduction from production ahead of schedule.

Reduction of CO2 emissions during product operation and the renewable energy usage ratio are also progressing largely as planned. That concludes my presentation.

With that, Fiscal Year 2026 forecast of the business, and that will be explained by Mr. Hishinuma.

This is Hishinuma, the GM from Business Coordination Department. I'd like to walk you through our forecast for Fiscal Year 2026 in our primary markets.

Page 16 summarizes impact of the situation in the Middle East and the US tariffs, as well as the underlying assumptions that have been factored into the Fiscal Year 2026 earning forecast. Then the Fiscal Year 2026 forecast incorporates items for which estimates can be made based on information available at this time.

Regarding the situation in the Middle East, assuming the turmoil in the Middle Eastern countries and soaring oil prices and supply chain disruptions will continue throughout the year, we have factored in the decrease in sales of ¥90.1 billion and an increase in costs of ¥18.8 billion. However, regarding the impact on production due to shortages of crude oil-derived materials, while there is a risk, the situation is unclear at this time.

Therefore, it has not been factored into the Fiscal Year 2026 outlook. Now, on to US tariffs, based on assumptions, the Section 122 additional tariffs will apply throughout the year and the revised steel and aluminum tariffs will apply from April the 6th throughout the year.

We have factored in additional costs of ¥67.8 billion. However, we have also factored in ¥30 billion in refunds, resulting in a net cost increase of ¥37.8 billion.

Page 17 provides an overview of the outlook for Fiscal Year 2026. We anticipate exchange rates of the 150 yen to the US dollar, 170 yen to the euro, and 106 yen to the Australian dollar.

We project net sales of the ¥4,118 billion, a 0.4% year-on-year decrease, and operating income of the ¥508 billion, a 10.5% year-on-year decrease. Net income is projected to be ¥318 billion, decrease of 15.5% year on year.

Furthermore, at the Board of Directors meeting held today, a resolution was passed to repurchase treasury stock up to maximum of the ¥100 billion or 25 million shares, and to cancel all repurchased shares during Fiscal Year 2026. ROE for Fiscal '26 is projected to be 9.1%.

The dividend per share is planned to be ¥190, the same as previous year, and a consolidated dividend payout ratio is projected to be 53.8%. In addition, when the ¥100 billion share buyback announced today is included, the total payout ratio is projected to be 85.4%.

Page 18 presents the revenue and profit forecast for each segment. Revenue for the construction machinery and mining equipment and utility segment is expected to decrease by 0.4% year on year to ¥3.79 trillion, while segment profit is expected to decrease by 10.4% to ¥440 billion.

Revenue for retail finance is expected to increase by 1.1% year on year to ¥127.5 billion, while segment profit is expected to decrease by 1.6% to ¥36 billion. Revenue for industrial machinery and others is expected to increase by 0.1% year on year to ¥239 billion, while segment profit is expected to decrease by 2.5% to ¥37 billion.

We'll explain the factors behind the change in each segment later. Page 19 presents the regional sales forecast for the construction equipment and utility sector for Fiscal Year 2026.

Sales of this segment are projected to decline by 0.5% year on year to ¥3,778.2 billion. Details of the YoY changes by region are provided on the following pages, broken down by mining machinery and general construction machinery.

Page 20 presents a regional sales forecast for mining machinery within the construction equipment and utility segment for Fiscal Year 2026. Sales of mining equipment are expected to decline by 2.4%—2.4% year on year to ¥1,858.5 billion.

Sales are expected to decline in Asia and Middle East due to sluggish demand for coal and impact of situation in the Middle East. In North America and Oceania, demand is expected to decrease as mining companies complete their equipment renewal cycles, leading to a decline in sales.

Page 21 shows regional sales forecast for general construction equipment within the construction equipment and mining equipment utility segment for Fiscal Year 2026. Sales of general construction equipment are forecast to increase by 1.5% year on year to ¥1,919.7 billion.

While sales expected to decline in Middle East and Asia due to regional situation, overall sales of general construction equipment are projected to increase year over year, driven by growth in North America where demand for infrastructure, energy projects remains strong, and in Latin America where public investment is robust. This page outlines the factors contributing to the projected changes in sales and segment profit for this segment.

Although we are striving to improve selling prices, sales are expected to decrease by ¥16 billion year on year due to negative impact of lower sales volume caused by situation in the Middle East. Segment profit is expected to decrease by ¥51.1 billion year on year.

Although we strive to improve selling prices, this is due to the negative impact of lower sales volume, the expanding impact of tariffs, and rising procurement costs. The segment profit margin is expected to decline by 1.3 percentage points year on year to 11.6%.

Page 23 presents the outlook for retail finance. Assets are expected to increase by ¥23.6 billion compared to the end of the previous fiscal year, as new lending exceeds collections.

New lending volume is expected to increase by ¥5 billion year on year, as we anticipate a high utilization rate continuing from the previous year. Revenue is expected to increase by ¥1.4 billion year on year, primarily due to an expansion in outstanding loan balance.

Segment profit is expected to decrease by ¥0.6 billion year on year, primarily due to higher costs. ROA is expected to decline by 0.1 percentage points year on year to 2.3%.

Page 24 presents the sales and segment profit outlook for industrial machinery and others. Sales are projected to increase by 0.1% year on year to ¥239 billion, while segment profit is expected to decrease by 2.5% year on year to ¥37 billion.

In the semiconductor industry segment, sales are expected to increase due to customers ramping up production amid a market recovery. However, for the automotive industry application, revenue is expected to rise while segment profit is expected to decline due to factors such as decreased sales of large presses and automotive battery manufacturing equipment, as well as rising procurement costs resulting from the situation in the Middle East.

The segment profit margin is expected to decline by 0.4 percentage points year on year to 15.5%. Starting on page 25, we will explain the demand trends and outlook for the seven major construction equipment categories.

The demand figures for the seven major construction equipment categories include mining equipment. The figures for the Fiscal Year 2025 are preliminary estimates based on our projections.

Demand for Fiscal Year 2025 appears to have increased by 5% year on year. For Fiscal Year 2026, we anticipate a year-on-year decline in demand ranging from 0% to -5%.

In addition to decline in demand in Indonesia, we expect a decrease in demand in Middle East and neighboring countries due to the deteriorating situation in the region. Page 26 outlines the demand trends and forecasts for the North American market.

Demand for the 2025 fiscal year appears to have increased by 3% year over year. Demand remains strong in sectors such as data centers and other infrastructure, rentals, and energy.

The demand forecast for the '26 fiscal year is expected to remain on par with the previous year. We anticipate the infrastructure and energy sectors will continue to drive demand as we go forward.

Page 27 shows the demand outlook and demand for European markets. The demand units for 2025 fiscal year was expected to increase by 4% previous year.

The demand outlook for '26 is expected to be 0% to positive plus percent—positive 5%. In Germany and the UK, public investment demand is expected to lead overall demand, and we are expecting to see the robust demand.

Page 28 covers demand trends and outlook for the Asia market. Demand for the '25 fiscal year appears to have increased by 5% year on year.

In Indonesia, although the demand for mining machinery declined due to sluggish coal prices, overall demand increased due to rising demand for general construction machinery such as food estate projects. In India as well, demand increased, driven by aggressive infrastructure investment.

The demand outlook for Fiscal Year '26 is projected to be a decrease of 5% to 10%. While demand in India is expected to remain robust, demand in Indonesia is forecast to decline significantly due to the government's policy to reduce coal production and impact of the introduction of the B50, which is biodiesel fuel regulations.

Page 29 outlines the trends and outlook for demand in the Japanese market. It appears the demand for the 2025 fiscal year declined by 13% compared to the previous year.

We expect demand for the '26 to remain at the same level as the previous year. Although nominal construction investment is increasing due to inflation, real-term growth is stagnant due to soaring material and labor costs, and there are currently no signs of recovery in demand.

Page 30 presents trends and outlooks for the prices of key minerals related to demand for mining machinery. We expect copper and gold prices to remain at high levels going forward.

While both low-grade and high-grade thermal coal are currently trending upward, we'll continue to monitor future developments closely. Page 31 shows the trend in demand for mining machinery.

It appears the number of units in demand for Fiscal Year '25 decreased by 10% year on year. Overall demand declined due to significant drop in demand for coal-related machinery in Indonesia.

The demand forecast for Fiscal Year '26 is expected to be a 10% to 15% decline. Although demand for copper and gold mining equipment is expected to remain at a high level, overall demand is projected to decline due to weak coal-related demand and the completion of the replacement cycle in North America and Oceania, and impact of the situation in the Middle East.

Page 32 presents a sales outlook for the construction machinery, mining equipment, and utility segment including equipment, parts, and services. In Fiscal '25, parts sales increased by 0.4% year on year to ¥1,055.2 billion.

The aftermarket segment as a whole, including services, accounted for 52% of total sales. Excluding the impact of forex, total aftermarket sales increased by 1% year on year.

For Fiscal '26, parts sales are projected to increase by 2.2% year on year to ¥1,078.5 billion. The aftermarket's overall sales ratio, including services, is projected to be 53%, and aftermarket sales, excluding forex effects, are projected to increase by 3.1% year on year.

The page 33 presents outlook for capital expenditures and other investments for Fiscal Year '26. Excluding investments in rental assets on the left, capital expenditures are expected to increase year on year due to investments in production and sales facilities as well as the reconstruction of the head office.

Research and development centers, as shown in the center, are expected to increase year over year due to focused investment in adapting diverse power sources and automation. Fixed costs shown on the right incorporate the effects of structural reforms.

However, they are expected to increase year over year due to wage increases and higher R&D expenses. Next, I'll explain the main topics.

Page 51 now. Komatsu has acquired the remanufacturing business for construction and mining machinery components and parts from SRC of Lexington through its wholly owned subsidiary, Komatsu North America, Komatsu America Corp.

In 2009, Komatsu transferred its North American remanufacturing business to SRC of Lexington, and since then has continued to do business with the company as one of its most important suppliers for Komatsu's North American remanufacturing operations. With this acquisition of SRC of Lexington's remanufacturing business, Komatsu will further expand this operation by establishing a new dedicated manufacturing facility in North America, one of the largest markets for construction and mining equipment.

Page 52. In December 2025, Obayashi Corporation, Iwatani Corporation, and Komatsu conducted demonstration tests of a hydrogen fuel cell powered hydraulic excavator during rockfall prevention work on the Joshin-Etsu Expressway.

The test confirmed several benefits, including operational performance equivalent to that of conventional diesel-powered models and reduced operator fatigue due to the absence of vibration. At the same time, we re-affirmed the challenges facing practical implementation, such as the need for higher capacity and the faster hydrogen supply and refueling systems.

The three companies will continue to conduct the studies and verification tests aimed at practical implementation. Page 53.

Komatsu exhibited at CONEXPO, international construction machinery trade show held in Las Vegas, USA, from March the 3rd to 7th. The company showcased a new generation of vehicles including bulldozers and hydraulic excavators equipped with the latest features such as intelligent machine control, as well as articulated dump trucks designed to further improve operational efficiency.

Komatsu highlighted its initiatives to leverage data from vehicles and digital solutions to enhance customer productivity and safety while reducing total cost of ownership. Page 54.

Komatsu has acquired Malwa Forest, a forestry machinery manufacturer, through its wholly owned subsidiary, Komatsu Forest. By acquiring technological capabilities and product lineup for lightweight, compact, cut-to-length forestry machinery specifically designed for thinning operations, a segment in which Komatsu previously had no presence, the company will contribute to value creation across entire circular forestry process.

Page 55. We have reached a cumulative total of the 1,000 units for our ultra-large autonomous dump truck equipped with autonomous haulage system, AHS, for mining operations.

Since introducing AHS for the first time in the world in 2008, the cumulative total haulage volume has exceeded 11.5 billion tonnes. That concludes my presentation.

Now we would like to move on to the Q&A session. First, we would like to take any questions from the people here.

Maekawa-san from Nomura, please.

This is Maekawa from Nomura. Thank you very much for your time today.

I have two questions. First, regarding tariff impact and price increases.

Hosotani-san, you mentioned this in your presentation, but last fiscal year, 64.2 billion was the cost impact. I think originally you were expecting 55 billion, and about 120 billion, which is four quarters—a quarter multiplied by four, was going to be your expectation for Fiscal '26.

What kind of changes did you experience in reaching your results for Fiscal '25? Can you confirm that first?

What have you accounted for for this fiscal year?

This is Hishinuma speaking. Regarding US tariffs, there are no major changes on a dollar basis.

We were converting it at 140 yen before, but now it's at 150 yen against the dollar, or to be more exact, 150.5 yen against the dollar. Therefore, on a US dollar basis, it's not different, it hasn't changed.

It's just because of the FX impact. For Fiscal '26, the impact will materialize on a full-year basis.

It was about around $600 million before, but it should reach around $900 million. Other than that, we have accounted for refunds as well, which is equivalent to the reciprocal tariffs that are likely to be refunded.

That's what we have accounted for. Thank you.

If it's $900 million, it's about ¥135 billion. For steel and aluminum, how much of an increase, how much of a decrease are you expecting from reciprocal?

The ¥30 billion refunds are also included in the ¥135 billion? When you look out at March 2028, is it going to become ¥165 billion?

Can you break down that ¥135 billion, what has been going up, what has been coming down? Or can you talk about how it's going to rise from the ¥64.2 billion?

Regarding the period, before, it was from the middle of the year. At the beginning of the year, we did have inventory from the previous year.

We started paying the tariffs at a later timing from a payment point of view. From a P&L impact, we had year-end inventories, it was relatively low.

In Fiscal '26, from the beginning of the fiscal year, we are making payments. There is a period difference.

Regarding the details, reciprocal tariffs may be gone, but for steel and aluminum, we used to calculate the content in order to reduce the level of tariffs paid, but now it's at 25%, the impact is greater. That is one reason why it's greater than before.

From that point of view, for the refunds, that's about last fiscal year's portion. For Fiscal '27, we won't have deferrals from the previous fiscal year, therefore we will see full impact.

If nothing changes, it's likely to be ¥165 billion next year. Of course, that 10% or Article 122, when that's going to end is a question mark, but well, if we're working off the assumption that the same thing is going to materialize for the next year, that's what we're accounting for, but we are not sure.

In that case, it's ¥135 billion. For next year, the following year, if sales and production is not going to change, it should be about ¥130 billion for Fiscal '27 as well.

This year, it's ¥30 billion less. Or, for the results for Fiscal '25, we already said that it was ¥64.2 billion, and for Fiscal '26, originally we were guiding ¥130.7 billion or ¥130.8 billion, but because of the refunds that we were explaining, which is worth $200 million, which we view as ¥30 billion in Japanese yen terms, when you account for that, it should be a little bit over ¥100 billion of an impact on our P&L.

Got it. Thank you.

For price increases, on page 22, when you look at the projections for selling prices, it's +¥68.9 billion. Hypothetically, even if you don't get the refunds at ¥130 billion, you should be able to make up for it through price increases.

Are you making progress, and have you gained visibility already? Can you also speak to that?

This is Hishinuma speaking. Regarding pricing, we did a bottom-up approach looking at the business plans of our subsidiaries, but price increases are also accounted for for the US.

Caterpillar is not raising prices, and those are the circumstances, there may be a risk. However, for the tariff increases in the US, we won't be able to absorb it completely just with the US, global price increases need to happen.

That's what we're accounting for.

Understood. My second question is for this fiscal year, and your view on volume.

Also going back to page 16, in light of the Middle Eastern conflict, you have reduced sales by ¥90.1 billion. Last year, when there were some tentative assumptions for GDP, as much as you can see, what can you see, what can you not see?

What are the assumptions that led you to ¥90.1 billion? Because in mining, when energy prices are high, I think that may also serve as a positive, I was wondering how you view this situation.

This is Hishinuma. First, regarding demand for the Middle East, a 60% decline is expected, so that has been accounted for, 60%.

Also, due to the impact from the Strait of Hormuz, we believe that costs are likely to increase, and especially negative impact on countries in Asia. We are expecting sales to decline.

When it comes to higher coal prices, there is a chance that they may stimulate demand, but when you look at countries like Indonesia, it's true that what originally used to be $40, $50 a ton are now reaching $60 a ton, but even so, we are seeing a higher idle, standby rate of equipment, and we're not sure if this is going to continue or not in the future. Demand has not really picked up.

Currently, people are still on the sidelines waiting and seeing. There may be an opportunity, but so far we have not accounted for that in our expectations.

Just to add a comment to that. Last year, US tariffs just started, it was hard to account for it in our guidance.

Based off IMF predictions and so forth, we have viewed how much GDP is likely to decline and what's going to happen to demand, and that is why we accounted for a ¥50 billion decline in sales. The global economies have not yet fallen, but we tried to account for risk as much as possible to the extent that we can calculate.

Also the Middle Eastern crisis, we don't really know its impact clearly yet, but our way of thinking is the impact from the Strait of Hormuz is likely to continue. That's the assumption we have.

Then because we are dependent on crude oil as well as LPG, regions like Africa as well as Asia are likely to be affected. Like Hishinuma-san explained, we are expecting a demand decline in Asia as well as in the Middle East, leading to a sales decline in turn.

Also accounting for our gut feeling that we have experienced from the past, we have accounted for a ¥90 billion impact. Also due to higher crude oil prices, we are already seeing material prices increase that are crude oil-derived, and that impact is ¥18.8 billion.

This is purely looked at as a cost increase. So ¥90 billion of volume decline and ¥18.8 billion of a cost increase, SVM-wise, is what we've assumed due to what I've just explained.

On the other hand, of course, the impact may be greater than our assumptions, or the crude oil-derived goods may fall into a shortage, which may affect our production, but that is still not known, we have not accounted for that negative impact.

Thank you.

I would like to move on to the next one, Sasaki-san from UBS.

Thank you. This is Sasaki from UBS Securities.

I got several ones, but the first question is the figures I always ask you. Page 22, this waterfall chart, and volume product mix, and also the cost variance.

Looking at the page 9 and page 22, the plan and actual performance, and there have been some figures related to tariffs, but could you please give us the details around those factors? This volume mix has been negatively contributed to your performance.

The -¥32.2 billion, that's in your plan, but what gets you to that number? Thank you.

This is Hosotani speaking. First, page 9, page 24, and page 25 variance.

First on segment profit, ¥72.6 billion of the volume mix and product mix difference, just hold on a moment. I'm sorry, I was wrong.

First, ¥25.8 billion for the volume difference, and that was a negative, and also product mix, ¥25.1 billion, that's included. Now, factors for this is that as we explained, the electric dump truck, as we explained those up until the last fiscal year, and it's not that they are able to enjoy the higher profitability, but the mix increased for this electrical dump truck, and also 2L contract business margin declined slightly.

Also regional mix had negatives here. Among the region, the highest profitability comes from Indonesia, and sales volume significantly decreased in Indonesian market, and that's why regional mix has seen the impacts from that, in ¥19.6 billion approximately.

Now moving on to the right in production cost, ¥81.6 billion in negative. Let me give you the breakdown for that, which includes US tariffs cost increase, ¥64.2 billion.

This is only applicable to the construction equipment of the ¥64.2 billion, and other ones like the variance coming from the industry others, industrial machinery and others, and also cost variance, let me give you the breakdown for that. From third party, we purchased components, the major components, and those costs started to inflate.

That's why that there is the major variance of the cost of goods. Fixed costs variance, Fiscal '24 to '25, the labor cost significantly increased.

Oh, apology. Oh, you talked about the volume variance.

Oh, apology. Hold on a moment.

For fixed cost, ¥20 billion comes from the labor cost, and SAP projects were underway, and also the variance in comparison between '25 and '26, ¥31.8 billion of the volume that's been included here, and of which the volume mix amounts to ¥40 billion. ¥40 billion, the big chunk comes from Indonesia.

Hold on a moment. Other than volume mix, the regional mix and product mix are written here.

Fiscal '25, the losses we had to make were all gone for '26, ¥31.8 billion included volume mix, and that amount to ¥40 billion. That's all from me.

What about the variance of cost of goods? Because I guess the cost increases comes from the conflicts in Middle East.

Yes. Fiscal '25 and '26, the ¥49.6 billion for production.

The US tariffs impact is included here in this number. About ¥67 billion is included here.

At the same time, that ¥30 billion of the refund is included, the net it all out, the ¥37 billion of cost increase is included here. Also other cost of goods variance, 10 billion-some is also included.

Thank you. My second question, let me take this opportunity to ask this question of Hosotani-san.

You took office as CFO. Give us your commitment as a CFO as we look ahead.

For example, as a Komatsu, the capital efficiency improvement and the better margin, there could be a number of the lists that you want to attain, but you're succeeding Horikoshi-san and took office as CFO, and as one of the members of the top management team, what are the things which you'd like to achieve? This is your first time to be here in a financial briefing.

Do you have any commitment which you'd like to make? That's my second question.

You set a high bar for me, actually, but let me try to answer. My predecessor, Horikoshi-san, mentioned this too, but basically we always have to be mindful of the shareholders in running the business.

I would like to be contributing to the way we run the business. Shareholder returns, and balance sheet, and ROE, those indicators are the things I always look.

For example, in comparison to '25 to '26, the net income, volume decline because of the conflicts in the Middle East, net income declined. Business size and the revenue size need to expand from our perspective, and to that end, we are engaged in various activities.

As we expand the business size, I would like to be of a support for the better decision on the management level, so that we are able to have a better top line. I would like to engage in those activities as CFO.

Is it more like a better top line, is it the one of the things would you like to commit? That's what I get from your message.

What made you think that way?

For example, as we look at the current status, the conflicts in the Middle East and there are the impacts from that, it takes time until the situation will go back to where it has been. In a longer term, this is a one-off factor.

The US tariffs is concerned, some say this is one-off factor, but at the end of the day, this is about the balance of the export-import of the United States and other countries and the try to correct this imbalance. This costs are permanently subject to occur.

That's why we need to continue to contribute to cut back costs, but net profit size need to be secure to an extent, which means that we need to have a better top line.

Thank you.

Let's take the next question. From SMBC Nikko, Taninaka-san.

This is Taninaka from SMBC Nikko. Thank you for taking my question.

Regarding mining equipment mainly, I have two questions. For metal prices, including coal prices, they are rising lately, and in the new fiscal year, when you add up the after-services, you're only accounting for about 3% growth year over year.

I think you're being conservative when you think about underlying trends. When you look at the underground mining equipment manufacturers' results, their growth rates look stronger.

Can you talk about the backdrop to how you derived these assumptions?

This is Hishinuma speaking. For mining equipment, as you rightly said, prices have been going up for obviously copper and gold and so forth, but on the other hand, for equipment and the way we look at demand, the replacement cycle is pretty long, there's ups and downs.

Also when you look at it by region, there are regions where we're expecting higher demand and other regions where we're expecting lower demand, that's for equipment. The growth we're expecting for the aftermarket business may look small, however, we did see drop-offs that were quite significant in Indonesia and also in the Middle East.

Including reman, we have been growing the business, but all in all, the numbers may not look as dynamic as you were expecting.

My second question is with respect to the replacement cycle. You talked that it has run its course.

From 2011 through 2013, demand for mining equipment grew quite substantially, and then you have the replacement cycle. Are you trying to say that the message was that the replacement cycle is over, or are you saying that over the short term there are ups and downs and replacements are at a standstill at this moment?

For March 2028, are you trying to imply that demand is going to go down even more?

The cycle we're referring to is not about the 2011 cycle. It's more about whether we have big deals or not in recent years.

For example, in North America, in '24, '25, for North America, there were some big deals, and we have been explaining that some big deals have been absent in 2025 because there were more in 2024, there were less in 2025. In 2026, we are expecting at this moment less of large deals.

Regarding the sheer volume of general deals, we are actually seeing an increase. It's just a matter of whether or not we are carrying large deals or not.

For example, in the case of Australia, in Fiscal '26, we're not expecting that much of big deals, to say. That's what we were referring to.

For super-large dump trucks that we manufacture in North America, when you look at our production plans and compare '25 with '26, production volume is not going to change that substantially. Even if the sales may not be recognized in 2026, there is a possibility that it's going to go into 2027 sales.

Rope shovels are being produced at 100% capacity, and we are also working on Fiscal '27 already. Because copper is doing well, we're not really expecting that much in decline.

However, we need to monitor closely the trends in Indonesia.

Thank you. That's all from me.

We would like to take question from Adachi-san from Goldman Sachs.

Thank you. This is Adachi from Goldman Sachs.

Thank you. I have two questions, too.

The first one, the mining equipment. As Hishinuma-san shared, Asian market, usually coal prices are on the rise, which is positive, but diesel prices and operating costs have been boosted, which is negative, and negative outweighs the positive, and the dormant, the populated the vehicles increasing.

What are the changes that you have seen for dormant and idle vehicles? I think up until Q1 last fiscal year, there was a last-minute demand was very strong, and that sapped demand in Q2.

As you look ahead, Q1 do you see the South can drop from the fiscal year, but do you think that that will be flattish after Q2, or you think that Q2 and beyond, do you think the moderate decline continues, especially for the Indonesia mining equipment market? Thank you.

Thank you for Indonesia. As you raise a number of the points, the idle vehicles ratio and what are the historical trend, for example, 2024, the end, 5%, it used to be 5%, then Fiscal '25 in June, 8.5%, and then that was up to 9.6% in January and 10% afterwards and 17% this January.

The coal prices goes up, and even the workload increases, and they are able to handle the increasing volume with the coal prices with the current volume. So 40, B40, and now start in July, it starts B50, and production volume, 800 million tons, 600 tons, 600 million tons, and there are some talks of increasing the volume throughout the year.

We are not 100% confident that they are bound to increase, Fiscal '26, I believe that we are seeing this as cautious note.

Thank you. As Taninaka-san and you yourself discuss a bit, Indonesian coal and the precious metal have been pretty strong in prices, and the production plan is at full, as you said.

In order to accelerate it, would you like to accelerate further on that point?

In North America production capacity ramp-up, rope shovel might be at full, the electric dump truck production plan for Fiscal '26 and '25 will be equivalent, as I said. Versus what has been in the past, there are some time where we produce more, at the full capacity, if we produce them, and there could be some more availability.

In North American market, we haven't gone to the point where we are doing CapEx.

Thank you very much. Next one is cash flow and the buyback is announced.

The previous year and the two years ago, like those two years, you have announced ¥100 billion. What are the decision-making process like?

Behind that, free cash flow assumption would have been calculated, how much free cash flow you are expecting, ¥160 billion is expecting, I guess. How much of the operating cash flow and working capital level, and what are the production assumption to the working capital, maybe you can have a breakdown approximately.

Do you have any up and down of your planning for production?

This is Hosotani speaking. For free cash flow, Fiscal '24, free cash flow, ¥300 billion or some, those are Fiscal '24.

It's been a few years that ¥250 billion to ¥300 billion of the free cash flow, that's our track record of the free cash flow. Now with this amount, dividend and buyback of the ¥100 billion, we have enough excess capacity to do that with this amount, because it amounts to ¥300 billion.

Now for Fiscal '26, free cash flow or as planned of the ¥250 billion plus, and deposits and others, sales were not growing and profits declined, but the working capital is expected to improve. As a result, we are able to generate equivalent level, ¥300 billion-plus of the free cash flow.

Our commitment, so that will continue for three years, and M&A portion excluded, then ¥1 trillion. That's a commitment and goal we set ourselves.

This is Otake speaking.

Thank you very much for the presentation. Just wanted to confirm again.

First question is regarding the impact from US tariffs. Please let me sort it out.

For the year ended in March 2026, the impact was ¥64.2 billion on your P&L. Is that correct?

That is correct. ¥64.2 billion for construction equipment.

That's for construction equipment. For industrial machinery, there is a bit of tariff impact as well that has been incurred.

Thank you.

Up until the previous results, according to the materials, you were saying ¥55 billion of impact from tariffs. Does this include industrial machinery as well on top of construction equipment?

It's only several hundreds of millions of yen attributed to industrial machinery, the level doesn't really change. It was about ¥400 million of an impact from industrial machinery and others.

Got it. From the assumption of ¥55 billion, the reason why it increased to ¥64.2 billion is due to FX impact, right?

Yes, exactly. No differences on a US dollar basis, broadly speaking.

It's just due to the differences in conversion FX rates.

For this fiscal year, for the year ending March 2027, excluding refunds, you're expecting ¥130.8 billion. Is that correct?

That is correct.

Got it. The impact amount, the reason why it's higher, you were saying that the content calculation has been abolished and that has had an impact.

Can you walk me through what that means and entails?

Regarding content, for steel and aluminum content, you calculate how much is included as part of your product prices or cost, and that is subject to steel and aluminum tariffs, and the rest to reciprocal tariffs. By calculating the content, we have been able to reduce its cost.

Even for derivatives, it is 25% now. When we were calculating the content, it was less than 25% basically.

By doing a precise calculation of content, you have been explaining from before that you are able to reduce the cost, but I guess that is not possible anymore. Then in order to reduce tariff impact going forward, such as reviewing our supply chain or logistics, I think that will be key.

With respect to these measures, in order to reduce the negative impact, what are you focusing on, or what would you like to focus on going forward?

Last year in April, we shared with you various types of countermeasures we were planning for. For the products that used to go through North America that went to ultimately Canada or Latin America, by shifting to direct shipments instead and shipping out to Canada directly, we will be able to alleviate the impact, and that is fully contributing already.

There are some parts that are going through the US as well, but by directly shipping and also creating warehouses in Panama, we are trying as much as possible to reduce the impact. For countermeasures, for steel and aluminum tariffs, not by simply just paying for it, but by calculating the content, we had been trying to minimize the tariff impact.

However, now it's going to be 25% across the board, so that countermeasure is no longer viable. However, reciprocal tariffs are now gone, on a net-net basis, the actual amount of payments are slightly up.

You referred to the P&L, but the impact on 2025 and the impact on '26, because of more inventory impact, it's going to become a greater impact, and the difference in tariffs rates are expected to impact us as well. I see.

You are working on various initiatives, but in order to mitigate tariff impact even more, one kinds of fields that it may be challenging, but what would you like to do additionally, or do you feel that you will be able to reduce its impact?

Of course, increasing production in the US is something we are considering, but from a cost point of view, it is also challenging, which is preventing us from doing so. I think it's more of a build-up of various improvements, and hopefully we could raise prices to make up for it globally, or reduce costs globally as well, so that we can ensure that we are profitable.

Sorry for going on, but for price increases, you were talking about Caterpillar and that they are not raising prices recently, but currently in the US as well as in other regions, when you look across a competitive landscape, how are the price increase trends from your point of view? How do you view the market?

We have been communicating this from before, but from several years ago, in accordance with higher steel prices, we had been increasing prices, but our competitors have been more bullish and raising prices. We were a little bit behind, but in order to catch up, we have continued to steadily raise prices.

Now, steel prices have calmed down, and price increases just limited to higher tariffs is not really happening, and that is why we are seeing difficulty here.

Thank you. My final question is about the Middle East and its impact.

¥18.8 billion of a cost increase is what you're expecting. Can you break it down?

How would it look like? Can you share with us as much as possible the breakdown?

Costs are rising, parts are rising due to oil-derived products, and also logistics, transportation costs because of higher fuel cost, that has been accounted for as well. The majority is because of higher parts prices and cost increases, meaning fuel, oils, paint, gas that are oil-derived.

Material prices have already been going up quite a lot, so that has been accounted for as a cost increase. I see.

Procurement cost increases is about maybe 80% of the cost increase, and maybe 20% to 30% associated with seaborne transportation? Maybe it's like a 70/30 split.

I see. Thank you.

This is Hotta from Bank of America. Thank you so much for your time.

I have two questions, too. First, with the conflicts for the Middle East and that has the impacts on volume and other mix, on the production front, you have uncertainty, you haven't incorporated them into the guidance, as you said.

If possible, on production front, how much impact do you think that there is? You said there's nothing for now, but given the current situation, how much potential impacts you might have to suffer from, or are you saying that you have enough inventory, you are able to have the muted impacts from that on the production front to give us the details around the production areas, if there's anything you can share with us?

First on production area, or production front, first we try to sustain production work, and we try to work with suppliers. We try to secure enough works and components, and how far we are able to secure them, it's not to say that we are to secure them for six months and one year ahead, we always have to summon to where we are, and we try to secure production.

To the worst-case scenario, naphtha and other materials could have issues in the future, and if we can secure some of the materials from plants or any of the one single supplier, and the production itself could be impacted. When would that happen, we're still not sure.

That's why we haven't incorporated that potential factors into the guidance this time.

Thank you. My second question is a mining equipment.

You said replacement cycle, and you said there is a completed replacement cycle now, but fuel is on the rise, a little bit outdated equipments needs to be a newer ones, so that uses less oil or less fuel. Is that kind of the replacement demand that you're seeing?

It's not going to be a replacement cycle you're going to see in the passenger cars.

Okay.

On the same topic of the fuel prices, if you look at the Australian market, diesel shortages is very dire, and SMEs mining companies started to say the shortage of diesel and they need to compromise the utilization ratio recently. BHP has no issue whatsoever because they are big enough, but Australian market is a primarily market where the utilization ratio for the machine is declining.

Is that something you're seeing, or is in there any impacts on your operation whatsoever in terms of the diesel shortage?

We haven't witnessed any of the specifics, be it suspension of the operation itself, but there are risks, yes.

Thank you very much. That's all from me.

Can you hear me?

This is McDonald speaking. Thank you for your time today.

I have a question about page 26 in North America. Looking at the right-hand side for Q4, for the 7 PLs, it was +7%, and going back, I think for the first time in several occasions, it was a good number, maybe several years, where you're seeing an uptrend.

Even so, for this fiscal year, for volume, you're expecting flattish demand compared to Fiscal '25. The non-housing space, when you look at the segments like mining, energy, road construction, and data centers and so forth, for this fiscal year, I kind of think that you're conservative in your projections for North America this year.

Of course, I'm sure you have a lot of concerns in your heads, but why are you guiding flattish demand? Shouldn't you be having an assumption that is more positive?

That's my first question.

Thank you for the question. For North America, as you said, what we show in the material for page 26, at the bottom right, we show the breakdown of demand by segment, divided into rental, energy, infrastructure, that are performing positively across the board.

It was only housing as well as government-related that was negatively contributing. All in all, the trends are positive, and after completing Fiscal '25, we saw +3% growth in demand.

When you listen to what customers are saying even, they have about order backlog of 6 months to 2.5 years, therefore we do believe the market is quite strong. Our assumptions are flattish, but we're not really anticipating any major negatives, therefore yes, you can say that we are being conservative.

From a regional point of view, Indonesia apparently had the highest profitability in the past, but if you're so bearish about Indonesia, the highest profitability as a market, I guess, is coming from North America in the non-housing segments. Do you think that's true, that it has the highest margins?

If you just look at SVM, excluding fixed costs, the procurement cost, inclusive of tariffs, is quite big. No, the margins are not the highest in North America?

Thank you. It will continue to be challenging.

Just wanted to confirm another thing about page 9, I think. In your comments, Hosotani-san, for last fiscal year, and the negatives from product mix was EDTs.

Is this one-off, or for electric dump trucks and its profitability, is it relatively low? I just wanted to confirm that point you made.

This is Hosotani speaking. For dump trucks, it's because of our dump truck mix.

Globally, the regions where dump truck margins were high was Indonesia. For Indonesia, we have been selling rigid dump trucks mainly, and for electric dump trucks are being made in the US on the other hand.

Compared to rigid dump trucks, the costs are greater due to its structure. Sales in Indonesia, especially for mining, has been dropping off, product mix-wise, rigid went down, whilst EDT composition has increased.

From a product mix point of view, because of more electric dump trucks, average margins have come down slightly.

I see. We shouldn't be that concerned, I guess.

Correct.

Finally, I have a quick question on topics. On page 50, you talked about AHSs and reaching 1,000 units in volume.

I think that's great. Going forward, do you have any numerical targets as to how to grow the business even more?

That's my final question.

In the strategic growth plan and our targets, it was 1,000 units in Fiscal '27, that was our original target, but we have been able to reach it beforehand. We are thinking about raising the target up to 1,200 units instead.

Compared to the pace we saw back in Fiscal '25, it looks like it's going to decelerate. However, new customer implementation is likely to increase, and in that case, the rate of increases is going to look like it's decelerating, but we will continue to work on its implementation.

How about margins? Compared to rigid dump trucks, is it lower?

We talked about electric dump trucks earlier, so that in itself is not that high, but this is an AHS system, and we receive income from subscriptions as well, so that is a positive.

I see. Thank you very much.

Narita from Mizuho Securities. Sorry, I'm repeating myself, but page 28, here in Indonesia mining equipment demand doesn't look like it's declining so much, and yes, I do understand there is a decline in market, but the Chinese manufacturers try to make inroads into mining equipments more and more, and against the haul truck in Latin America, the Indonesia and those smaller kinds of the smaller dumps are utilized in those Indonesia.

Other than the market, there have been in anything that you can share other than competitive landscape? Also you said Indonesia it has the highest margin, whereas coal prices will give you the headwind, and that might be changing in the future, but with yourself effort, do you see any capacity to increase further of a performance in Indonesia?

As you see the bottom right, page 28, you see the demand trend, and that might be misleading, but you see by sector here. In terms of the size, the smaller equipments for mining are included here.

Then Fiscal '25, we are shipping a lot of those smaller ones, and 100-ton demand is on a decline, so that sounds like that doesn't add up, but the demand for 100-ton, the customer try to hold back the purchase, that's why we are struggling. Fiscal '26, the coal production volume is going to be a struggling, but we work with the distributors to secure enough volume here.

Clear. Thank you.

Yes, I'll keep my question brief. I have a question for Imayoshi-san.

With respect to the Middle East and tariffs, that was the main topic for today's call. Even if you add back those numbers into your guidance, profitability is expected to be about the same as last year, or a little bit down, whether it be on a company-wide basis or for the CNME segment.

I think it all comes down to inflation, maybe. How about striving to raise profitability by making up for it?

Do you have that intention, or are you fine with this kind of margin? Would you like to instead raise top line?

Because you have just started a new fiscal year. Imayoshi-san, of course, can you talk about some themes that you're considering as a company?

Of course, countermeasures for the Middle Eastern conflict may be one, but I was hoping that you could share one or two things on your mind.

As stated in the strategic growth plan, we want to have profitability and growth rates that exceed industry levels. It's not just about growing top line, but also profitability as well.

Overall, demand-wise, we are at a juncture where it's roughly flat. It's not just tariffs impact, but Indonesia's drop-off is also a negative when it comes to profitability, but we will steadily implement the measures that were stated in the strategic growth plan.

We will work on product development as well as we will think about ways to grow the aftermarket business. We would like to ensure that we're able to generate results so that we can also enhance profitability.

Thank you. I see.

That's all for me.