Introduction

Business strategies for value creation

ISEKI Group’s value creation aims

Foundation for sustainable growth

Financial and non-financial data

Company information / Stock information

Business strategies for value creation

explain the background behind the
Q Please
implementation of the business structural reform.

We will execute the businessstructural reform without
exceptions to build a strong
management foundation.
Hajime Odagiri
Representative Director & Senior Corporate Executive Officer
Leader, Project Z

A: With the aim of building a strong management foundation by
improving and enhancing profitability and asset efficiency, we
will proceed with fundamental business structural reform underthe moniker Project Z.
The ISEKI Group has been working to realize a consolidated
operating margin of 5% by 2025 as a numerical target in the fiveyear Mid-term Management Plan formulated in 2021. The plan for2024 is 1.2%, a significant deviation from the original target. We have
not yet achieved our transformation into a company with a lean andstreamlined business structure that can constantly generate profit

without being affected by the fluctuation in sales, another goal
set forth in the Mid-term Management Plan. We acknowledge that
this was largely attributable to insufficient responsiveness to thedrastically changing environment and the failure of implementationof overall management reform. Moreover, low net income margin
and total asset turnover ratio have kept return on equity, or ROE,
below the target of 8%.
We believe improving and enhancing profitability and asset
efficiency—a challenge for our group—is essential in building
a strong management foundation. To this end, we established
Project Z on November 14, 2023, for the purpose of implementing
fundamental business structure reforms.

┃ Consolidated operating margin

5.0%

Mid-term Management Plan
Results
Plan

2.6%

2.5%
2.0%

1.6%

2016

2017

2018

1.8%

2019

2.1%
1.4%

2020

Q What are the policies and objectives of Project Z?
A: We aim to achieve a consolidated operating margin of 5% or
more, ROE of 8% or more, and dividend on equity (DOE) of 2%
or more by implementing fundamental structural reforms andgrowth strategies.
Under Project Z, we will draft and implement fundamental structuralreforms and growth strategies. Looking at fundamental structural

2021

2022

1.3%

1.2%

2023

2024

2025

reforms, we will promote the three themes of “Optimize production,”“Optimize development,” and “Deepen domestic sales.” Our goals
are to achieve a consolidated operating margin of 5% or more, ROE
of 8% or more, dividend on equity (DOE) of 2% or more, and pricebook-value ratio (PBR) of at least 1.0x by 2027. With regard to our
growth strategy, we will deepen our selection and concentration,and concentrate resources on domestic and overseas growthmarkets with the aim of further development. Through these┃ Idea behind Project Z
Consolidated operating income ......................................... 5% or more
ROE .......................................................................................... 8% or more
DOE........................................................................................... 2% or more

Vision2027

Fundamental structural reforms(Core themes)

Optimize
production
Optimizedevelopment
Deepen domestic
sales

25

ISEKI Report 2024

(Direction of improvement)● Optimal allocation of machine types and sites● Capital investment prospects● Environmental response and efficiency

Improvement of profitability● Concentration of development resources● Efficiency through shared design● Consolidation of management resources through integration

Asset efficiency● Reallocation of resources to growth markets● Improvement of logistics and reduction of inventory● Overseas

Development of strategies by region
Concentrate on areas symbolized by the keywords: large,
cutting-edge, environment, and dry fields▲ ▲Growth strategy

PBR 1.0x or more

● Domestic

Cash allocation for growth

ISEKI Report 2024

26

Introduction

ISEKI Group’s value creation aims

Business strategies for value creation

Foundation for sustainable growth

Financial and non-financial data

Company information / Stock information

Business strategies for value creation

Project Z initiatives, we will work to improve profitability and asset
efficiency, and implement the allocation of cash for growth.

discuss the project’s fundamental structural
Q Please
reform initiatives.

A: We will implement the three themes of “Optimize production,”“Optimize development,” and “Deepen domestic sales” andpromote the transformation to a lean and streamlined businessstructure in a short-term, concentrated fashion.
Normally, fundamentally reforming a business structure requires
a considerable amount of time, but we believe it is necessary
to rapidly build a lean and streamlined business structure notsusceptible to changes in the environment, as we continue tofail to achieve the goals of our business plan. We will implement
the three themes of “Optimize production,” “Optimize development,”
and “Deepen domestic sales” from 2024 to 2025, and promote thetransformation of the company’s structure very rapidly.
First, with regard to “Optimize production,” we have beenpromoting the establishment of an optimal production systemfor domestic and overseas production sites as a priority measure
to enhance profitability, and through Project Z we will further
accelerate these efforts. In July 2024, we plan to integrate theoperations of Iseki-Matsuyama MFG. Co., Ltd. and Iseki-Kumamoto
MFG. Co., Ltd. The consolidation of human resources and systems

will lead to the creation of operational efficiency and reduced costs,
and create a robust structure for the production sites. ( P47)
Next, concerning “Optimize development,” after analyzing productgrowth potential and profitability, we will consolidate types andmodels by 30% or more and concentrate development resources onareas of growth. Moreover, to improve efficiency, we will promote
global design with a common base for all regions in terms ofdevelopment methods. In addition to streamlining the organization
by boosting the efficiency of development and concentrating
resources, we will implement product profitability improvements ina short-term, intensive fashion. ( P46)
Finally, looking at “Deepen domestic sales,” in January 2025, weplan to integrate the management of our sales subsidiaries, whichhave divided their operations into six regions nationwide. This
will heighten management efficiency through consolidation of
resources by streamlining redundant indirect operations, reviewing
inventory bases and distribution systems to lower distribution costs,
and centralizing nationwide inventory management to reduceinventory. ( P40)
Since time will be required for some of these effects to manifest
themselves, we have set 2027 as the completion date of thefundamental structural reforms. We will, however, steadily implement
these initiatives during the two year period from 2024 to 2025.

┃ Direction of growth strategy
OverseasJapan

Accurately ascertain demand in each region to drive earnings
growth and business expansion forward

Concentration on large, cutting-edge, environment,
and dry fields
Large-scale model (*) unit sales (estimated)

Net sales ratio (estimated)

FY2020■Combine harvesters■Rice transplanters■Tractors

FY20302024■JapanDevelopment structureIntellectual property

Management foundation

27

ISEKI Report 2024

2030

do you see as the keys to successful structural
Q Whatreform?

A: We will concentrate management resources on domestic andoverseas growth markets to expand sales.
Our analysis shows that the growth axis for the Group is in specificfields, both abroad and in Japan. Among these fields, we will
accurately ascertain demand in each region to accelerate theimprovement of profitability and business expansion in overseas
markets. The Group is expanding its business in three key regions—North America, Europe, and Asia—and in recent years, overseas sales
have been steadily increasing. To further expand sales in the future,
in North America, we will cooperate with our OEM partner, AGCO,
to expand our market share and introduce new, environmentallyfriendly products. In Europe, we will expand our lineup ofenvironmentally friendly products such as electric and consumer
products, and promote the centralized management of inventory. In
Asia, we will establish and implement specific measures for the nextstage in each region. These measures include strengthening thesales channels of IST Farm Machinery Co., Ltd., our sales subsidiary inThailand, launching production machines from Indian agricultural
machinery manufacturer TAFE, with whom we have a businessalliance, and launching high-performance machinery for East Asia.
( P41–44)
In Japan, which is facing agricultural issues including adeclining agricultural workforce, food security, and mitigationof environmental impact, we forecast expansion in the large,
cutting-edge, environment, and dry fields markets in responseto these issues. By promoting the use of dynamic, broad-based
human resources through the operational integration of our sales
subsidiaries, we will further develop our domestic business throughthe nationwide development and diligent study of know-how
concerning these markets—already advanced in some regions—aswell as through the agricultural management support capabilities
cultivated at the Dream Agricultural Research Institute (DARI).
Similarly, we will expand profitable businesses, such as aftermarket
maintenance and used machinery businesses, across Japan to build
a stable management foundation. ( P37–40)
Also, with regard to the development structure and intellectual
property that support these efforts, we will concentrate ourresources on growth markets and move forward with unified,Group-wide goals.

A: It is important for each employee to serve as a leader
in Project Z and to make a unified, Group-wide effort in
implementing it.
The “Z” in Project Z indicates an unknown value, and it is also the first
letter in the word “zero.” It is an expression of our determination torethink everything from scratch as we move forward. To complete
Project Z—in which we will reevaluate the state of the Group
from zero in preparation for our 100th anniversary in 2025 and thecentury to come—it is essential that we all share the same goal
and that each individual takes the initiative in working toward that
goal. Although each employee has a different position and role,
we hold briefings for employees, training sessions for executives,and group discussions in each department to help members
understand the significance and importance of Project Z, to seethat they themselves have a responsibility toward its success, and toact in that manner. Each individual employee will play a key role in
Project Z, and the Group will work in a unified manner to reform thebusiness structure.
We believe that we must complete Project Z to realize our group’s
long-term vision of becoming a “solution provider for agriculture
and landscape.” Project members currently meet once a week fordiscussions on all measures and to monitor progress. Specific plans
and quantitative targets for each measure, as well as additional
measures, are scheduled to be announced during FY2024. To aid
our stakeholders in better understanding our business, we intend toprovide explanations as necessary through means such as financial
results briefings and the website. As the project leader, I will take thehelm and work together with the Group to achieve reforms in ourbusiness structure.

Utilization of dynamic, broad-based human resources
through operational integration of sales subsidiaries➡ Acquisition of customers in growth markets■Overseas

Concentrate development
efforts on growth markets

2027*Large-scale models
Tractor: 75 hp or more
Combine harvesters : 100 hp or more
Rice transplanters : 8 rows or moretell about the project’s growth strategy
Q Please
initiatives.

Cutting-edge
technologies
Environmental
response

Enhancing revenue management
Optimize development

～2025

2027

Level 1 and 2 automation upgrading

Level 3 automation

Expansion of variable fertilizer application

Electric products

Optimize production
Deepen domestic sales

We will announce additional measures and other information
on Project Z going forward.
Please refer to our website for the latest information.

https://www.iseki.co.jp/ir/management/zplan/

ISEKI Report 2024

28

Introduction

ISEKI Group’s value creation aims

Business strategies for value creation

Foundation for sustainable growth

Financial and non-financial data

Company information / Stock information

Business strategies for value creation

Responses toward realization of management consciousof capital costs and stock prices
Based on the issues we identified in our analysis of the current situation, we aim to achieve a PBR of 1.0x or more by 2027
through the steady implementation of a host of measures under Project Z and by bolstering IR activities and ESG initiatives.

Key analysis results and direction of improvement
Perspectives of current analysis

Profitability

Consolidated operating margin

5% or more

Vision for 2027

8% or more
ROE

Toward realization ofmanagement conscious of
capital costs andstock prices

ROE

PBR

1.0x or more

Key analysis results● Net profit margin and operating margin are low compared with othercompanies and have not satisfied investors’ expectations● Failed to generate return on capital surpassing investors’ anticipatedcost of equity

Asset
efficiency
Capitalstrategies
including( financial
leverage )2% or more

PBR
Growthpotential

compared with other companies, progress in sales and profits has been
limited, keeping the non-current asset turnover ratio low.
● Inventory turnover period is lengthening compared with other companies● The ratio of overseas net sales to total sales is inferior to that of other companies● Shareholder returns such as dividend payout ratio are low compared with othercompanies

Changes in PBR, ROE, and PER over time (current analysis)

PER

Our PBR has remained below 1.0x, standing at 0.34x as of December 31, 2023. We broke down PBR into its component parts, ROE and PER, andorganized the factors for each of these indicators through comparison with other companies in the same industry over time and the gathering of
opinions from investors connected with the company.

Information
disclosure/
dialogue● Inadequate disclosure of profitability and strength differences between

domestic and overseas operations● Significant differences between plans and actual results negatively impact

plan credibility● Governance (oversight function) needs reinforcement❶ ROE
Based on changes in ROE over time, the Company failed to reach the target figure of 8% set forth in the Mid-term Management Plan. We havedetermined that this was due to the low net income margin and low total asset turnover ratio. Our view is that the net income margin is affectedby the profit margin and selling, general and administrative expenses ratio for each product, while the total asset turnover ratio is impacted byfactors such as inventory volume and facility utilization rate. The understanding of our institutional investors with whom we have daily contact isthat our cost of equity is generally around 8%.

❷ PER
Our PER has been less than 10x since 2020. We view this as being attributable to a dearth of information disclosure regarding factors such as
growth, strengths, and profitability, as well as a discrepancy between plans and actual results.

1.0

5%

4.2%
1.6%

6.2%

5.1%

1.1%

0%

Accelerate the upgrading of profit management and1│ Improvement of profitability2

P31–32
We will improve profitability and asset efficiency to generate−8.8%
2017/122018/122019/122020/122021/122022/12

40.0

22.9

0.0
2019/122020/122021/122022/122023/12

−20.0

4│

32.6

20.0

ISEKI Report 2024

3│ Cash allocation for growth

operating cash flows. We will invest this cash in structuralreforms and growth, return profits to shareholders, andreduce interest-bearing debt.

52.2

60.0

29

2023/12

841.5

0.34x

2018/12

investment decisions based on hurdle rates and inventory
reduction.

PER (times)

2017/12

P25–28We will endeavor to improve asset efficiency by making│ Asset efficiency

0.0%

0.5

0.0

implement fundamental structural reforms and growthstrategies through Project Z to enhance profitability.

−5%
−10%

Bolstering ofIR activities
and ESGinitiatives

Toward improving PBR

ROE (%)
ROE target for 2025 (final year of the Mid-term Management Plan): 8%.

Cashallocation
for growthfinancial soundness● Inadequate disclosure of action targets to achieve management objectives

Capital costAssetefficiency● Sales and profit growth rates are low compared with other companies● Debt redemption period is long, requires attention from the perspective of

10%

Improvementofprofitability● While the share of operating cash flows allocated to investment is highDOE

PBR (times)

Direction of
improvement

9.8

6.4

2021/122022/12

Bolstering of IR activities
and ESG initiatives

We will upgrade and augment activities toward promoting
understanding of our growth strategies and lowering theP77–78

cost of capital.

−5.5
2017/122018/122019/122020/122023/12

ISEKI Report 2024

30

Introduction

Business strategies for value creation

ISEKI Group’s value creation aims

Foundation for sustainable growth

Financial and non-financial data

Company information / Stock information

Business strategies for value creation

Financial and capital strategies
Measures toward value creation❶ Asset efficiency

We provide financial and capital support for
Project Z with the aim of realizing sustainablegrowth and enhancing corporate value.
Shuichi Jinno❷ Cash allocation for growth

Director & Senior Corporate Officer
in charge of Finance and IT Planning

Message from Director in charge of FinanceIn the 2021–2025 Mid-Term Management Plan, we have set the numericaltarget of a 5% operating margin in the final year and the cumulative
creation of 60.0 billion yen in operating cash flow over the five years of theplan. While we have made further progress than anticipated in our overseas
business expansion in the past three years, we have not succeeded in
improving profitability due to the lack of progress in reducing costs andselling, general and administrative expenses in response to changes in theenvironment, including the soaring raw material prices and distribution
costs. Moreover, inventories increased as domestic sales of agricultural
machinery products declined and inventories for Europe—which had
been at low levels—built up, resulting in the second consecutive fiscal
year of negative operating cash flow. The biggest challenges we face are
improving profitability and asset efficiency. We intend to resolve theseissues by implementing each measure in Project Z.
We do plan to make investment in structural reform and growth, butwhat is important for us is to focus management resources on priority
areas. While providing support for each Project Z initiative from a financial
and capital perspective, as the director in charge of finance, I believe it is
my responsibility to assess the profitability and growth potential of eachbusiness and ensure that the entire group concentrates on cost-effective
projects, particularly when making investment decisions.

Structural reform andgrowth investment

Business structuralreform without
exceptions

Improvement of
profitability

Vision for 2027

Asset efficiency

Operating margin ........ 5% or more
ROE .............................. 8% or more
DOE .............................. 2% or more

Creating
operatingcash flows

Priority areas for strategic growth
Overseas, large, cutting-edge,
dry fields, environment

ISEKI Report 2024

We will work to generate 50.0 billion yen in operating cash flow over the four-year period from 2024 to 2027. Then, in the ensuing three-year
period from 2028 to 2030, our target is 52.0 billion yen, even more than in the previous four years. From 2024 to 2027, we will invest aggressively
to realize our structural reform and growth strategy by procuring funds in addition to operating cash flow. We will allocate the funds to the priority
areas of our growth strategy in particular—namely “large, cutting-edge, dry fields, and environment”—along with the “Optimize production”
bases and investment in human capital. We have also invested in venture companies as part of our growth-oriented outlay. In addition to growthinvestments, we will also seek to heighten operational efficiency and reduce costs through core system renewal and other investments ininfrastructure. Beyond 2028, we will continue investing in our growth while reducing interest-bearing debt.

Shareholder return policy
ISEKI considers stable dividend payments to shareholders to be a key policy of the Company. We aim to achieve a DOE of 2% or more by 2027,
while continuing to pay stable dividends. We intend to meet our shareholders’ expectations by improving profitability and asset efficiency toachieve sustainable growth and raise corporate value.

┃ Inventories┃ Non-current assets■ Inventories (100 million yen)

■ Inventories (100 million yen)

Inventory turnover ratio (times)

2.2
2.0

1.9

1.4

1.8
1.6
653

541

518

498

Dec. 2019

Dec. 2020

Dec. 2021

Dec. 2022

Dec. 2023

Dec. 2027┃ Operating cash flow

1.7

Dec. 2019

974

965

970

1,017

Dec. 2020

Dec. 2021

Dec. 2022

Dec. 2023

2024–2027 (four-year cumulative)

500
2027

Dec. 2027

2030

Debt

2029

Operatingcash flows

2025
83
2024
2024–2027
Operating cash flows(forecast)

2028–2030 (three-year cumulative)

520

2026

2021–2023
Operating cash flows(actual)

1.7┃ Cash allocation(100 million yen)

Structural reform

1.6

1.5

1,103

728

System investment

Shareholder return

Inventory turnover ratio (times)

2.4

Human capital

Reduction of interest-bearing debt

31

We recognize the need to heighten asset efficiency, particularly through the reduction of inventories and the optimization of non-current assets.
We intend to improve inventories in a short-term, intensive manner over a two-year period through 2025. We will reduce inventories through theimplementation of a fundamental review of logistics and procurement strategy, organizational restructuring and model consolidation, and othermeasures, with the objective of achieving an inventory turnover ratio of 2.4 in 2027. With regard to non-current assets, we have set a hurdle rate
to apply to investment decisions. The hurdle rate is set at our calculated cost of capital with a margin added, and we review it each year. We will
make thorough investment decisions based on hurdle rates and focus investment on areas of growth, while improving asset efficiency throughstructural reforms including organizational restructuring and review of production lines.

2028
2028–2030
Operating cash flows(forecast)Debt
reduction

Structuralreforms,
growthinvestments,
etc.

Operatingcash flows

Shareholder
returnStructuralreforms,
growthinvestments,
Shareholder
etc.
returnISEKI Report 2024

32

Introduction

ISEKI Group’s value creation aims

Business strategies for value creation

Foundation for sustainable growth

Financial and non-financial data

Company information / Stock information

Business strategies for value creation

ISEKI Group’s strengths

Employee roundtable discussion

The strengths of ISEKI Group that create value are “technological capabilities,” “support capabilities to offer farm businessproposals,” and “innovation based on collaboration,” which we have cultivated over approximately a century. ISEKI Groupwill continue to generate social and economic value through business activities that leverage these strengths as a sourceof competitive advantage.

Technological capabilities

To develop breakthrough agricultural and landscape machineryand create innovation as a leading company

Support capabilities to offer
farm business proposals

To solve customers’ issues from both hard (agricultural machinery)and soft (production management and advanced farm businesstechnologies) aspects

Innovation based oncollaboration

To develop and provide groundbreaking products and services andpitch new value to the new markets by collaborating with partners
in each field and region both in Japan and overseas

Growth strategy of the ISEKI Group —environmental response—

Reducing the environmental impact of agriculture and landscapemaintenance operations globally with ISEKI technology

Initiatives to reinforce strengths (cultivation of expert personnel)
We have established an integrated human resource development system for development, production, and sales and services, and are focusedon cultivating expert personnel in each specialized field. In addition to holding several technology contests internally to improve the Group-wide
technological capabilities, ISEKI is also working to upgrade the skills of individual employees by encouraging them to obtain certified qualifications.
We also conduct training for employees working outside Japan actively to roll out our technological capabilities and know-how developed inJapan globally. We will continue to promote initiatives to reinforce our strengths, which will lead to the provision of reliable manufacturing andrevolutionary products and services.

Development

Production

Sales and services

ISEKI Basic Engineering
Training Center (IETC)

ISEKI TechnicalTraining Center (ITTC)

ISEKI Global
Training Center (IGTC)

Tomoshi Kitagawa

Nurturing young designers

Nurturing leaders of production sites
in Japan and overseas

Nurturing sales and service staff
in Japan and overseas

Development & Production Division

Business Division

Overseas Business Division

General Manager, Green Innovation Promotion Section

General Manager, Dream Agricultural Solution
Promotion Department
Director, Dream Agricultural Research Institute (DARI)

General Manager, Europe Sales& Marketing Department

Number of trainees: 410 in 2023

Number of trainees: 151 in 2023

Number of trainees: 510 in 2023

Holding of technological researchpresentations

Holding of company-wide
technology contest

Holding of service skills contest

Sharing R&D results and invention
information to improve Group-wide
technology

Representatives from each production
site gather to participate in a contest of
manufacturing techniques.

Fortify R&D capability

33

ISEKI Report 2024

Improve productivity and enhance quality

Representatives from sales subsidiaries
across Japan gather to show the accuracy
and speed of their service skills.

Bolster technological and service capability

Satoshi Sogabe

Keigo Seri

In Project Z, under which the Company aims to formulate and implement measures for fundamental structuralreform and growth strategies, the ISEKI Group has identified “Leverage ISEKI technology to realize on a global
scale reduced impact on the environment for agriculture and landscaping” as one of its key themes. This
year’s session featured a roundtable discussion among key front-line people on the themes of environmental
response and value creation initiatives that leverage the ISEKI Group’s strengths.
do you position the environment in your
Q How
business activities?
Kitagawa: The Green Innovation Promotion Section, to which I
belong, conducts research and formulates development themeswith an eye to developing electric products and utilizing newenergy sources such as decarbonized fuel and hydrogen toward
the realization of a carbon-neutral society.
Agriculture and landscaping business, which benefit fromnature, are closely related to the environment and climate change,and significantly impact the Group’s business environment.

Based on this perspective, we have positioned the “realizationof a decarbonized and recycling-oriented society” as one of ourpriority issues (materiality). And, in our Environmental Vision
revised in 2022, we have set the goal of creating a carbonneutral, sustainable society by 2050 by providing innovative
products and higher quality of services to the customers. In
addition to promoting the dissemination of our business activities,
products, and services, we have announced our endorsementof the Task Force on Climate-related Financial Disclosures (TCFD)
recommendations in 2022 and operate our own eco-productcertification system.*1 We are working to develop products that
ISEKI Report 2024

34

Introduction

ISEKI Group’s value creation aims

Business strategies for value creation

Foundation for sustainable growth

Financial and non-financial data

Company information / Stock information

Business strategies for value creation

by an average of 10% over conventional organic cultivation. Thereis great promise in organic and other environmentally soundagriculture as a market. We are convinced that this is a field inwhich we can leverage our singular strengths in proposals andproviding support for farm business from both a tangible aspectsuch as smart agricultural machinery, and an intangible aspectsuch as farm business technology.

contribute to mitigating environmental impact throughout theirlifecycle, from raw material procurement to product disposal.
*1: Our unique system that certifies products with high environmental conformance that clear internal
evaluation criteria in areas such as conservation of energy and labor, environmental burden
reduction, resource conservation, and consideration of biodiversity.

Sogabe: As a supporter of our customers’ farming business,
the Dream Agricultural Solution Promotion Department iscommitted to environmental initiatives. We believe that mitigating
environmental impact in line with the Ministry of Agriculture,
Forestry and Fisheries’ policy, “Strategy for Sustainable Food
Systems, MIDORI” is a key theme. Large-scale farmers are more
highly aware of environmental conservation. From 2024, crosscompliance*2 will also be required in order to receive subsidized
projects. In response to this farming business environment,
we plan to work on both expanding organic agriculture andreducing chemical fertilizers. To this end, we intend to steadily
and repeatedly conduct verification testing, and provide
environmentally friendly agricultural solutions while maintaining
yields and profits.
*2: To ensure that implementing support does not create a new environmental burden by mandating
the practice of minimum environmental impact reduction efforts when receiving subsidies from the
Ministry of Agriculture, Forestry and Fisheries (MAFF), etc.

Seri: In Europe, while complying with various environmental
regulations, we provide landscape maintenance machinery
used for park and street cleaning. Within our business history of
more than five decades, we have a proven track record of, andtake pride in, having supported European urban development
and expanding our business. In the meantime, the “European
Green Deal” was announced in 2019. Our mainstay diesel engine
products are also required to be carbon neutral. While thisconstitutes a major change in direction, our basic policy remains
the same as it has been. As a company that supports European
landscape maintenance, which is an essential business, we willcontinue to offer new electric and other products to satisfy newmarket demands.

35

ISEKI Report 2024

*3: AI-based cultivation management system recommended by Japan’s National Federation ofAgricultural Cooperative Associations (JA Zen-Noh). AI analysis of data such as soil and crop variety
characteristics, weather information, and satellite images will enable the creation of efficient
cultivation management plans.

Kitagawa: From a development standpoint, I think it is important
to consider how we can add value to the electrification process.
Transitioning from diesel engines to electric power will lead togreenhouse gas emissions in customer use dropping to zero.
Looking ahead to the next phase, we are discussing with the
production and sales sections how to provide added value
to customers and the market and how to then link this to
profitability. We are in the process of developing electric productswith value only ISEKI can provide.

solutions do you offer to help resolve issues
Q Whatfor customers and the environment?
Sogabe: Even with regard to the solutions we provide in ourdomestic business, we concentrate on how we can offer highadded value. One such effort is focused on variable fertilizing
technology, which prevents the application of excess fertilizer, thus
reducing the environmental burden. The use of a variable fertilizer
rice transplanter equipped with a real-time automatic fertilizer
adjustment function—our best weapon—has resulted in a 15%
reduction in chemical fertilizer use compared with conventional
systems, while verified results show it ensures the same yieldand quality as conventional systems. The technology is highly
regarded by customers as it reduces environmental impact while
also making possible low-cost cultivation. Furthermore, a newrice transplanter compatible with the xarvio® FIELD MANAGER*3
fertilizing map went into full-scale operation in the spring of 2024.
We are augmenting our variable fertilizer agricultural machinery
lineup. Moreover, we are working to expand the use of organic
farming in wet-rice cultivation, centered on the Aigamo-Robo, an
automatic weeding robot. In a verification test conducted with
the National Agriculture and Food Research Organization (NARO),
Tokyo University of Agriculture and Technology, and Newgreen
Inc. (formerly Yukimai Design Co., Ltd.), mechanical weeding
frequency was reduced by an average of 58%, and yields increased

Seri: In Europe, we are also focusing on rolling out
environmentally friendly products. In 2022, we became Japan’s firstmanufacturer to introduce an electric riding lawn mower to themarket on a limited basis. The reason the release was on a limited
basis was not only to gather know-how in terms of productdevelopment and production, but also to accumulate know-how
in battery storage—which diesel engine-equipped machines
do not have—as well as after-sales service and logistics, and toascertain user needs. We achieved a certain degree of success as
individual and semi-professional users, the target audience for the
product, was sufficiently impressed by the development theme,“ensuring performance on a par with diesel engine specifications.”
We have also introduced products compatible with the use ofhydrotreated vegetable oil (HVO) fuel, made by hydrotreating usedcooking oil and other raw materials, to our diesel engine-powered
product lineup. To heighten the competitiveness of our products,
we plan to sequentially roll out the product in all models by 2025.

We will continue, through product development, to deliver
value to our customers and the market that only ISEKI, an
integrated manufacturer specializing in agricultural machinery, canoffer, and we will strive to play a role in the food supply as well as
in creating livable communities. As an extension of this, we would
like to contribute to the creation of a social environment where
young people, the leaders of the next generation, will want tochoose a career in agriculture and the landscaping business itself,
by making it more appealing.
Seri: We believe that we have built our current position in Europe
together with our customers. We are now in a period of significant
change in European environmental policy. As Mr. Kitagawa noted,
we feel that we need to show agility in developing products thatsatisfy user needs. This includes transitioning to decarbonized fuels
and electrification. Europe is the most vital region of our overseas
endeavors. We intend to continue expanding our business in theenvironmentally conscious European market by providing highvalue-added solutions that focus on resolving issues that ourcustomers and the global environment are faced with.

Kitagawa: We based the electric riding lawn mower on a small
diesel engine model that had been well received in the European
market—where environmental awareness is particularly high—as
it allows us to respond swiftly to market needs. Although there
are still numerous issues to overcome in the electrification of
medium- and large-scale machines for professional users, such as
extending continuous working hours, reducing the time required
for recharging, and cost, we will effectively link the many opinions
we obtained through monitoring surveys of previous small-scalemachines to the development of the next generation of electric
products.

tell us about any plans you have for future
Q Please
initiatives.
Kitagawa: While enhancing our own core technologies, insteadof settling on a self-sufficient approach, we intend to generate
new value by proactively incorporating highly specialized external
technologies and ideas. We will collaborate with companies—
including start-ups—as well as suppliers, universities, andgovernment agencies more than we did previously to accelerateand streamline technology development in growth markets. Weview it as important to achieve carbon neutrality not only throughelectric products—the keyword up to this point—but also,
depending on the application and region, through the optimal
combination of energy and technology. This includes the use of
decarbonized fuels and hydrogen.

Sogabe: I believe that future initiatives will be concentrated
on smart agriculture that utilizes cutting-edge technology anddata and the term “environmentally sound agriculture” that I
mentioned earlier. In my own, frank words, I would characterize
it as “the achievement of profitable agriculture.” Farmers areworking very hard to realize sustainable agriculture. But it isultimately meaningless without both sides involved. We would
like to collaborate with farmers to make laborsaving, low-costfarming possible while also realizing profitable farm management.
We are presently promoting about 12 projects in cooperation
with municipalities, private-sector companies, and producers
nationwide and, through strengthened collaboration, we intend
to push forward a series of initiatives and further upgrade anddeepen our solutions in growth markets.

ISEKI Report 2024

36

Introduction

ISEKI Group’s value creation aims

Business strategies for value creation

Foundation for sustainable growth

Financial and non-financial data

Company information / Stock information

Business strategies for value creation

Domestic Market Strategies
Priority measures ❶We will address the issues facing Japanese
agriculture and achieve agriculture passed
on to the next generation.

Strengthening of initiatives for large-scale farmers

Productivity improvement by laborsaving through smart agricultural machinery
Demand for smart agricultural machinery that leverages ICT and robot technologies is growing following changes in the Japan’s agricultural
structure. For the immediate future, revisions of the Basic Act on Food, Agriculture and Rural Areas are being considered; as part of the revisions,
it is expected that new law concerning advancement of smart agriculture is formulated to promote, among others, introduction of newtechnologies including smart agriculture. Viewing these developments as business opportunities, the Company will provide various types of smart
agricultural machinery that solves issues faced by Japan’s agriculture and meets needs of large-sized business entities, and thereby contribute toproductivity improvement through laborsaving.

Noriaki Ishimoto
Corporate Officer
General Division Manager, Business Division

Although demand for agricultural machinery products declined in the fiscal year ended December 31, 2023, sales increased due togrowth in maintenance revenue, a pillar of the revenue-expenditure structural reform, and other revenue. In the domestic market, we
expect an acceleration of labor shortages due to a further decline in agricultural workforce, as well as farmland consolidation sparking
a transition toward large-scale farming and smart agricultural machinery. There is also an increasing need for environmentally soundagriculture, as seen in the Strategy for Sustainable Food Systems, MIDORI, to mitigate the burden on the environment.
In our domestic market strategy, we will focus on strengthening our initiatives for large-scale farmers, DX and smart strategies,
and bolstering our efforts in revenue-expenditure structural reform, and reinforce cooperation with various related partners
with the aim of contributing to resolving the issues of Japanese agriculture. Furthermore, under Project Z, we will promote theintegration of management of wide-area sales companies and the utilization of personnel in areas of growth so that we canheighten management efficiency and deliver solutions from the customer’s point of view. We will continue to contribute to thesustainable development of Japanese agriculture by supporting a farm industry full of dreams.

● Enhance lineup of products equipped with a function to assist straight traveling
Large-sized business entities who farm wide areas need technologies that reduce fatigue
caused by long working hours and improve operational efficiency and accuracy. In response,
the Company has worked to enhance the lineup of products equipped with a function to assist
straight traveling, which enables them to eliminate the need to operate handles while working
straight ahead. Starting with large-sized rice transplanters in 2017, we launched small-sizedtractors in 2021 and mid-sized tractors and large-sized combine harvesters in 2022. Now, weoffer the function for all three major machine types: tractors, rice transplanters, and combine
harvesters. Mid-sized tractors (BF series) launched in 2023, which represent the largest market
segment of the Company, are adapted to many implements and have enabled a wide variety ofwork styles. The sales ratio of machine types equipped with a function to assist straight travelingis increasing year by year. The Company is committed to further penetration.

BF series mid-sized tractors (equipped with a function toassist straight traveling) which have undergone the firstmodel change in 10 years and which represent our largest
market segment● Enhance lineup of the large-sized robotic agricultural machinery

Business policy

Net sales

Three priority measures

Improvement of sales
and service provision
capabilities

Strengtheningof initiatives
for large-scale
farmers

Machine types to promote sales■Agricultural machinery products

・Large-sized agricultural machinery・Smart agricultural machinery
・Vegetable farming machinery・Imported implements■Implements, parts, and repair“Transformation”
Strengtheningof DX and smart
strategies

of domestic
business

Improvement ofoperating margin

Acceleration ofrevenue-expenditure
structural reform■ Measures to realize fundamental structural reforms and growth strategies● Fundamental structural reforms: intensification of domestic sales (management

integration of wide-area sales companies)● Growth strategies: flexible and wide-area utilization of human resources

Market environment● Labor shortage following aging of farmworkers, etc.
● Acceleration of consolidation of farmland andincreased large-scale farming● Promotion of diversification of cultivation● Acceleration of smart agriculture

1,173

486

1,126

1,130

496

469

450

420

433

420

425

252

243

236

254

2020

2021

2022

2023

In May 2021, the Ministry of Agriculture, Forestry and Fisheries formulated the “Strategy for Sustainable Food
Systems, MIDORI,” which strikes a balance between the productivity improvement and sustainability in food,agriculture, forestry and fishery industries through innovations, for the purpose of establishing a sustainable
food system.

— 2050 targets related to agricultural production —● Strengthen initiatives for food security● Increasing interests in environmentally sound●and Rural Areas

ISEKI Report 2024

2025 target

Ministry of Agriculture, Forestry and Fisheries’“Strategy for Sustainable Food Systems, MIDORI”●

agriculture

GNSS-equipped robotic rice transplanters which enable
unmanned work through remote control

Value creation through promotion and penetration of environmentally sound agriculture● Improvement in food self-sufficiency rate

● Revisions of the Basic Act on Food, Agriculture

37

1,159

(100 million yen)

■Other

The Company offers robotic agricultural machinery which operates unmanned automaticallyunder manned monitoring, and concentrates on establishing efficient agriculture throughreduction in the number of required workers and laborsaving. As for tractors, the Company
commercialized the 65HP class in 2018, and launched the 75HP and 98HP classes in 2021
and in 2024, the first 120HP class robotic tractors in the industry to further respond toincreased large-scale farming. We also brought rice transplanters into the market in 2022. Bystrengthening the lineup of the large-sized robotic agricultural machinery, we will transformthe work styles and thereby contribute to expansion of the business scale by improving
productivity through super laborsaving.

To achieve zero CO2 emissions in agriculture, forestry and fishery industries
To reduce the use of agrochemicals by 50%● To reduce the use of chemical fertilizers made from imported raw materials and fossil fuels by 30%● To expand areas of organic agriculture to 25% (1 million hectares) of total cultivated land

In addition to the promotion of the “Strategy for Sustainable Food Systems, MIDORI,” response to climate change is being required startingfrom 2024, as seen in the fact that businesses under the Ministry of Agriculture, Forestry and Fisheries have been obligated to work to reduce
environmental burden. At the same time, there is a growing focus on environmentally sound agriculture, including organic farming, toward therealization of sustainable agriculture such as adding value to farm products. The Company views the environment as one of the growth areas andhas strengthened provision of community-based solutions in both tangible and intangible ways.
Income per 10 acres of organic rice farming nearly triples that of conventional rice farming. On the other hand, in week management, it issaid to take about five times longer*, and it has been a challenge to reduce labor for weed management. The Company enters into partnershipagreements with local governments across the nation and proposes a variety of technologies, not just for agricultural machinery, using “AigamoRobo” developed by NEWGREEN Inc. (former Yukimai Design Co., Ltd.) as a sample forprospective customers. This automatic weeding robot controls growth of weed by agitatingwater and rolling up mud to block sunlight.
In addition, the Company entered into a business alliance with Faeger Co. Ltd. in 2023, to
expand initiatives related to J-Credit. “Amoni,” a web portal operated by the Company for farmbusiness solutions, offers rice growth forecast service and various technologies to provide
farmers with information necessary for calculating the appropriate midseason drainage period.
The Company also promotes environmental preservation throughout the agricultural industry
by supporting application and approval procedures, etc. required for generating J-Credit.
*Source: Ministry of Agriculture, Forestry and Fisheries, “Current State of Japan’s Organic Agriculture”

Aigamo-Robo, an automatic weeding robot

ISEKI Report 2024

38

Introduction

ISEKI Group’s value creation aims

Business strategies for value creation

Foundation for sustainable growth

Financial and non-financial data

Company information / Stock information

Business strategies for value creation

Domestic Market Strategies

Priority measures ❷Strengthening of DX and smart strategies

In order to cope with aging of farm workers and labor shortage, improve productivity, and conduct more sophisticated agricultural management,
the Company believes that it is important to realize a transformation to new agriculture that utilizes sensor technologies and data. As of 2022, theratio of agricultural business entities who implement agriculture that utilizes data was 26% nationwide and 65%* in Hokkaido; this ratio is expected
to increase further in the future. ISEKI Group is working to promote and expand precision farming and smart agriculture from a perspective of
production sites, while strengthening collaboration with various related partners.
*Source: Ministry of Agriculture, Forestry and Fisheries, “2023 Study on Agricultural Structure Dynamics”● Link with sensor map data “Variable fertilizing technology” to adjust to
the soil imbalances
Nutrients in soil is unbalanced; therefore, it is important for the quality stabilization to adjust
the quantity of fertilizer used according to the state of soil and equalize crop growth. The
Company adjusts the quantity of fertilizer used for each area (or on a specific-area basis)
according to the soil imbalances. We have developed the “variable fertilizing technology”
which enables reduction of fertilizer while maintaining the yield and quality.
In 2015, the Company launched real-time variable fertilizer rice transplanters which
automatically adjust the quantity of fertilizer while measuring soil imbalances using a sensor.
Machine types equipped with a variable fertilizing
function that links with map data also supports map data
Afterwards, it launched a smart fertilizer top dressing system that enables variable fertilizerof “xarvio® FIELD MANAGER” promoted by JA Zen-Noh.
addition for rice and wheat in 2020, and then rice transplanters and tractors equipped with avariable fertilizing function that links with map data in 2023. The Company proposes environmentally friendly agriculture while supporting quality
improvement and cost reduction through realization of high precision operation.

TOPIC

Customer feedback — Mr. Kazunori Sakamoto, Representative Director of Sakamoto Farm K.K.

At present, we are farming rice in 30 hectares, vegetables in 2 hectares and fruits in 6 acres.
We introduced variable fertilizer rice transplanters in 2017. The price of variable fertilizer ricetransplanters is higher than conventional rice transplanters; however, we could reduce fertilizer
costs amid the recent surge in prices of agricultural materials. The longer the period of use, thegreater the investment effect. We are undertaking challenges for further cost reduction such as
to gradually decrease the quantity of fertilizer based on the results, including the harvest, of theprevious year, while assessing the line that fully secures the yield and quality. Fields consolidated
through infrastructure development had different soil conditions depending on locations; as such,
equalization of growth was the issue. However, we have eliminated the growth imbalances byutilizing the variable fertilizer rice transplanters.

● Farm business support utilizing data
There is a growing need for enhancement of business management efficiency in response
to increasingly complicated farming and operational process management associated withan increase in areas managed. “ISEKI AGRISUPPORT,” which creates data from information on
agricultural machinery operation, links its data with “agri-note,” which is an agricultural business
management tool, and supports efficiency improvement of agricultural management byautomatically accumulating farming operation records. In addition, it enables data-driven
farming management, and thus is expected to contribute to the cost reduction and yield
increase, as it makes it possible to, for example, set the optimal quantity of fertilizer used byvariable fertilizer rice transplanters based on yield data.
In 2024, the Company entered into a capital and business alliance with WaterCell Inc. which
offers agri-note. We will strengthen the information platform functions that agri-note has andexpand the data linkage.
“Amoni,” a web portal for farm business information, offers a rice growth forecast service
for each field and variety based on weather data as a function convenient for farming
management, and thereby supports optimization of farming management.
We will provide services that utilize data in various situations and contribute to realization ofhighly profitable agriculture through visualization of agricultural management.

Priority measures ❸Strengthen efforts toward revenue-expenditure structural reform

The Company is working to increase maintenance revenue (parts
sales and repair fees) which accounts for about 20% of domestic
net sales, with the aim of building a stable revenue base that is notaffected by the environment of demand for agricultural machinery.
Revenue has been steadily increased thanks to higher demandfor planned maintenance associated with increased large-scale
farming as well as our efforts to strengthen service activities. We willcontinue to place an emphasis on maintenance as a pillar of revenueof sales subsidiaries. In addition, the coin rice milling business has
contributed to securing revenue stably. In 2023, the Company
launched coin rice milling machines equipped with a function called“UMAMI rice milling,” which has a 6-7% higher rice taste analysis
value (tastiness indicator) than standard rice milling.
Furthermore, the Company has been conducting a block strategy
with the aim of achieving optimal allocation of sales bases andhuman resources and thereby working to improve management
efficiency. The Company strives to improve profitability by dividing
sales bases into blocks centering on large-sized maintenancebases and making investment decisions from a comprehensive
perspective that includes profitability of the region, share, anddemand for large-sized machinery.

┃ Maintenance revenue(100 million yen)

230

220

220

214
210

212

214

207

200

190
2019

2020

2021

2022

2023

┃ Coin rice milling business revenue(Millions of yen)

758

800

600

517

581

573

584

2020

2021

2022

400

200

0
2019

2023

向上

による経営効率の
資源集約
Project Z
Measures to realize fundamental structural reforms and growthstrategies“Improved management efficiency achieved byconsolidation of resources”

効率的な在庫運用

商品部品流通改善

Improved management efficiency achieved by consolidation of resources

しによる在庫拠点最適化や物流体制の見直。 of product parts
Improved
distribution
物流費の圧縮The Company plans to implement reorganization in January 2025
through management integration of six wide-area sales companies.
Through the reorganization, the Company intends to improve
management efficiency by means of consolidating management
resources, such as reducing logistics costs (warehousing andtransportation costs) through the reform of stock bases and logistics
systems, achieving efficient stock management and stock reduction
through central stock management, and streamlining redundant
indirect operations.

Reductionof 品流通logistics costs改善
through the optimization of stock bases
商品部
and reform of logistics systems

運用と削減
全国一元管理による効率的な在庫

Efficient stock management
産

棚卸資 and stock reduction throughEfficient stock management
nationwide central stock management

Improved
化 distribution of product parts
在庫拠点最適Inventories

Optimization of stock bases

物流体制見直しReform oflogistics systems

2023
2023

2027

2030

2027

2030

“Growth strategies: Flexible and wide-area utilization of human resources”
Support farming management that links with agricultural
machineryIn the context of an accelerating decline in the number of farm workers, growing interest in environmentallysound agriculture as seen in the “Strategy for Sustainable Food Systems, MIDORI,” and intensified efforts toachieve food security, “large-sized machinery,”“dry fields,” and “environment” markets are expected to expand
based on advanced technologies. The Company will focus on providing solutions in these growth markets.
Through the management integration of sales subsidiaries, the Company will further develop its domestic
business by flexibly utilizing human resources with know-how in the wider area and allocating resources togrowth markets.
Similarly, in the high-profitability businesses such as the maintenance business and used machinery
business as well, the Company aims to establish a business model with stronger earning power by utilizing
strengths and know-how of each sales subsidiary on a nationwide basis.

ide
nwハiウonoit at 開ow
Naノtiウliz 展-hu 全n国owkoff
用t o cesnem登 ur
in材t reso
人op
Ap manhu

Agri-note visualizes through map, etc. operational
information and records obtained by ISEKI AGRISUPPORT39

ISEKI Report 2024

ISEKI Report 2024

40

Introduction

ISEKI Group’s value creation aims

Business strategies for value creation

Foundation for sustainable growth

Financial and non-financial data

Company information / Stock information

Business strategies for value creation

Overseas market strategies
Priority measures ❶As a “solution provider for agriculture andlandscape,” we will contribute to local needs
worldwide through manufacturing.
Kazuya Tani
Director & Senior Corporate Officer
General Division Manager, Overseas Business Division

The fiscal year ended December 31, 2023 was a year of increasing uncertainty in the business environment, with prices andgeopolitical risks growing globally. Strong performance in Europe, however, drove our overseas business, and enabled us toachieve record sales for the third year in a row. We successfully followed the path we set forth in our Mid-term Management Planfor our overseas business and achieved our 2025 sales target ahead of schedule.
Moreover, with Project Z, we aim to accelerate our growth beyond the objectives established in our Mid-term Management
Plan. We will further promote Non-Agri products in particular—which are used by professional users in Europe to maintainlandscape and for light work by individual users in North America—as a segment to serve as a driver for our growth strategy.
In Asia, we will expand our business foundation to capitalize on growth potential in the agricultural field, where we canfully demonstrate the technology and know-how we have cultivated in the domestic market. Based on this selection andconcentration, we will roll out businesses that have an impact on agriculture, the environment, and people’s lives, with the aim ofrealizing a prosperous society.

In the North American market, we supply compact tractors with 40HP or less on
an OEM basis as the Massey Ferguson brand to AGCO Corporation which is a local
partner and a major global manufacturer of agricultural machinery. The products areused mainly by private users for various applications such as light civil engineering,garden maintenance, and snow clearing work in the cold area. The products areergonomically designed from a perspective of users, and highly recognized by local
users as well.
Demand for compact tractors has been rapidly increasing in the past 10 years. In
2020 and 2021 in particular, demand strongly increased following changes in thelifestyles such as moving to the suburbs. The year 2022 onward faced the adjustment
phase; however, the market size remains large, with sales unit of about 170,000. The
Company will implement product and sales strategies that meet market needs tosteadily capture this demand.

(thousand units)250■ North America ■Europe ■Asia and other regions

Three priority regions

Results

North America

200

Increase presencein the landscaping
market(100 million yen)

333

93
97

66

251

568

139

Roll out rice
farming-related
machinery developedin Japan

128

151

2020

2021

EuropeIncrease environmentally-friendly products such as electrical ones
Increase products for consumers
Promote central stock management, etc.

Asia

41

ISEKI Report 2024

94.8

96.3

123.5

131.7

145.1

2,000
1,500
1,000
500

195
2022

142
2023

2025 targets

Capture demand in each region precisely and accelerate the profitability
improvement and business expansion.
[Net sales]*CAGR: Compound annual growth rate

Net sales
CAGR 10%

Operating income■Asia

CAGR 20%■North America■Europe

2020

2006

2007

2008

2009

2010

2011

2012

Measures to realize growth strategies

Strengthen sales channels of IST Farm Machinery Co., Ltd.
Launch machinery manufactured by TAFE
Launch high-performance machinery*AGCO Corporation: OEM customer*IST Farm Machinery Co., Ltd.: The Company’s Thai sales subsidiary*TAFE: Indian agricultural machinery manufacturer with which the Company has entered into business alliance

90.5

104.4

114.2

172.4

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

0

332

■ Measures to realize growth strategies
North
America

113.5

193.2

178.7

Sources: Association of Equipment Manufacturers (AEM), United States Census Bureau (USCB)

92

159

Asia

Promote the increase in share through cooperation with AGCO
Corporation
Launch new products such as environmentally-friendly ones

127.1

156.0

170.1

50
0

539
407

Europe

132.7

2,500

215.8

Mid-term Management Plan

Increase share in thecompact tractor market

Expandthe overseas
business(thousand homes)

236.9

U.S. new housing starts■ North American compact tractor market (PTO 0-40HP)

100

Net sales

Compact tractors used for personal applications such as light civilengineering and garden work

┃ Trends in North American compact tractor market and new housing starts

150

Business policy

North America: Strengthen relationship with AGCO Corporationand increase share in the compact tractor market

Project Z“Promote the increase in share through cooperation with AGCO Corporation” and “Launch new products
such as environmentally-friendly ones”
In order to accelerate expansion of the overseas business, the Company has positioned the sales expansion of Non-Agritractor products mainly in the European and North American markets as the “key segment that drives growth strategies.”
In the North American market, the Company will further strengthen the cooperation with the strategic partner, AGCO
Corporation, focus on expansion of the sales network of local dealers and development and provision of products tomeet more diversifying and sophisticating needs of the market in a smooth and precise manner, and thereby aim toincrease share. For the environment area in particular, where demand is expected to increase in the future, we willconcentrate our efforts on rolling out solutions to mitigate environmental burden. In addition, we will commence local
marketing, besides conventional supply of products on an OEM basis, to strengthen our competitiveness by developing
and providing highly unique products that respond to the North American nature of the region’s wide area.
It will be important to immediately respond to orders received from customers in addition to ensuring the productappeal; as such, PT ISEKI INDONESIA which produces compact tractors, etc. targeted at North America worked tostrengthen its system by reinforcing its production capacity in 2023.
We will continue to strengthen cooperation with AGCO Corporation and contribute to enrich customers’ private lives.

2030

ISEKI Report 2024

42

Introduction

ISEKI Group’s value creation aims

Business strategies for value creation

Foundation for sustainable growth

Financial and non-financial data

Company information / Stock information

Business strategies for value creation

Overseas Market Strategies

Priority measures ❷Europe: Further expansion of presence in the landscaping market

In the European markets, the Company offers Non-Agri products for landscaping
to be used for mowing lawns in parks, road cleaning, and snow clearing work byprofessional contractors who undertake task from municipalities. The landscaping
business is essential business that cannot be interrupted from the perspective of
maintaining comfortable city functions. Therefore, products are required to have ahigh level of quality and functionality including comfortableness and durability. The
Company has established the ISEKI brand over 50 years of history of its business in
Europe by deploying sales activities and providing services to the entire region, andthereby contributed to town development of Europe.
In France which is one of the largest European markets, ISEKI France, a consolidated
subsidiary, has developed a sales and service network with over 200 bases in the
country. Net sales and operating income of ISEKI France hit a record high in the fiscal
year ended December 31, 2023, resulting from its efforts to focus on the provision ofhigh value-added products and services.
ISEKI Germany became our consolidated subsidiary in 2022 so that we canfurther expand presence in Europe, and possesses development and manufacturingfunctions in addition to provision of sales activities and services. By making the
maximum use of the strengths of ISEKI Germany, we will develop our business in aconsistent manner through such initiatives as product development that captures
market needs at an early stage.

Priority measures ❸Asia: Business expansion through leveraging technologies andknow-how developed in JapanIn Asia, we are supporting improvement of agricultural productivity and food production through provision of agricultural machinery and services
that utilize technologies and know-how developed in the domestic market.

● ASEAN

Riding lawn mower that play an active role in mowing inparks and ranches

In the ASEAN markets, we offer agricultural machinery for field crops and rice farming.
Under the tropical rain forest (hot and rainy) environment, products are often usedby contractors in severe conditions such as long working hours. Therefore, there areneeds for durability and low prices. With IST Farm Machinery Co., Ltd. which became
a consolidated subsidiary in 2020 at the core, we work to sell and provide services
to Thailand and neighboring countries. In Thailand, in addition to conventional rice
farming, we focus on sales of agricultural machinery for field crops such as sugarcaneand cassava. We successfully increased sales of tractors for field crops in 2023 by
stepping up promotion through exhibitions and demonstrations, and by targeting
enterprises in a concerted effort with local distributors.

Highly durable tractors used in fields with lots of stones
and gravels● East Asia
In the Korean and Taiwanese markets, we mainly sell agricultural machinery for rice farming through sales agents (South Korea: TYM; Taiwan:International Agricultural Machinery Co., Ltd.). In both countries, farm workers are decreasing and aging, and farmland is being consolidated
as in Japan; and therefore there are growing needs for larger-sized machinery and high-performance models with high durability. Based ontechnologies and know-how for rice transplanters equipped with a function to assist straight traveling, highly-durable tractors, combine
harvesters, etc. developed in the domestic market, we supply products that are finely tuned to local farming systems.
Tractor clearing snow with a snow blower mounted in its front

Measures to realize growth strategies

Project Z“Increase environmentally-friendly products such as electrical ones,” “Increase products for consumers” and“Promote central stock management, etc.”
The European markets account for about 60% of overseas sales in the fiscal year ended December 31, 2023, boastinghigh profitability. Therefore, the Company regard them as the most important markets for further growth of its overseas
business.
It is a region with high awareness of and interest in environmental problems such as reduction of CO2 emissions.
Accordingly, in addition to previously implemented emissions regulations, demand for solutions that lead to mitigationof environmental burden is expected to increase. The Company regards the environment as one of the growth areas, andis committed to expansion of environmentally friendly products toward realization of carbon neutrality. We launchedriding lawn mowers that run on biofuels (HVO fuels produced through hydrogenation of used cooking oil, etc.) in 2023.
The Company plans to implement this initiative to all models one after another by 2025, and aims to strengthen productcompetitiveness. Furthermore, given the rapid advancement toward electrification, we commenced limited sales ofriding lawn mowers powered by lithium-ion batteries in 2022. By being the first Japanese company to bring this productto market, we have successfully increased presence, and plan to enhance the lineup in the future. Moreover, in addition
to the Company’s products, we will increase purchased products for consumers for which we have put efforts to expand
sales in response to changes in lifestyles, with the aim of expanding sales. Also, in the future, we will establish a central
stocking system in the European region to scale up revenue opportunities and improve asset efficiency through timely
provision of products to customers.
We will continue to contribute to protection of beautiful European cityscape and development of towns where people
can continue to live through provision of products and services that satisfy customers.

43

ISEKI Report 2024

Measures to realize growth strategies

Project Z“ASEAN: Strengthen sales channels of IST Farm Machinery Co., Ltd.”The ASEAN markets have high potentialities in the medium to long term with expectations for an increase in fooddemand associated with population growth. With IST Farm Machinery Co., Ltd. at the core, we will continue to expand
business in Thailand and neighboring countries by further strengthening the sales and service system and improving
profitability.

“India: Rolling out of TAFE-produced machinery”
In order to globalize development, production, and sales, in 2018, we entered into a technical and business allianceagreement with TAFE, which boasts the No. 2 share in India which is the world’s largest tractor market, and havepromoted collaboration. In 2022, we launched co-developed and TAFE-produced small-sized tractors in Thailand. In
addition, in order to manufacture and sell the Company’s products with more competitive prices, we commenced
procurement of parts for production from TAFE. We aim to deepen the relationship with TAFE and expand sales andrevenue through global business development.

“East Asia: Launch high-performance machinery”
Toward improvement of agricultural productivity, demand for high-performance machinery is expected to continue inthe future. The Company will roll out high-performance machinery such as rice transplanters equipped with variable
fertilizing technologies and combine harvesters equipped with a function to assist straight traveling, and at the sametime, based on the policies to encourage cultivation diversification, offer products for field crops. In addition, we will
provide fulfilled technology and service training for sales agents to focus on post-sales services that lead to customer
satisfaction.

ISEKI Report 2024

44

Introduction

ISEKI Group’s value creation aims

Business strategies for value creation

Foundation for sustainable growth

Financial and non-financial data

Company information / Stock information

Business strategies for value creation

Product/Development Strategies
We will concentrate on areas of growth andcreate valuable products that will be selectedby markets worldwide.
Tsutomu Watanabe
Corporate Officers
General Division Manager, Development & Production Division

In the fiscal year ended December 31, 2023, we were embroiled in a challenging business environment in which raw material
and energy prices were soaring. Amidst these conditions, while implementing a host of measures in the areas of development,
procurement, and manufacturing, we introduced a total of 19 new models (series), including the BF Series tractor and Frontier Master(FM) Series combine harvester—both in the volume zone—to the domestic and overseas markets.
In our management strategy, we have been promoting initiatives to concentrate resources on regions and products where we arestrong and on growth markets, as well as structural reforms. And, under Project Z, we will steadily put these initiatives into practicewith a sense of urgency. With regard to fundamental structural reforms, we will promote the “Optimize production” by integrating
the management of production sites, and of development by selecting and concentrating development models and reforming
development methods. This will help us to build a structure that enables us to concentrate management resources on growth markets.
As for our product strategy, we will focus on the fields of large, cutting-edge, environment, and dry fields—where significant growth isexpected—and create highly competitive, valuable products that will aid our customers in solving their problems.

Research and development system
We have built a research and development system that displays
collective power through mutual collaboration among the planning,development, production, and sales departments, and manufacture
products that meet the market needs of each country and region.
The “Product Development Strategy Committee” regularly discusses
the direction with an eye on medium-term solution of social issues
from the recent business perspective, and determines basic policies
and plans for product strategies and research and development. For
advanced technologies, a priority area, the “Advanced Technology
Strategic Committee” narrows down themes to be addressed andshares technological trends, takes a deep dive into issues, and discusses
business development that leverages the Company’s strengths.
The Iseki Basic Engineering Training Center (IETC), which is a training
facility specialized in designing technologies, dedicates itself to foster
human resources to promote frontrunner development such as
application of robotic technology and electrification. In addition, theCompany creates new value by integrating external help with theCompany’s core technologies in various forms such as joint researchand open innovations with universities and corporations.

Product Development Strategy Committee

Cooperation andation sharing
informAgricultural

Planning■ Measures to realize fundamental structural reforms andFocus on regions, products, and growth markets, which are our strength

growth strategies● Response to large-scale farming

Overseas● Response to brand expansion● Safety and environmental responses

Common● Frontrunner development■ Structural reforms through establishment of an optimal
production system● Improve quality and earning power through selection andconcentration● Improve productivity through optimal allocation of humanresources and facilities

Fundamental structural reforms:● “Optimize production” (optimal allocation of machine types
produced and production bases, capital investment for the
future, environmental responses, and efficiency improvement)● “Optimize development” (concentration of development
resources, and efficiency improvement through the use ofshared design)
Growth strategies:● Concentration of development capability in the priority areasof the growth markets (automation, laborsaving, and mitigationof environmental burden)● Strengthen the production system on a global basis

Research and development policy
We conduct research and development in line with the four spirits
as the engineer, upholding the mission of “contributing to society
through agricultural machinery.”

Spirits as the engineer● Market ideas● Exert all technical potential● Always being one step ahead of the competitors● Be totally dedicated to product philosophy

45

ISEKI Report 2024

needs

technology

Sales subsidiaries
Suppliers

Testing research
institutions
Universities
Corporations

Development
and production
departments┃ Joint development projects in FY2023

9 themes
1 themeResearch institutions
Universities

Project Z“Optimize development”■ Product development
Japan

Sales

policy trends
departments Joint research
departments
Educational systems
IETC
Empirical
ITTC
research
Specialized
Discussion
IGTC
human
resources
MarketNew

Measures to realize fundamental structural reforms and growth strategies

Business policy

Needs of regions
and customers

The Company will concentrate resources in the growth strategies for “large, cutting-edge, environment, and dry fields” byreducing the machine types (series) and models to be developed by at least 30% through selection and concentration.
In addition, even if products have different targeted markets, technologies that support them are in common in manycases. Therefore, we will promote development optimization by reforming the develop methods that include global
design in which we apply shared design for the product body, and then design parts specifically to meet the needs ofdifferent regions. Through effective and efficient utilization of investment in research and development centered aroundthe aforementioned initiatives, we will work to improve the product margin in the in the near future with the aim of
reducing product variable expenses by at least 10%, and also strive to realize production optimization.

“Realize automation, laborsaving, and lower environmental burden in agricultural and landscaping work”
The Company will narrow down priority areas based on growth potential, etc. of markets and concentrate management
resources in the areas where its strengths can be leveraged. We will focus on research and development particularly ontechnologies related to mitigation of environmental burden such as advanced technologies for automation, laborsaving,
etc., variable fertilizing technologies, and electrification.
Reduce the numbers of models and types by
30% or more, and focus on growth strategy

The Company’s characteristics in researchand development, production● Maximized product value based on technological capabilities

and intellectual property strategies● Brand power of combine harvester “JAPAN” and ricetransplanter “Sanae”● Joint research and development in collaboration with research
institutions, universities, etc.
● Strengthened collaboration with Dream Agricultural ResearchInstitute (initiatives for smart agriculture that utilize advanced
technologies)● Development of specialized human resources in research anddevelopment and at production sites

Select &concentrate onmodels to be
developed●●

Growth rate
Market scale

More efficient development & streamlined organization
Integrate
Full-scale launch of optimization manufacturing
company management● Process integration(Matsuyama &● Greater indirect efficiency
Kumamoto)

Development & production
structure that creates
valuable products

Improveproduct profit
margins

Large, cutting-edge, environment, and dry fields●●

Common design
Enhance efficiency

Reformdevelopment
methods

Reduce variable product costs
by 10% or more to improve
profit margins in the short-term
Short-term focused measures
Across all models● Unification of standards●●

Global design*Global design: Common design for the product base and exclusive
design for those components that differ depending on the region.

ISEKI Report 2024

46

Introduction

ISEKI Group’s value creation aims

Business strategies for value creation

Foundation for sustainable growth

Financial and non-financial data

Company information / Stock information

Business strategies for value creation

Product/Development Strategies

Production system

Procurement: Strengthening supply chain management

We have five domestic production bases (Matsuyama, Kumamoto, Niigata, Shigenobu and Minamiyoshida) and three overseas bases (Indonesia
and two venture factories in China). The high-mix, low-volume production system in Japan enables us to promptly respond to diverse needs; onthe other hand, each product is manufactured at a different production base, and it is important to realize production standardization. Therefore,
we work on various initiatives to establish an optimal production system.
We are working to reduce fixed costs by promoting external production of parts and processes previously manufactured in-house, while continuing
in-house production of core technologies that have high added value and require the transmission of skills, and accumulating know-how. We haveshifted human resources to higher value-added operations by improving the productivity and enhancing and stabilizing the quality through introductionof facilities that utilize robotic and IT technologies, while responding to labor shortage through laborsaving and ensuring the safety of workers. We
have horizontally deployed systems at other bases for which we have confirmed effectiveness of their introduction, leading to overall improvement of
productivity. In addition, we stopped in-house development and production of dryers in December 2022 and switched to purchasing and selling.
With an eye on the further expansion of the Company’s overseas business, we are promoting strengthening of systems and production transfer
at PT ISEKI INDONESIA, our global production base. Production ofriding lawn mowers for Europe, which was previously produced
at ISEKI-Matsuyama MFG. Co., Ltd. has been transferred to PT ISEKI
INDONESIA since July 2022, realizing cost reduction. Furthermore,
we expanded PT ISEKI INDONESIA by constructing a new factorybuilding in 2023 to increase its production capacity to 22,000 units,
whereby we established a system that enables production at lower
cost. The number of units produced at PT ISEKI INDONESIA in 2023
and 2024 was temporarily decreased due to production adjustments
conducted in response to the trend in the North American market.
However, we expect that the number will increase in the future as
we further transfer production of products currently manufactured in
PT ISEKI INDONESIA with strengthened production capacity
Japan and promote growth strategies of the overseas business.
We will accelerate our establishment of an optimal production system on a global basis and improve profitability.

Measures to realize fundamental structural reforms and growth strategies

Project Z“Optimize production”
While we have been promoting the establishment of an optimal production system for domestic and overseas production sites asa priority measure to enhance profitability, we will further accelerate the effort through Project Z. In July 2024, the Company plansmanagement integration through reorganization of ISEKI-Matsuyama MFG. Co., Ltd., our mother factory which manufactures tractors
and engines, and ISEKI-Kumamoto MFG. Co., Ltd. which manufactures combine harvesters. Optimal allocation of machine types andproduction bases and capital investment for the future are included in the measures under the reform. The Company will consolidate
processes that are redundant among production bases, realize reduction of stock and fixed costs through consolidation of humanresources, investments, and systems, and strengthen a structure by optimizing production and assets. In addition, we will strengthen thesystem at PT ISEKI INDONESIA to increase production and accelerate global expansion.

We have strengthened our initiatives for optimal procurement based on
central purchasing by integrating the Purchasing Department of Head
Office and procurement departments of manufacturing subsidiaries. While
overseas procurement including indirect purchasing is increasing every year,
exceeding 30% in FY2023, the Company promotes optimal procurementby considering returning procurement to Japan in regard to geopoliticalrisks such as conflicts, terrorism, and other problems, and preparing solutionplans for each region in regard to foreign exchange risks caused by the
weaker yen.
The Company entered into a technical and business alliance agreementwith TAFE, which boasts the second largest share in India. In order tostrengthen price competitiveness of our products, the Company started touse parts produced by TAFE in our tractors, and will adopt them to othermachine types in the future.
By continuing to strengthen communication with suppliers, the Company
aims to avoid production loss and line stoppage risks, conduct stableproduction, and procure parts of good quality at fair prices.

┃ Percentage of procurement from overseas suppliers
Plan

Results

(%)

34.5
33.2

29.2
27.7

31.4

28.8
28.8

26.6
25.0

2019

2020

25.8

2021

2022

2023

TOPICS
Automation

Development of industry’s first manned monitoring-based
robotic tractors for the 120HP class
While the labor shortage issue has become serious amid the decline in thenumber of farm workers, it is required to ensure food security and improve
food self-sufficiency. As one of the solutions to these issues, autonomous
agricultural machinery (robotic agricultural machinery) that contributes tosuper laborsaving of agricultural work has been attracting attention. For
large-sized fields in particular, expectations for large-sized-class unmanned
tractors have been growing, as they will lead to an increase in operational
efficiency through cooperative work, etc. In this market where future
expansion is expected, the Company commercialized 120HP robotic
tractors which are the largest class in Japan ahead of other companies.

Unmanned operations compliant with the“Guidelines to Ensure Safety”
Unmanned operations under manned monitoring are enabled by satisfying
the Level 2 set forth in the “Guidelines to Ensure Safety.”

Smooth automatic operations
Smooth automatic operations are realized by addressing the issue of false
detection of dust scattered by field crop operations.

Expansion to large-sized fields
The product can be used even in larger-sized fields due to the improved
communication function.

Reduction of environmental burden

Development of rice transplanters that utilize variable
fertilizing technologies and map data
PT ISEKI INDONESIA
Tractors for overseas markets
ISEKI-Niigata MFG. Co., Ltd.
Rice transplanters

ISEKI-Kumamoto
MFG. Co., Ltd.
Combine harvesters

ISEKI Report 2024●

“Create robustly-structured manufacturing companies”●

Integrate human resources, investment & systems
to generate synergy through greater operational efficiency and cost
reductions
Enhance production efficiency
Effectively utilize human resources
Enhance asset efficiency
Reduce inventories
Reduce fixed costs

ISEKI-Matsuyama MFG. Co., Ltd.
Tractors and engines
ISEKI-Minamiyoshida
MFG. Co., Ltd.
Cabins47

Basic policy

ISEKI-Shigenobu
MFG. Co., Ltd.
Implements●

Establish a structure for expanding production at PT ISEKI INDONESIA

There is a growing need for utilization of variable fertilizing technologies
that prevent excessive fertilizer application as a countermeasure against
climate change, in step with the progress in the data utilization associatedwith increased large-scale farming conducted by rice farmers. In addition
to variable fertilizer rice transplanters equipped with the Company’s
unique technologies, we launched map-data-linked variable fertilizer ricetransplanters that are compatible with “xarvio® FIELD MANAGER” which is a
farming management support system that utilizes AI and is promoted by
JA Zen-Noh. Through such means, the Company further strengthened thelineup of smart rice transplanters.

Reduction of fertilizer cost
The product restrains farmers from excessive or insufficient fertilizing bychanging the quantity of fertilizer based on data of the fertilizing maps.

Stabilization of crop quality
The product eliminates growth imbalances and reduces lodging by controllingsoil imbalances by curbing excessive fertilizing.

Easy operation
Anyone can easily operate the product because the map registration, which
was previously required, is no longer necessary to load maps from ISEKIAGRISUPPORT.

ISEKI Report 2024

48

Introduction

ISEKI Group’s value creation aims

Business strategies for value creation

Foundation for sustainable growth

Financial and non-financial data

Company information / Stock information

Business strategies for value creation

Response to climate change
World view of each scenario (envisaging 2030)

In May 2022, ISEKI Group announced its endorsement of the TCFD Recommendations, and sincethen, has disclosed information in line with the Recommendations.

Governance
Agriculture and the landscaping business, which benefit from nature, are closely connected to climate change. Given their potential for a major
impact on the business activities of ISEKI Group, an integrated manufacturer specializing in agricultural machinery, we have positioned taking
measures for climate change as one of our priority management issues and are practicing environmental management.
Climate change-related risks and opportunities are managed centrally by the ESG Committee. The Committee meets monthly in principle,
examining and deliberating on climate change-related risks and opportunities four times a year. The results of deliberations at the Committee
meetings are recommended to the Board of Directors, and important matters are deliberated and determined by the Board of Directors. This
framework enables the management team to strengthen their involvement. (Please refer to p. 53 for information about the ESG Committee)

4°C Scenario

1.5°C/2°C Scenario

Prioritize economic development resulting in
aggravation of temperature rise and its effects

Transform business towards decarbonization andsuccess in curbing temperature rise

Natural environment

Natural environment

・Decrease in areas for rice farming
・Increase in average temperature andsevere typhoon and flood damage

Strategy

Farm workers
・Damage to agricultural soil caused byconcentrated torrential rains
・Radical changes in agricultural production
infrastructure

・Temperature rise and consistentincreases in the frequency of storm
and flood disasters

Investors and financial institutions

Procurement

Government

・Emphasis on BCPs and risk management
due to concerns over disaster risks

・Disruption in the supply chain due todamage from storms and floods

・Full-scale introduction of policies toward
carbon neutrality

Physical risks

・Face changes associated with the progressof decarbonization in agricultural
machinery and agricultural methods

Investors and financial institutions
・Expand ESG investments and loans,
and withdraw from businesses that
consume fossil fuels

Impact on ISEKI & CO., LTD.

In 2021, ISEKI Group conducted a trial analysis on climate change scenarios to understand the impact of climate change on our business, manage
associated risks and opportunities, and factor these into our management decisions.
Based on the two scenarios, namely, the 1.5°C/2°C Scenario in reference to external scenarios and the 4°C Scenario, we analyzed the entire value
chain of the agricultural machinery business, the core business of ISEKI Group, both in Japan and overseas, and identified risks and opportunities
as of 2050. Collection and analysis of data were conducted across the whole ISEKI Group (domestic sales, overseas sales, product planning, finance,
procurement, quality, and environment-related departments), with the Strategic Planning Section of the Corporate Planning Department playing acentral role. Year 2030 is envisaged in qualitative and quantitative evaluations.

Farm workers

Procurement
・Raw material price hikes and demand
surges caused by tightened
environment regulations

Impact on ISEKI & CO., LTD.

Physical risks

Opportunities<Business suspension and increased
countermeasure expenses><Changes in demandfor products>

caused by temperature rise andcatastrophic disasters

caused by changes in
the agricultural environment

Physical risks< Business suspension and increased
countermeasure expenses >caused by temperature rise and occurrenceof storm and flood disasters
However, the impact can be limited comparedto the 4°C Scenario

Transition risks

Opportunities<Changes in operational andprocurement costs>

associated with the progress indecarbonization policies and responses

Transition risks

Opportunities<Changes in business
opportunities>

associated with advancement ofdemand for decarbonization

Risks, opportunities, and countermeasures based on scenario analysis
Risk category
Technology

Details
Decline in competitiveness caused by delays in technological development

1.5°C/2°C Scenario
Financial Potential
impact4°C Scenario
Financial Potential
impactMediumMediumMediumMediumTimescale formeasures
Short term

Direction of strategies and measures

R&D of carbon-free agriculture● R&D of agricultural machinery that supports agriculture adapted
to natural disasters and rising temperatures●

Transition risk

MarketPolicyDecline in sales due to decline in demand caused by needs and social infrastructure status

Large

Increase in operation cost due to introduction of carbon tax and emissions trading scheme
Basis for calculation of financial impact(

Supplementary information on P51

Reputation

Deterioration of reputation among shareholders and other stakeholders, divestment, or plummeting share priceMarketChanges in supply chain caused by climate change result in higher manufacturing costs, making it difficult to provide
products

Medium

1.1 billion yen/year of increased
cost burden

Small

)

Small

MediumMedium(MediumSmall

0.35 billion yen/year of increased
cost burden

)

Small

Small

Short term

Medium

Mid term

Medium

Mid term

Provision of increasingly detailed TCFD information disclosures● Comprehensive understanding of greenhouse gas emissions andstocktake of reduction plans●

Close monitoring of global material prices caused by climatechange and improvement of material input efficiency● Close monitoring of status of water resources with respect toclimate change

Physical risk

●

Acute

Suspension of product and service provision systems due to damage suffered by the Company/supply chain caused bysevere typhoon and flood damage
Basis for calculation of financial impact

Supplementary information on P51

Decline in value of existing products
Chronic

Small(

Medium

4.8 billion yen/year reduction
in salesMediumMedium)Medium
Small

Small

(

Medium

6.8 billion yen/year reduction
in salesLarge)

MediumLong term

MediumShort term

Understanding of detailed flood risks to production and sales
bases and supply chain● Formulation of BCP that encompasses supply chain●

MediumLong term

Increase in energy price caused by rise in temperature

Small

Large

Small

Large

Long term

Rebuilding of product sales channels in line with changes and reduction of farmable areas due to progression of climatechange

Small

Small

Small

Small

Long term

Increase in demand for agricultural machinery that contributes to energy conservation and greenhouse gas reduction

Large

Small

MediumSmall

Short term

Rebuilding of product sales channels in line with changes andreduction of farmable areas● Promotion of procurement of renewable electricity and energy
conservation●

R&D of carbon-free agriculture● R&D of agricultural machinery that supports agriculture adapted
to natural disasters and rising temperatures

Opportunities●

Products andservices

Increase in sales of products and services that accommodate changes in the agricultural environment caused by climatechangeLarge

MediumLarge

MediumShort term

Close monitoring of trends in subsidy schemes of national andlocal governments● Deliberation of solutions that respond to farm producers’ needs● Establishment of sustainable infrastructure for agricultural
production●

Increase in demand for solutions that contribute to reducing greenhouse gas emissions from farming soil

MediumMediumSmall

Medium

Mid term

Existing initiatives
Sales of products featuring straight-travel assist systems (tractors, combine
harvesters, and rice transplanters)● Starting limited sales of electric riding lawn mowers (Dec. 2022)● Starting sales of biofuels (HVO)-compatible products●

Identification of climate change risks and opportunities, scenario analysis● Understanding and disclosure of greenhouse gas emissions (Scope 1, 2 & 3)
● Introduction of International Renewable Energy Certificate (I-REC) at overseas
business bases (from 2022)●

Understanding of input of material and water resources
Setting reduction targets for water consumption (global production bases)● Reducing weight of parts using iron, reducing processing waste
●
●

●
●

Formulation of BCP (offices, production, and sales sites in Japan)
Mapping of domestic suppliers, formulation of diversification plan

Fuel switching and introduction of cogeneration facilities
Establishment of energy conservation targets (global production bases)● Recognition as risks● Preparation of draft decarbonization plan at each production site
● Creation of a decarbonization roadmap for the entire Group

Future initiatives
Enhancing lineup of automatic steering-enabled & robotic agricultural
machinery● R&D of electric agricultural machinery● R&D of agricultural machinery adapted to natural disasters and risingtemperatures●

Regular revision of climate change risks and opportunities andreflection in management plans● Understanding of greenhouse gas emissions, including sales bases, andrevision of scope of reduction targets● Consideration of the introduction of ICP●●●

Understanding of detailed flood risk of the entire supply chain,including overseas bases● Formulation of BCP that encompasses global supply chain●

Setting targets for renewable energy ratio to energy consumption
Establishment of renewable energy power generation facilities● Energy consumption efficiency improvement through production
optimization● Detailed survey of long-term changes in farmable areas

●

●

●

●

Sales of products featuring straight-travel assist systems (tractors, combine
harvesters, and rice transplanters)● Starting limited sales of electric riding lawn mowers (Dec. 2022)● Starting sales of biofuels (HVO)-compatible products●

Innovation in environmentally sound agriculture based on collaboration withcompanies and local governments● Business alliance with Faeger Co. Ltd. related to J-Credit● Sales of tractors and rice transplanters that are compatible with a farming
management system (variable fertilizing map) that utilizes AI

Reducing weight of parts using iron, reducing processing waste
Recycling of cooling water, use of reclaimed water (stormwater, etc.)

Enhancing lineup of automatic steering-enabled & robotic agricultural
machinery● R&D of electric agricultural machinery● R&D of agricultural machinery adapted to natural disasters and risingtemperatures
●

●

●
●

Formulation of business plans as for-profit business
Demonstration of model cases, nationwide rollout of business

Potential: Large (short term: within 3 years); Medium (mid term: 3 to 5 years), Small (long term: 5 years or longer)

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Business strategies for value creation

Response to climate changeManagement of risks and opportunities
Risks and opportunities identified in the scenario analyses are categorized and assessed on two axes (four quadrants); one is the magnitude of financial
impact and the other is the degree of the potential of such financial impact. This helps us determine the timescale for measures to address the risks andopportunities. The ESG Committee has established a system for categorization, assessment, and follow-up of risks and opportunities. It will continue toreview the system on a yearly basis, including examining and deliberating on strategies and confirming new risks in line with environmental changes.
Management of risks that may affect business activities in the short term is integrated into management by the Risk Management Working Group (WG).
In doing so, we strive to prevent risks from materializing and minimize losses, to contribute to smooth business operations and preserve assets within
our operational processes in accordance with risk management regulations. (Please refer to P79-80 for information about the Risk Management WG)
Meeting bodies that discuss future directions of product planning, development themes, and other issues, such as the Product Development Strategy
Committee and the Advanced Technology Strategic Committee, evaluate and deliberate opportunities for climate change-related products and solutions andincorporate the results with certain importance in the development planning with the approvals of the Directors’ Operation Committee and the Board of Directors.

Indicators and targets
ISEKI Group strives to contribute to the creation of a carbon-neutral and sustainable society by 2050 through “providing innovative products andhigher quality of services to the customers.”
Indicators
CO2 emissions for entire ISEKI Group (Scope 1 & 2)
Eco-product ratio in domestic sales

Targets (mid- to long-term environmental targets)
2030 46% reduction compared with 2014 (Total)
2025 65% ratio in domestic sales

Foundation for sustainable growth
CONTENTS

Initiatives throughout the entire value chain

Sustainability in ISEKI Group ..........................................................................53

Scope 3 Category 1

In April 2022, we asked suppliers to establish their own voluntary CO2 reduction targets
We aim to formulate CO2 reduction targets in collaboration with suppliers that account for 70% of transaction amount

Stakeholder engagement................................................................................54

Scope 3 Category 11

We are conducting R&D on electrification of agricultural machinery and agricultural machinery that uses alternative energy sources such as hydrogen

Intellectual property strategies ....................................................................55

Other

We participate in decarbonization demonstration projects in the agricultural industry in collaboration with local governments and other partners.
Such projects include the promotion and expansion of environmentally sound agriculture.

Human resource strategies .............................................................................57*Please refer to

P61 for progress in achieving mid- to long-term environmental targets in 2023. Information about the eco-product certification system and past results are posted on the Company’s website.

Efforts to improve quality and customer satisfaction .......................63

CO2 emissions from value chain
Scope 1
3%

Excluding categories 8, 9, 10, 13, 14
and 15

Other categories
6%

1,100,000 tons

DX Promotion ........................................................................................................652023 Results

Scope 2
2%

Total of Scope 1, 2 & 3

Scope 395%

Scope 227,000 tons

Scope 3

1,050,000 tons

Category 1
38%

Category 11
51%

Environmental management.........................................................................61

Scope 1

1,100,000 tons
28,000 tons

Category 1

420,000 tons

Category 11

560,000 tons

Other categories

67,000 tons

Scope of calculations:
Consolidated companies of ISEKI Group(including overseas sites)

Initiatives for society ..........................................................................................66*These figures are calculated with reference to the Basic Guidelines on
Accounting for Greenhouse Gas Emissions Throughout the Supply Chain of the
Ministry of the Environment and Ministry of Economy, Trade and Industry.
*Category 11 includes future emissions based on the assumption that the
products sold in the respective years will be used for their useful lives.
*Category 12 includes future emissions during the disposal of products sold in
the respective years.
*Scope 3 emissions of overseas sites are calculated based on the emission
intensity database for Japan.
*For details of emissions in each category, please refer to the Company’s website.

Corporate governance ......................................................................................69

Message from an Outside Director .............................................................67

Messages from newly appointed Outside Directors ..........................74
List of officers .........................................................................................................75
Dialogue with shareholders and investors .............................................77
Risk management ................................................................................................79
Compliance .............................................................................................................81

Supplementary information
External scenario mainly referenced in the scenario analysis
1.5°C/2°C Scenario

IPCC AR6 SSP1-1.9, SSP1-2.6 (Climate policy scenario in which post-industrial temperature increase can be curbed to less than 1.5°C/2°C),
IEA’s NZE scenario, and APS scenario

4°C Scenario

IPCC AR6 SSP3-7.0, SSP5-8.5 (scenario in which no climate policy is introduced due to regional conflicts and dependence on fossil fuels)

Basis for calculation of financial impact
Increase in operation cost due to introduction of carbon tax and emissions trading scheme
Increased tax burdens associated with ISEKI Group’s total GHG emissions in 2030 were calculated by multiplying ISEKI Group’s emissions volume in FY2020 (64,000 tons/year [Scope 1 & 2]) by therelevant carbon price (1 U.S. dollar = 140 yen).
● For the 1.5°C/2°C Scenario, the carbon price used was 130 U.S. dollars/ton in 2030 (the carbon price for advanced economies in Net Zero by 2050: A Roadmap for the Global Energy Sector, published by
the International Energy Agency [IEA]).
● For the 4°C Scenario, the carbon price used was 39 U.S. dollars/ton in 2030 (an assumption based on the carbon price for Europe in the IEA World Energy Outlook 2020’s Stated Policies Scenario [STEPS]).
●

Suspension of product and service provision systems due to damage suffered by the Company/supply chain caused by severe typhoon and flood damage
The financial impact of ﬂooding was calculated for ISEKI’s production bases, and for the production bases of suppliers from which we purchase 100 million yen or more of raw materials or parts per year.
● The impact on our own production bases was surmised by prorating average net sales from 2020 to 2021; the impact on suppliers was surmised by prorating the value of supplies purchased in 2021
from the aforementioned suppliers.
● Flood risk was determined by creating a risks and hazards map for each base using the World Wildlife Fund Water Risk Filter.
● As ISEKI has a business continuity plan (BCP), our calculation assumed that the time required to recommence sales or business would be 20 days (from data provided by the Small and Medium Enterprise Agency).
●

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