Introduction

ISEKI Group’s value creation aims

ISEKI Group’s value creation aims

Message from our President

Business strategies for value creation

Foundation for sustainable growth

Financial and non-financial data

Company information / Stock information

Toward the 100th anniversary of our foundation

We will pursue management that balances social andeconomic value and drive through henkaku (Change)
targeting a “new ISEKI”
Shiro Tomiyasu
ISEKI & CO., LTD.
Representative Director, President & Executive Officer“Toward the next 100 years...”
ISEKI Group’s mission
Working to solve social issues as a “solution provider for
agriculture and landscape”
Continuously inheriting the passionate thoughts and feelings of its
founder, Kunisaburo Iseki, to “free farmers from exhausting labor,”
the ISEKI Group will celebrate its 100th anniversary in 2025. Duringthat time, we have contributed to agricultural modernizationand laborsaving by providing agricultural products and services.
Specifically, comparing Japan’s rice farming in 1960 with that oftoday, the energy required to produce one unit of rice in Japan
has decreased to about one-eighth of what it was. The Group has
supported this development by mechanizing hard manual work
and work done with the help of animal power. In the spirit of “being
farmers’ closest supporter,” we have developed many productsahead of the rest of the world as a frontrunner and, with ourtechnological power, have driven the mechanization of agriculture.
The Group’s continued high ranking in terms of the number ofpatents acquired per specialty field is a testament to this. We intend
to continue to uphold this “frontier spirit” and pride.
The products the Group offers contribute to improving
agricultural productivity, particularly in the Japanese and Asianmarkets. Moreover, the riding lawn mowers, compact tractors, andother equipment for the European and North American markets areused to maintain parks and green spaces, clean roads, and otherwise
improve the landscape, thereby contributing to the creation oflivable villages and towns and the improvement of people’s qualityof life. One social issue that the Group must help to resolve is foodsecurity, which emerged following the COVID-19 pandemic and theinvasion of Ukraine. The world’s population reached 8 billion in 2022,
and is expected to go beyond 10 billion in the first half of the 2050s.
Considering that more than ten percent of the world’s population issuffering from hunger, boosting food production is a pressing issue.
However, it is difficult to increase the land area under cultivation
due to issues such as the associated environmental burden

13

ISEKI Report 2024

and reduced availability of farmland caused by industrializationand desertification. Thus, it is essential to improve agricultural
productivity. Moreover, climate change and increased natural
disasters due to global warming, and the loss of biodiversity areserious issues, making initiatives to mitigate the environmental
burden essential.
The corporate philosophy of the Group is to “strive to contributeto the creation of the prosperous and sustainable society through‘providing innovative products and higher quality of services to thecustomers.’” We also establish the long-term vision of becoming a“solution provider for agriculture and landscape.” Farming safeguards
food and land and provides the foundation to realize prosperity forpeople and society. We believe that our mission is to be a corporategroup that supports “agriculture” and “people and society” andto resolve issues related to them. We are confident that we cancontribute to the achievement of the Sustainable Development
Goals (SDGs). In addition to using the knowledge and experience
we have cultivated over the years, ISEKI Group will work to resolve
social issues by responding to changing business environment andneeds, with the aim of becoming a solutions company that creates
new value.

Progress of Mid-term Management Plan
(achievements and challenges)
Review of the fiscal year ended
December 31, 2023
Despite setting record for consolidated net sales, issues
remain in responding to changes in the environment
In the domestic market, challenges we face include bolstering foodsecurity, the rapidly decreasing agricultural working population,and mitigating environmental burdens such as climate change.
In addition to transitioning to large-scale and smart agriculture,

ISEKI Report 2024

14

Introduction

ISEKI Group’s value creation aims

Corporate Philosophy
Corporate Philosophy

We strive to contribute to the creation of the prosperous and sustainable society through“providing innovative products and higher quality of services to the customers”

Long-term Vision
To be a “Solution Provider for Agriculture &Landscape”
Passion of FounderTo free farmers from exhausting labor

ISEKI Group’s value creation aims

Business strategies for value creation

domestic agricultural machinery product sales and the buildup of
inventories for the U.S. and Europe, which had previously been low.
Meanwhile, operating cash flow was negative for the second
consecutive fiscal year, due to low net income levels and growth ininventories.
The challenge remains “the transformation into a company with alean and streamlined business structure that can constantly generate
profit,” which is the goal of the Mid-term Management Plan.

┃ Consolidated net sales(Billion yen, %)

149.8

149.3

158.1

166.6

169.9

170.0

Long-term VisionJapan

To be a “Solution Provider for Agriculture & Landscape”— Supporting a farming industry full of dreams and beautiful landscapesand creating a future of sustainable agriculture and landscape —● SDGs to be realized by ISEKI Group through its business

Farming
Food production

Agricultural
machinery

Toward the realization of a sustainable society
Environmental preservation

Supporting the enhancement of resilience in agriculture
Landscaping for comfortable villages and towns

Food
Survival

Landscape
Farmers

Environmental preservation for a recycling-oriented society

Foundation for living

People andsociety
we promoted measures for agricultural resilience throughenvironmentally sound agriculture and other initiatives. ( P37–40)
Looking at overseas markets, through collaboration with strategic
partners in North America, Europe, and Asia, we crafted measures
to satisfy the differing needs of each region. In North America,
we are strengthening our ties with AGCO. In Europe, we continue
to reinforce our sales network through subsidiaries such as ISEKI
France and ISEKI Germany. And, in Asia, particularly in ASEAN, weare bolstering our support for field crop farming with subsidiary
IST Farm Machinery Co., Ltd. In India, we are also evolving ourcooperation with TAFE and have begun procuring production parts
from the company. ( P41–44)
For the fiscal year ended December 31, 2023, consolidated net
sales reached a record high due to increased sales both domesticallyand abroad. In Japan, despite strong performance by the new BF
Series tractors, which went on sale in July 2023, sluggish rice prices
and continued high costs for agricultural production materials
worked to suppress demand. Additionally, sales of agricultural

15

ISEKI Report 2024

machinery products fell due to delays in production caused bydisruptions in the supply chain for large-scale models. Meanwhile,
maintenance revenue and the completion of certain facilities underconstruction supported the overall increase in sales. Overseas sales
continued to be robust—particularly in Europe—reaching a record
high for the third consecutive fiscal year, and the ratio of overseas
net sales to total sales increased to 33.5%.
Profitability is an issue, as operating income was down year on
year and the operating margin was 1.3%, due in part to lower grossprofit margin resulting from a decline in production attributableprimarily to lower sales of agricultural machinery products andincreased selling, general and administrative expenses. Althoughprice revisions finally offset the impact of the sharp raw material
price increase for the single fiscal year of 2023, the total from fiscal
year 2021 is still insufficient.
Our balance sheet faces challenges with regard to asset efficiency,
including high non-current assets and growing inventories.
Inventories in particular grew significantly on the impact of lower

21.5%

22.4%

25.8%

Dec. 2019

Dec. 2020

Dec. 2021

32.4%

33.5%

32.4%

Dec. 2022

Dec. 2023

Dec. 2024(Forecast)

Overseas

Project Z Measures
Implementing structural reform without exceptions andbuilding a strong management foundation
Indicating a path toward a 5% operating margin
ISEKI Group’s results forecasts for the fiscal year ending December
31, 2024 remain challenging. We expect 170.0 billion yen in net sales(unchanged from the previous year), operating income down 0.2
billion yen to 2.0 billion yen (an 11.1% decrease year on year), andprofit attributable to owners of parent of 0.4 billion yen. Continued
production adjustments for the purpose of reducing inventories
bring down profit levels. For us, 2024 will be a year of patience.
While the numerical target of the Mid-term Management Plan
is an operating margin of 5% for the year ending December 31,
2025, the result for 2023 was 1.3% and the forecast for 2024 is 1.2%.
This makes the transformation to a leaner and more streamlined
structure an urgent issue.
Factors behind our failure to achieve the goals of the Mid-termManagement Plan include price revisions not keeping pace withsoaring raw material and energy prices, and the deterioration of
production site profitability due to production adjustments causedby the decline in domestic demand for agricultural machinery
products. Moreover, gross profit margin remained flat as insufficient
progress was made in initiatives such as the “Optimize development”
and production systems. Despite efforts to improve operational
efficiency toward reducing selling, general and administrative
expenses, they increased owing to factors such as a rise inFoundation for sustainable growth

Financial and non-financial data

Company information / Stock information

distribution costs. The selling, general and administrative expenses
to sales ratio has been worsening year by year.
In summary, 1) the measures in response to the drastic changes inthe environment were lacking in effectiveness and speed, and 2) the
efforts toward overall management reform and its implementation
were unsuccessful. We believe these are the two key points.
In response, we have identified the improvement of profitability
and asset efficiency as issues the Group must urgently address, andto implement the business structural reform without exceptions andbuild a robust management foundation, we established Project Z in
November 2023. Under Project Z, we will develop and implement
fundamental structural reforms and growth strategies.
We will promote the three fundamental structural reform themesof “Optimize production,” “Optimize development,” and “Deepen
domestic sales” in a short-term, intensive fashion. In 2024 and 2025,
we will develop key measures for each of the themes: “management
integration of manufacturing companies,” “improvement of profit
margins by product,” and “management integration of domestic
wide-area sales companies.” Meanwhile, time will be required before
some of the measures bear fruit, so we will continue to act, repeatedly
implement reforms, and complete the three aforementioned themes toachieve an operating margin of 5% or more and return on equity (ROE)
of 8% or more by 2027. Moreover, with regard to shareholder return, we
aim to increase dividend on equity (DOE) to 2% and price book-value
ratio (PBR) to more than 1.0x. ( P25–28)
Then, we will firmly and concurrently implement fundamental
structural reforms and growth strategies.
The axis of our growth strategy is, first and foremost, overseas
business. The ratio of overseas net sales to total sales has grown
to 33.5%. We will develop region-specific strategies and set oursights high for the next stage. Meanwhile, domestically, we willconcentrate on the growth areas symbolized by the keywords: large,
cutting-edge, environment, and dry fields. Now, let me explain our
growth strategy from a different angle and by product. The key tothis strategy is large-scale agricultural machinery in Japan and NonAgri products for landscape maintenance, which we are rolling out
in Europe and North America. We will focus our resources on growthareas and begin laying the foundation in 2024.
We are currently considering specific measures and will announce
them as they are determined during 2024. ( P25–28, P37–48)

Toward improving PBRSteadily implement a variety of measures under Project Z
to achieve a PBR of 1.0x or more
Bolster IR activities and ESG initiatives
Our PBR has remained below 1.0x, standing at 0.34x as of December
31, 2023. In analyzing PBR, we asked investors and securities analysts
with whom we regularly communicate for their opinions. We also
broke PBR down into ROE and price-to-earnings ratio (PER) andlooked at changes over time in analyzing the current situation.

ISEKI Report 2024

16

Introduction

ISEKI Group’s value creation aims

ROE has been stagnant for some time, remaining below 8%,
the target figure of the Mid-term Management Plan. A further
breakdown of ROE reveals that the primary reasons for this are
low net income margin and low total asset turnover ratio. Ourview is that the net income margin is affected by the profit marginand selling, general and administrative expenses to sales ratio foreach 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 is that our cost of equity is generally around 8%.
PER has been less than 10x since 2020. We were reminded that thereasons for this are the significant discrepancy between plans andactual results, along with insufficient disclosure of information on
issues such as growth, strengths, and profitability, and dividend level.
Our efforts to improve PBR based on our analysis of the current
situation center on Project Z. In addition to the three fundamental
structural reform themes, we will put into action growth strategies
to heighten profitability and asset efficiency, and allocate cash for
growth.
Furthermore, by enhancing and upgrading dialogue andinformation disclosure, reinforcing the governance structure, andotherwise strengthening IR activities and ESG initiatives, we aim toachieve a PBR of more than 1.0x by 2027. ( P29–30)
The introduction and setting up of an administrative accounting
system has made visible the profitability of each market andbusiness, finally enabling decisions to be made based on thesefactors. We believe that a key theme is to upgrade disclosure
information—both quantitative and qualitative—for dialogue, andto be able to show everyone how the plan is progressing.
We also feel that in achieving sustainable growth and realizing
mid- to long-term corporate value enhancement, building
relationships of trust with our shareholders and investors is essential.
We intend to outline our management policies in detail and strive toengage in constructive dialogue. ( P77–78)

Aiming for sustainable growth
We set up the ESG Committee, establishing a frameworkthat enables the management team to strengthen theirinvolvement
For the purpose of centrally managing ESG-related issues in theGroup, we established the ESG Committee in August 2022. The
Committee is composed of Directors and Corporate Officers
and chaired by an Independent Outside Director. In principle,
Committee meetings are held each month, and the Committee
seeks to find solutions for the Group’s materiality (priority issues) by
examining and deliberating sustainability-related initiatives for theGroup as a whole from the perspective of risks and opportunities.
Such initiatives include responses to climate change, respect forhuman rights, and employee health. The results of deliberations at
Committee meetings are reported to the Board of Directors, which

17

ISEKI Report 2024

in turn deliberates and determines them, thereby strengthening
management’s involvement. Moreover, a working group led byworking-level personnel has been established to further promote
ESG-related activities.

Environmental initiatives
The Group has positioned the realization of a decarbonized
and recycling-oriented society as one of our priority issues, andpractices environmental management by setting the Environmental
Vision and the Basic Environmental Policy. We also announced
our endorsement of the Task Force on Climate-related Financial
Disclosures (TCFD) recommendations and have begun disclosing
information in line with the recommendations. ( P49–51)
Additionally, agriculture and landscape maintenance, which
receive benefits from nature, are closely related to issues such as
climate change and biodiversity. We are endeavoring to reducethe impact our business activities have on the environment. In
concrete terms, we are upgrading and expanding our lineup ofenvironmentally friendly products and services, such as proposals forenvironmentally sound smart agriculture and electric products. In
Japan, initiatives are proceeding to expand organic farming, utilize
carbon credits, and suppress agricultural methane gas emissions
through farm business solutions. In environmentally conscious
Europe, we launched limited sales of electric riding lawn mowers
in 2022. Based on local evaluations, this may lead to full-scale sales
in the future. ( P33–36) Through these initiatives, we will continue
to contribute to resolving climate change issues and mitigating theenvironmental burden.

A company is its people—initiatives related
to people, human capital, and diversity
In my message to employees when I assumed the position ofpresident, I said, “Our Group is based on the cumulative efforts ofour predecessors who, since our founding, have carefully preserved
our desire to be close to our customers. A company is supported byits people, and as such we will focus more than ever on cultivating
human resources.” We have established a policy for human resources
development and a policy for workplace environment creation, andunder the themes of “enhancement of employee engagement” and“transformation of human resources,” we are working to maximize
the Group’s human resource capabilities.
In enhancing engagement, we will accelerate our promotionof diversity, equity, and inclusion, and reinforce the bond with our
employees. We will also promote the cultivation of human resources
who will lead the way in the century to come.
Concerning the transformation of human resources, we are
actively promoting human resources management that transcends
the boundaries between Group companies. Our aim in this pursuit

ISEKI Group’s value creation aims

Business strategies for value creation

Foundation for sustainable growth

Financial and non-financial data

Company information / Stock information

is to optimize the allocation and full utilization of group personnel
based on our business strategy. In 2023, we introduced the Group
personnel open recruitment system. The program, which respects
employees’ autonomy, encourages them to cultivate their own
careers. Firstly, we transferred personnel from a sales company inJapan to a sales subsidiary in Thailand to capitalize on the knowhow these employees accumulated in Japan. We will continue toconcentrate the human capital within the Group on focused areas.
To secure and cultivate human resources to bring our businessstrategy to fruition, we are also working to diversify our recruitment
and further upgrade employee education programs related to DX
and other topics.

Initiatives to reinforce corporate governance
We have established the Nomination and Compensation
Committee, which comprises two Representative Directors andthree Outside Directors, to enhance and reinforce governance byheightening transparency and objectivity in the appointment andcompensation of Directors and Corporate Officers. In concreteterms, we revised the Directors’ compensation system in 2022. The
purpose of this revision was to make compensation’s link to businessresults and shareholder value more explicit. The revision is intended
to increase Directors’ focus on helping to improve business results
and enhance corporate value over the medium- to long-term byensuring that they have the same interests in the risks and benefitsof share price fluctuations as shareholders. Moreover, in the interestof diversity on the Board of Directors, two new female Directors—
including one with corporate management experience—were
appointed to the Board following approval at the Ordinary
General Meeting of Shareholders in March 2024. We will continue
to aggressively push forward the invigoration and functional
improvement of the Board of Directors.

Toward the next 100 years...
Pursuing an economic role alongside a social role
The Group, an integrated manufacturer specializing in agricultural
machinery, has developed its business on an aspiration to befarmers’ closest supporter and has worked to resolve social issues.
This aspiration is rooted in an abiding commitment to acting firstand foremost for the benefit of customers. This is our greatest
strength, and I believe it is precisely because we are fulfilling thissocial role that we have been able to continue operating ourbusiness for almost 100 years.
Nowadays, food security and food are of growing concern due
to the COVID-19 pandemic and the invasion of Ukraine. Agriculture,
which supports food supply, and landscaping business, which
supports people’s daily lives, are being reaffirmed as essential

businesses. I believe that ISEKI Group, through activities that support
customers, can grow while continuing to fulfill its social role.
Moreover, for the Group to sustain its development over the next
100 years and continue providing innovative products and higher
quality of services to customers, we must operate our businessin such a way that a diverse range of stakeholders, including
shareholders, suppliers, and employees, can feel confident about
joining forces with us. In other words, it is essential to generateadequate profits and fulfill an economic role as well.
These two roles do not need to be prioritized one above theother; I believe they can balance and complement each other as
they progress. However, ISEKI has become accustomed to lagging
behind somewhat in terms of pursuing its economic role. ISEKI
operates in such a way that it fulfills its economic role in addition to
the social role it has contributed to over the years.
Since I took office, I have advocated henkaku (Change). While
there has been gradual change with regard to certain aspects,
I believe that it is still insufficient. We have always said that themeaning of change is to review design, production, sales, andservice methods in particular from the ground up. Regardingthese changes, the structural reform through Project Z represents
the tightening of these screws. The “Z” in Project Z stands for “0.” It
represents the unknown and is the first letter in the word “zero.”
Project Z will be the key in creating a new century, looking aheadto the 100th anniversary in 2025 and the century to follow. In laying
the foundation for sustainable growth, I consider it my own personal
responsibility to involve the entire Group in a concerted effort todrive forward the transformation into a company with a lean andstreamlined business structure. As we determinedly move forwardwith our transformation, I hope we can continue to rely on yoursupport as we endeavor to forge a “new ISEKI.”

ISEKI Report 2024

18

Introduction

ISEKI Group’s value creation aims

ISEKI Group’s value creation aims

Business strategies for value creation

Foundation for sustainable growth

Financial and non-financial data

Company information / Stock information

Value creation process
ISEKI Group engages in business activities that are founded on its corporate philosophy and governance and that leverage theoperating capital accumulated so far as well as its unique strengths. In doing so, we provide products and services that meet a varietyof needs, thereby creating social and economic value. By addressing social issues and reflecting them in our business activities,
and continuing this cycle of value creation, we strive to contribute to solving social issues, while achieving sustainable growth andenhancing corporate value of the Group.

Social issues

Input
Operating capital

Issues related to agriculture andlandscaping

Business activities and growth strategies

Value to provide

P23

Social value

Human capital●● Number of employees (consolidated): 5,457● Number of employees trained at the Center for

Human Development for experts:

Products andservices that meet

1,071Intellectual capital

workers

diverse needs

specialty field in Japan:
No. 2 (in 2022; Other special machinery)Mid-ter
mM
ana
gem
e

● Patent allowance rate in Japan:

No. 3; 94.6% (of all industries in 2022)● Maintenance of urban and city functions

234

Manufacturing capital

22

Overseas sales

Domestic sales

P41–44

P37–408● Global production bases:t Z measures
rojec
nd P
na
Pla
nt

● Number of invention awards received in Japan:

The earth and environment● Large-scale maintenance facilities in Japan: 54● Dream Agricultural Research Instituteglobal warming● Problems related to depletion of energy andresources

governments and private-sector
companies:

12● Overseas: number of overseas strategic

2

partners:Th

P45–48re es t rengths ( s o u rc eeeo f i ts c o m p e t i t i v

dge

)

P3

3–

the environmental burden(Promotion of environmentally sound smart agriculture,provision of electric products, etc.)74.2 billion yen
76.9 billion yen● Cash and deposits:

Cultivation of human resources
who can bring about changes andprovision of rewarding workplaces

Contribution to SDGs
achievement

At least 70% (in 2025)●●

Co-existence and mutual prosperity
with local communities
Stable dividend payment
At least 2% (in 2027)

Economic value●● Interest-bearing debt:

Agriculture & Landscape”

At least 80% (in 2030)

Management Philosophy andCorporate Governance

Financial capital● Net assets:“To be a Solution Provider for

Dividend on equity (DOE)● Development of digitalization● Increased geopolitical risks

Building of a sustainable value chain
Rate of answers for CSR questionnaires

96%● Providing solutions that contribute to reducing● Lifestyle change●

Realization of the vision

Overall satisfaction rate in engagement surveys

resources

Natural capital● EMS certification acquisition rate:

5,000 hectares (in 2030)●

Active participation
by diverse humaninstitutions and universities: 10 themes

Society and economy

Land area of organic rice farming

Reduction ofenvironmental
burden36● R&D: number of joint R&D with researchLong-term vision(2030)

65% (in 2025)

Development and manufacturing● Japan: number of collaborations with local

Contribution to realizing adecarbonized and recyclingoriented society
Eco-product sales in Japan (%)

P25–
28

Social and relationship capital● Problems related to climate change andAt least 60%
●

P2
1–

shortage● Decrease in number and aging of farm

Percentage of advanced technologies toinvention proposals● Number of patent application registrations per

Mate
riali
ty

● An increase in world’s population and foodContribution to improvement ofagricultural productivity as well as
quality of life

Improvement of corporate value
through sustainable growth
Consolidated operating margin
At least 5% (in 2027)

9.9 billion yen

Return on equity (ROE)
At least 8% (in 2027)

Contribution to solving social issues and
19

ISEKI Report 2024

strengthening of operating capital

ISEKI Report 2024

20

Introduction

ISEKI Group’s value creation aims

ISEKI Group’s value creation aims

Business strategies for value creation

Foundation for sustainable growth

Financial and non-financial data

Company information / Stock information

Materiality
The Company has determined the materiality to hit balance between solving social issues and sustainable growth of ISEKI Group.
Materiality

Vision (2030)

Improvement offinancial performance

Building of a resilient management baseEnhancementof brand value(building oftrust)

Enhancementof employee
engagement

Enhancement ofcorporate value
by reinforcing
corporate
governanceTransformation
to a lean andstreamlined
business
structure

Japan
Asia
North America

Contribute to the realization ofsustainable agriculture through thedissemination and promotion ofagriculture that uses smart agricultural
machinery and data
Contribute to the improvement of
productivity through the mechanizationof agriculture by providing agricultural
machinery to suit individual
countries and regions, leveraging therice-growing technologies developedin JapanSupport the enhancement of private
lives including hobby gardening andfarming through provision of smallsized tractors, etc.

Contribute to the realization of a decarbonized
and recycling-oriented society throughbusiness activities that take the environment
into consideration

Progress in mechanization of agriculture in ASEAN, India,
and other regions
Dissemination of smart agriculture (data-driven andenvironmentally sound agriculture) in East Asia, etc.
Expansion of price competitive products manufactured by
TAFE into the ASEAN market

New demand for electric products, etc.
Contribute to the SDGs such as “Sustainable cities andcommunities” by increasing sales of our products

Increase in demand for products and services that
accommodate changes in the agricultural environment
Tightening of environment-related regulations and standards
・Conservation of energy and labor
Decline in demand due to changing market needs
Decline in competitiveness due to delays in responding to GHG emission ・Reduction of greenhouse gas emissions
reduction solutions
・Reduction of fertilizer and agrochemicals
・Expansion of organic farming, etc.
Cost reduction through the introduction of facilities with highSuspension of product and service provision systems due to naturalenvironmental efficiency
disasters such as typhoons and floods
Minimization of resource consumption
Increase in costs due to introduction of carbon tax and rising energy
Production activities with low environmental burden by
pricescurbing waste generation

KPI

TargetPercentage of invention proposals related to advanced technologies: 60% (in 2025)

Dissemination of large-sized agricultural machinery andsmart agricultural machinery

Strengthening of initiatives for large-scale farmers
Larger proportion of large-sized agricultural machinery and smart agricultural machinery to sales Strengthening of DX and smart strategies
Acceleration of revenue-expenditure structural reform

A wider spread of our products in the Asian region

Sales expansion in Asia

Expansion of sales of tractors and riding lawn mowers forNorth America and Europe

Eco-product sales ratio
Land area organically farmed (rice)

Reduction of CO2 emissions
Reduction and reuse of production resources
Enhancement of customer satisfaction

Larger proportion of electric products to sales

Satisfaction rate in each survey item: NPS of at least 20; at least 100% compared with theprevious year
Suppliers’ CSR questionnaire response rate: at least 80% (in 2030)
Suppliers’ green procurement rate: at least 85% (in 2025)
Implementing NOGYOJOSHI (female farmers) project activities (agricultural machinery seminars:
three times/year; online seminars: three times/year)
Ratio of female employees in managerial positions: at least 7% (in 2025)
Foreign nationals in managerial positions: to be increased from the current level
Ratio of mid-career hires in managerial positions: at least 7% (in 2025)

Secure core human resources to executebusiness strategies
Maximize each individual’s abilities anddevelop human resources with a spirit ofchallenge to bring about change
Provide employees with secure and safe
workplaces, and create rewarding workplaces

Shortage of labor power, outflow of human resources
Rigid organization and culture due to homogeneity and bias of humanresources

Improvement of ability to generate innovations throughretention and development of women, experts, and foreign
nationals

Promotion of diversity, equity & inclusion (DE&I) andenhancement of education

An impact of property and personal damage on our business
Reputational risk and damages due to industrial accidents
Human rights violations due to labor issues (harassment, overtime
work, etc.)

Improvement of motivation and productivity
Securing health and safety of employees

Improving engagement survey scores

Overall satisfaction rate in engagement surveys: at least 70% (in 2025)

Stabilization of business activities
Transformation through prompt management decision andappropriate risk taking

Zero material legal violations and scandals

Number of material legal violations and scandals occurred: continued zero occurrence
Material information security incident: zero occurrence

Engagement opportunities

Number of dialogues held between senior management, shareholders and investors: at least 50
times/year (in 2025)

Improvement of operating margin

Operating margin: 5% (in 2027)

Improvement of asset efficiency

Generation of operating cash flows: 50.0 billion yen (cumulative total of 2024–2027)

Respond to changes in the businessenvironment swiftly and accurately, andmaintain fair management
Strive to disclose necessary information
promptly and accurately, and create atransparent company
Build a management structure andfoundation that can respond to changes in theenvironment and strive to achieve sustainablegrowth and enhance corporate value

Risks in general・Risk of legal violation
・Risks related to information security
・Risks derived from international business and other risks
Fluctuations in production caused by changes in economic conditions
and the environment
Stock market trends, price decline in land and other fixed assets
Exchange rate fluctuations
A hike in interest rate, rise of an obligation to pay back loans earlybecause financial covenants are triggered

Promotion of awareness and understanding throughinformation disclosure
Establishment of trust through constructive dialogue
Establishment of an optimal production system capable ofresponding to changes
Improvement of management efficiency and sophisticationof business management
Capital investment in line with growth strategies
Diversification of procurement methods

Identification of issues

Evaluation of materiality● The process identified issues to be addressed as a priority for the creation of social and economic value throughbusiness activities and issues to be addressed from the perspective of risks and opportunities in business activities,
such as environmental changes, impediments to business activities, and burden on the global environment.

Development
andproduction

Sales andservices

Use ofproducts

Evaluation of reasonableness● Evaluate the importance of the issues identified from the perspectiveof impact on society and impact on ISEKI Group.

● Issues were identified by identifying risks and opportunities through SWOT analysis.

Procurement
anddistribution

P37–40

Build foundations for ASEAN business based on IST Farm Machinery Co., Ltd.
Bring high-performance, large-scale agricultural machinery to market
Enhancement of service systems
Build a new business model through collaboration with TAFE

P41, 44

Support for AGCO brand strategy development
Bring machinery with reduced cost and economical specifications to market

P41–42

Reconstruct sales network with a view to consolidation
Expand products such as electrification products
Enhance consumer products and streamlined procurement of implements

P41, 43

Response to climate change
Preservation of biodiversity
Resource circulation in production

P49–51,
P61–62

Enhancement of customer satisfaction and quality assurance

P63–64

Strengthening supply chain management

P66

Co-existence with local communities

P66

Utilization and development of diverse human resources
P57–60● Issues were identified based on social issues and various guidelines (ISO26000, GRI, SDGs, etc.).

Raw materials

P45–48,
P55–56

Reduction rate of group-wide CO2 emissions (compared with 2014): 46% (in 2030)
Reduction rate of final volume of waste (compared with 2013): 71% (in 2030)

Capturing customers and fans with secure, safe, and costeffective products and services
Building trust with suppliers
Stabilization of business through a sense of presence in theregion, enhancement of brand value, and co-existenceStrengthening relationships with local communities throughongoing communication activities

Responses to changing demand and needs
Generation of business and creation of new value through innovation

Eco-product sales in Japan (%): 65% (in 2025)
Domestic land area organically farmed (rice): 5,000 hectares (in 2030)

Serious defects in products and services
Dependence on specific suppliers, soaring raw material prices, difficulty
in procurement, and supply chain disruptions
Reputational risk

Promotion of CSR procurement

Status ofactivities

Focused themes (strategies)

Expansion of advanced technological intellectual properties
Increase in the proportion of research and development
investment in priority strategic fields

Make our presence felt by solving social issues,leading to development of the relationshipsof trust with stakeholders and mitigation andprevention of risks

In identifying materiality, materiality has been examined fromboth aspects of the realization of corporate philosophy andlong-term vision of ISEKI Group and social issues. In 2022, while
striving to align with the vision and management strategies
and based on the suggestions from the dialogue with externalsustainability expert organizations, senior management
discussed and partially revised materiality to be addressed.

21

Lowering of prices, rise of Indian, South Korean, and Chinese competitors
Chinese and other manufacturers leading the competition of EV products

Contribute to the development ofpleasant communities by safeguarding
beautiful landscapes and environments

Materiality identification process

ISEKI Report 2024

Risks and opportunities
Risks
Opportunities
Response to changes in policies of individual governments
New demand and needs
Competition with other companies, changes in economic conditions andGeneration of business and creation of new value throughthe environment of agriculture
innovation
Climate change, reduction of environmental burden, natural disasters,
Increased demand for electric products
infectious diseases, etc.
Dissemination of electric products in the landscaping
Lagging behind Chinese and other competitors in the European and U.S.
business and personal hobby market
electric product markets
Larger scale of Japanese agriculture, diversification of crops
Develop measures to ensure the stability of food supplies
Decline in the number of farms in Japan, advancing age of farmers, andDissemination of smart agriculture (data-driven andslowdown of demand due to an increase in contracting of farm work
environmentally sound agriculture)
Partnerships with entities in other industries through DX

Disposal of
products

Issues identified from the perspective of opportunities and risks in business activities

Maximum

Great

Impact on ISEKI Group● Issues and the reasonableness of the results of the evaluation ofimportance are discussed at the ESG Committee and reviewed byexternal sustainability expert organizations.

Impact on society

Realization ofa decarbonized
and recyclingoriented society

Develop products and generate business that
contribute to the creation of the prosperous
and sustainable society

EuropeImprovement of qualityof lifeValue creation through business

Improved agricultural productivity

CommonRelated SDGs

Promotion of health & productivity management
Strengthening governance systems
Strengthening internal control and ensuring compliancePrevention of risks from becoming obvious and minimization of losses throughrisk management, prompt management decision, and appropriate risk taking
Information disclosure and constructive dialogue
Systematic checking of disclosure information through the Information
Disclosure Working Group and ESG Committee
Structural reform
Enhanced management efficiency

P69–73

P54,
P77–78

P25–32

Improved inventory turnover period
Improved non-current asset turnover period

Identification of materiality● The materiality to be addressed by ISEKI Group are identified throughdeliberation and decisions at the ESG Committee and the Board of
Directors.
● The ESG Committee and the Materiality Working Group deliberate
once a year whether or not a review of materiality is necessary.

Maximum
ISEKI Report 2024

22

ISEKI Group’s value creation aims

ISEKI Group’s management capital
The six types of capital we have accumulated since our founding are important management capital that support the ISEKI Group’sbusiness activities. Our aim is to constantly raise corporate value while optimally using capital in areas of growth.
Diverse human resources who resolve issues and realize growth

HumancapitalUnder the policy for human resource development and the policy forworkplace environment creation, we are working to develop the skillsof our employees and maximize the Group’s strength. We accomplish
this by developing expert personnel at training facilities specialized
for development, production, and sales and services, providing
voluntary training opportunities, and cultivating a comfortable working
environment.

Technological capability and intellectual property that generate
new valueIntellectual
capitalThe technological expertise that we have cultivated throughout ourhistory is a source of new value. We are working to maintain andbolster our competitiveness by ensuring that intellectual property iscomprehensively protected and managed, and by creating high-quality
intellectual property.

● Number of employees (consolidated)

5,457● Number of employees trained at the Center for Human

Development for experts

1,071● Number of patent application registrations per specialty

field in Japan:
No.

Business strategies for value creation

2 (in 2022; Other special machinery)● Patent allowance rate in Japan:

No.

3 94.6% (of all industries in 2022)● Number of invention awards received in Japan:

234 (as of December 31, 2023)

CONTENTS“Project Z,” business structural reform without exceptions ...25
Responses toward realization of management conscious of
capital costs and stock prices....................................................................29

Bases for high-quality manufacturing and high added value

Manufacturing
capitalFrom our production sites in Japan and overseas, we provide astable supply of high-quality products. To deal with the changing
agricultural structure, we are researching and disseminating smart
and environmentally sound agriculture and expanding large-scale
maintenance facilities with the aim of augmenting our service
capabilities.

● Global production bases

8 (including 2 of an equity method subsidiary)● Large-scale maintenance facilities in Japan:

54

Financial and capital strategies ................................................................31
ISEKI Group’s strengths ...............................................................................33
Domestic Market Strategies .....................................................................37● Dream Agricultural Research InstituteOverseas Market Strategies ......................................................................41
Product/Development Strategies .........................................................45

Network to drive innovation forward

Social andrelationshipcapital

We are not limited to our own resources. To incorporate superior
technologies and know-how from external sources, we collaborate andwork with partners to develop technologies and products that deliver
efficiency, provide a competitive advantage, and help to cultivate newmarkets.

Business activities in harmony with the global environment

NaturalcapitalUnder our Environmental Vision, based on a quantitative understanding of
the impact our business activities have on the environment, we promote
initiatives such as those that serve to mitigate CO2 emissions, and provide
solutions that reduce the environmental burden and conserve biodiversity.

Source of sustainable business activities and growthinvestments

Financial
capitalWhile maintaining financial soundness, we are proceeding with initiatives
to enhance asset efficiency and raise profits to transform ourselves intoa lean and streamlined business structure. We will allocate the cash flow
generated to investment in key fields to enhance corporate value andprovide stable returns to shareholders.

● Number of partnerships with local governments andprivate-sector companies

12● Number of overseas strategic partners:

Response to climate change ....................................................................49

2● Number of joint development with research institutions

and universities:

10 themes● EMS certification acquisition rate:96%● Providing solutions that contribute to reducing theenvironmental burden(Promotion of environmentally sound smart agriculture,provision of electric products, etc.)74.2 billion yen● Interest-bearing debt: 76.9 billion yen● Cash and deposits: 9.9 billion yen● Net assets:(Actual as of FY2023 or as of May 31, 2024)

23

ISEKI Report 2024

ISEKI Report 202424