IS E K I R e p or t

2024

Contact about this ISEKI report

Public & Investor Relations Section,
ISEKI & CO., LTD.
5-3-14, Nishi-Nippori, Arakawa-ku, Tokyo, 116-8541 JAPANTEL: +81(0)3 5604-7602 FAX: +81(0)3 5604-7701
E-mail: isk-info@iseki.co.jp
Issued in May 2024

ISEKI & CO., LTD.

What ISEKI Group aims for

Corporate Philosophy — Purpose —ISEKI Group strives to contribute to
the creation of the prosperous andsustainable society through“providing innovative products andhigher quality of services to the customers”
Important Values ─ Value ─Long-term Vision — Vision —SpiritInheriting our company’s
founding philosophy, we always
carefully consider food,agriculture and landscape andmove forward with farmers.

Supporting a farming industry full of dreams and beautiful landscapes andcreating a future of sustainable agriculture and landscape

Solution

Spirit of ISEKI – Passion of founder –“I want to free farmers from exhausting labor”
Agriculture was hard work, done by hand and with the help of animal power. To change this, Kunisaburo Iseki,

Quality──As a front-runner, we produce
innovative products andhigher quality services.

We will always make premium
quality products with passion.

Innovation

Global────

We create innovations andprovide new value.

With a global perspective,
we work toward solutions to
the world’s social issues.

Paving the way for tomorrow,
open up the future of food,agriculture and landscape.

Company Motto
Our management philosophy is to provide:

1. Products that satisfy customers;
2. A stable workplace to the employees;“We produce good machinery,” Kunisaburo Iseki, the founder, used to say. He devoted himself to providing

3. Appropriate dividend to the shareholders;

day as “ISEKI’s spirit.”

ISEKI Report 2024

FutureWe constantly take action forsolutions to customer issues.

the founder, realized laborsaving through mechanization and endeavored to further develop agriculture.
products that made customers happy. The founder’s passion has been inherited in an unbroken line to this1

Front runner─

To be a “Solution Provider for Agriculture & Landscape”

and thereby we will fulfil our social mission.

ISEKI Report 2024

2

Key Points of ISEKI Report 2024
Editing policy

CONTENTS

ISEKI Report consists of three pillars of ISEKI Group’s value creation: “ISEKI Group’s value creation aims,”“Business strategies for value creation,” and “Foundation for sustainable growth.” We have been striving toenhance and improve the content based on opinions of stakeholders on our ISEKI Reports and insights
obtained through daily engagement activities, among other things.

What ISEKI Group aims for ...........................................................................1
Key Points of ISEKI Report 2024 ..................................................................3

Introduction
History of solving social issues ..............................................................5
ISEKI Group ...................................................................................................7

ISEKI Group’s value creation aims

Key Point

1“Project Z” measures to promote fundamental structural reforms and growthstrategies
This section showcases purposes of “Project Z,” which was announced on February 14, 2024, toward therealization of our long-term vision, “To be a ‘Solution Provider for Agriculture & Landscape’,” as well as growthstories and measures for fundamental structural reforms and growth strategies.
P13–18 Message from our President

P41–44 Overseas Market Strategies

P25–28 Project Z

P45–48 Product/Development Strategies

P37–40 Domestic Market Strategies

Key Point

2

Message from our President ...............................................................13
Value creation process ..........................................................................19
Materiality ..................................................................................................21
ISEKI Group’s operating capital ..........................................................23

Business strategies for value creation

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

Business activities that leverage the strengths of ISEKI Group— theme: environmental responses —Financial and capital strategies ..........................................................31

Through the roundtable discussion by General Manager of Green Innovation Promotion Section, Director ofDream Agricultural Research Institute, General Manager of Europe Sales & Marketing Department themed
environmental responses, this section provides in-depth explanations on our initiatives toward value
creation leveraging “Technological capabilities,” “Support capabilities to offer farm business proposals,” and“Innovation based on collaboration,” which are the strength of ISEKI Group.

Overseas Market Strategies .................................................................41

P33–36 ISEKI Group’s strengths

ISEKI Group’s strengths .........................................................................33
Domestic Market Strategies ................................................................37
Product/Development Strategies .....................................................45
Response to climate change ...............................................................49

Foundation for sustainable growth52

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

Initiatives to strengthen corporate governance

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

Through a message from the Outside Director who serves as the Chair of the Board of Directors, this section
introduces initiatives to strengthen governance with the aim of improving corporate value.

Human resource strategies ..................................................................57

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

Key Point3

12

P67–68 Message From an Outside Director

Environmental management ..............................................................61
Efforts to improve quality and customer satisfaction ................63

Two new female Directors assumed their offices upon approval at the Ordinary General Meeting of
Shareholders held in March 2024, for the purpose of increasing diversity of the Board of Directors. Messages
from the newly appointed Outside Directors are presented.
P74 Messages From Newly Appointed Outside Directors

DX Promotion ...........................................................................................65
Initiatives for society ..............................................................................66

Messages From Newly Appointed Outside Directors ................74
List of officers ............................................................................................75

The Company has published ISEKI Reports since 2019, for the purpose of having
constructive dialogue with stakeholders. This report was edited through united effortsof related departments, that organized a Group-wide project led mainly by young andmid-career employees who will be responsible for ISEKI Group’s next generation.
As the Director in charge of investor relations, with responsibility for this report’s
preparation, I affirm that this report was produced in good faith with the involvementof the management team and the cooperation of related departments, and its
content is accurate.

Dialogue with shareholders and investors ....................................77
Risk management ...................................................................................79
Compliance ...............................................................................................81
Director & Senior Corporate Officer
In charge of Personnel,
Corporate Planning, andPublic & Investor Relations
Deputy in charge of Compliance

Masayuki Fukami

Covered period
From January through December 2023.
The report also includes some information from and after January
2024.

Scope
As a general rule, this report covers the activities of ISEKI & Co., Ltd. and ISEKI
Group’s associated companies in Japan and overseas; notes are added
when the scope is limited in certain part hereof.

Referenced guidelines, etc.
IFRS Foundation, “The Integrated Reporting Framework” / Ministryof Economy, Trade and Industry, “Guidance for Collaborative Value
Creation 2.0” / GRI, “Sustainability Reporting Standards” / ISO26000/ SDGs / Ministry of the Environment, “Environmental Reporting
Guidelines” / Task Force on Climate-related Financial Disclosures(TCFD)

Positioning of information disclosure
ISEKI Group has issued a variety of communication tools to enable
constructive dialogues with stakeholders. For detailed information
on operating results, ESG data, etc., please refer to the latest
information on “Investor Relations” and “Sustainability” pages of our
website; along with the ISEKI Report.
Financial information

Non-financial information

Integrated Report (ISEKI Report)• Management strategies(Mid-term Management Plan)• Securities reports• Quarterly financial summaries• Quarterly briefing presentationmaterials• Business reports• Corporate Governance Report• ESG data

Message From an Outside Director ..................................................67
Corporate governance ..........................................................................69

Publication of “ISEKI Report 2024”

This report has been published with the aim of communicating our
initiatives for medium- to long-term improvement of the corporate
value of ISEKI Group to a wide range of stakeholders including
shareholders and investors from both financial and non-financial
aspects.

Financial and non-financial data

Website (Investor Relations / Sustainability)

Notes on forward-looking information
Forward-looking statements contained in this report are based on
information available at the time of the preparation and involve
potential risks and uncertainties. Actual results may differ fromthose expressed by the statements due to changes in economic
conditions and market trends.
*Amounts and numbers of shares are rounded down to the unit.

Financial highlights ................................................................................83
Financial summary (consolidated) ....................................................84
Non-financial highlights .......................................................................85

Company information / Stock information
Company information / Stock information ...................................86

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ISEKI Report 2024

ISEKI Report 2024

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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

Introduction

History of solving social issues
We have contributed to society in the fields of “food, agriculture, and landscape.”
The Company has inherited the passion of our founder, “I want to free farmers from exhausting labor,” and continued to generate value that
contributes to solution of social issues and grow by “providing innovative products and higher quality of services to the customers” in the fieldsof “food, agriculture, and landscape.” We will take on challenges to solve global social issues, with an eye toward the 100th anniversary of our
foundation in 2025, and the future beyond.

Foundation

1945 to 1960s

1970 to 1980s

1985 to 2000s

2010 to 2020s

Toward the future

1926

1945-

1970-

1985-

2010-

Smart agriculture

Foundation

Supported the post-war food production
increase and high economic growth

Expansion to overseas markets

Strengthened support to offer farm businessproposals

Acceleration of global expansion / promotionof sustainability

Kunisaburo Iseki, the founder, had a strong passion, “I want to free
farmers from exhausting labor,” originated from his experiencein agriculture which was his family business. With this passion
in mind, he established “Iseki Farm Implement Trading Co.” inMatsuyama City, Ehime Prefecture and began selling fullyautomated rice hullers. This is the start of the history of ISEKI Group
that continues until today.
We have inherited the passion of the founder up to present in
an unbroken line as ISEKI’s DNA.

We have supported the post-war food production increase andhigh economic growth through contribution to automation andmodernization of agriculture by developing numerous agricultural
machinery and establishing the integrated rice cultivation system.
We expanded sales bases nationwide to respond to the rapid
increase in demand. The Company was the first to sell the walking
combine harvester, “HD50-model Frontier,” as the world’s firstauto-threshing combine harvester suitable for rice farming in ricepaddies. In addition, the walking rice transplanter, “PF20,” wasequipped with a backward-tilting seedling tank which used plastic
float, and established the current basic form. They were selected
as part of “the best 100 innovations in post-war Japan” in 2014,
recognizing them as products that significantly contributed to thedevelopment of industries and economy in Japan.

We promoted expansion to overseas markets to enhance businessof the Company. The Company concluded an agency agreementwith the French agent, Yvan Beal (currently ISEKI France), in
1967, to commence export and sale of tillers that served as thefull-fledged start of our business in Europe, and established a local
subsidiary in Belgium in 1971. We promoted sale of tractors inthe small-sized tractor market in North America and Europe, themain application of which are maintenance of parks and gardens,
management of homegrown-vegetable gardens, etc. rather
than the agricultural use. This initiative served as the foundation
for the current landscaping business. In Asia, we embarked on
global business by forming a sales network through efforts suchas building relationships with local distributors, while providing
cooperation in domestic production of agricultural machinery.

In 1990, labor hours* in rice farming dropped to one-fourth of
those of 1960, thanks to advances in mechanization. Meanwhile,mechanization needs for vegetable farming increased. We havecontributed to laborsaving by developing transplanters that
automatically plant vegetable seedlings through applicationof the transplanting technologies of rice transplanters whichwere the strength of the Company. Furthermore, in conjunction
with agricultural machinery, we have strengthened support tooffer farm business proposals by leveraging our farm businesstechnologies and know-how accumulated so far, and provided
value of new agriculture that contributes to improvement ofagricultural productivity and food reliability and safety. The support
capabilities to offer farm business proposals are the source of thecurrent competitive edge of ISEKI Group. In addition, the Company
started the coin rice milling business in 1984 and sale of automatedsuccessive rice cooking equipment in 1985. Through these andother efforts, we began activities in the field of food.

Starting with the establishment of PT ISEKI INDONESIA as a global
production base in 2012, the Company accelerated its global
expansion by, for example, establishing ISEKI SALES (THAILAND) in
Thailand in 2013, and making a French agent, Yvan Beal (currently
ISEKI France), a Thai distributor, IST Farm Machinery Co., Ltd., andISEKI Germany, subsidiaries, in 2014, 2020, 2022, respectively. In
the domestic market, we contributed to super laborsaving andhigher profitability of agriculture by promoting smart agriculturethat utilizes advanced technologies and data and environmentallysound agriculture, with the aim of responding to changes in the
agricultural structure such as increased large-scale farming.

We are promoting smart agriculture that utilizes the latest
technologies such as robot technologies and information andcommunication technology (ICT).
We aim to realize highly efficient and productive farm business.

Contribution to agriculture of the world
We will contribute to more efficient food production and moreproductive agriculture through automation of agriculture in Asianand other countries.

*Direct labor hours per 10 acres in rice farming

Enhancement of quality of life
PT ISEKI INDONESIA, a global production baseKunisaburo Iseki, the founder
The world’s first auto-threshingcombine harvester,
HD50-model

Walking ricetransplanter equippedwith a backward-tilting
seedling tank, PF20

Issues and needs● Post-war needs for a food production

increase

Value● Saving of labor and improvement ofFirst fully-automated rice huller
produced after the foundation

1926 Iseki Farm Implement Trading Co. was established1936 ISEKI & CO., LTD. was established5

ISEKI Report 2024

productivity through automation ofagriculture

1946 Established Matsuyama Factory
1949 Established Kumamoto Factory
1958 Began establishing sales subsidiaries
Subsequently, established sales subsidiaries around Japan
1961 Established Niigata Factory
Listed its shares on the Tokyo Stock Exchange
1969 Renamed Tokyo Branch as Tokyo Headquarters

Export and sale of tillers in Europe

Issues and needs● A decrease in agricultural workforce

following the high economic growth● Increased switchover to heavy industries● Accelerated overseas business expansion ofJapanese companies

Value● Improved productivity throughestablishment of the integrated system for
automating rice farming● Contribution to Japan’s economic
development through larger-sized and morediversified agricultural machinery

1971 Established N.V. ISEKI Europe S.A.S. (currently ISEKI Europe GmbH) in
Brussels
1972 Expanded Matsuyama Factory, relocated Head Office to Matsuyama
1977 Established Central Training Center in Ibaraki Prefecture
Commenced exporting tractors (OEM) to North America

Fully-automated vegetable transplanter,“Naueru PV101”

Issues and needs● Accelerated decrease in number and aging

of farm workers● Improvement in food self-sufficiency rate
● Needs for a food production increase

following world’s population growth
Value● Agricultural productivity improvement andlandscaping through provision of agricultural
machinery that is suitable for each region in
Japan and overseas● Provision of new agricultural value by
supporting and offering proposals for farmbusiness
2001 Separated the Production Section from the company and established
ISEKI-Matsuyama MFG. Co., Ltd. and ISEKI-Kumamoto MFG. Co., Ltd.
2003 Established Iseki-Changzhou Mfg. Co., Ltd. in Jiangsu Province, China

We will contribute to town development in Europe and enrichmentof private lives in North America.

Issues and needs● Strengthening of food security● Productivity improvement associated withincreased large-scale farming and adding
value to farm produce● Increased responses to natural disasters andclimate change● Increased environmental responses andcontribution to realization of decarbonizedsociety

Environmental preservation
We will contribute to the realization of a decarbonized andrecycling-oriented society.

Value● Agricultural productivity improvement

through laborsaving, unmanned equipment,
and data utilization● Reduction in CO2 emissions throughpromotion of environmentally soundagriculture, electrification, etc.
2011
2012
2013
2014

Established Dongfeng Iseki Agricultural Machinery (Hubei) Co., Ltd. in Hubei Province, China
Established PT. ISEKI INDONESIA
Established ISEKI SALES (THAILAND) CO., Ltd. (current IST Farm Machinery CO., Ltd.)
Integrated the businesses of Iseki-Changzhou Mfg. Co., Ltd. and Dongfeng Iseki Agricultural Machinery (Hubei) Co., Ltd.
and established Dongfeng Iseki Agricultural Machinery Co., Ltd.
Acquired French agents Yvan Beal S.A.S. and YB Holding S.A.S. (current ISEKI France S.A.S.) and made them subsidiaries
2015 Established Dream Agricultural Research Institute2020 Made Thai distributor IST Farm Machinery Co., Ltd. a subsidiary2022 Made Germany distributor Iseki-Maschinen GmbH a subsidiary

ISEKI Report 2024

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Introduction

ISEKI Group’s value creation aims

Business strategies for value creation

Foundation for sustainable growth

Other agriculturerelated business

Cultivating andmowing machinery

Asia(19.6%)(36.2%)

Financial and non-financial data

Company information / Stock information

Introduction

ISEKI GroupAt a glance

Composition of net sales
Foundation

Consolidated net sales

August 1926

169.9 billion yen

33.3 billion yen

61.4 billion yen

In Fiscal Year Ended December 31, 2023, since overseas sales hit
a record high for three consecutive fiscal years, consolidated net
sales also hit a record high.

8.1 billion yen

1.1 billion yen

EuropeNet salesby product33.2

billion yen

Planting machinery

9.0 billion yen

Implements, spare partsand repair fees

48.9 billion yen(28.8%)

North
America

Net salesby region

14.2(5.3%)

With a passion, “I want to free farmers from exhausting labor,”
Kunisaburo Iseki, the founder, established “Iseki Farm Implement
Trading Co.” in Matsuyama City, Ehime Prefecture.

Otherbillion yen

Harvestingand processing
machineryJapan

113.0 billion yen

17.0 billion yen(10.1%)

Group companies

Overseas net sales (%)

21

33.5%

Our associated companies include 20 consolidated subsidiaries inJapan and overseas: 9 domestic sales subsidiaries, 6 productionrelated companies, and others (2 domestic and 3 overseas
companies), as well as 1 equity-method subsidiary.

7

Overseas net sales grew to 33.5% from 21.3% five years ago.
We have steadily increased our presence overseas, working to
expand awareness of our brand.

Number of employees (consolidated)Intellectual properties / Number of patentapplication registrations per specialty field

5,457

No. 2

As of the end of 2023, 1,670 employees in development andmanufacturing departments, 3,427 in sales departments, and 360
in other divisions.

We have ranked highly since 2000 with regard to the numbersof laid-open applications and patent application registrations
per specialty field in Japan. In 2022, we ranked second for thenumber of patent application registrations in the “other special
machinery field,” and ranked third for the patent allowance rate in
all industries.

ISEKI Report 2024

Overview of products and services
Cultivating and mowing machinery

Planting machinery

Harvesting and processing machinery

Main products
Tractors, riding lawn mowers, tillers,
multipurpose vehicles, high-clearance
multipurpose vehicles

Main products
Rice transplanters, vegetable transplanters

Main products
Combine harvesters, binders, rice hullers,measuring and sorting machinery ricegraders

Main sales region
Japan and Asia (Agri)

Main sales region
Japan and Asia (Agri)Europe and North America (Non-Agri)

Implements, spare parts and repair fees

Main sales region
Japan and Asia (Agri)

Other agriculture-related business

Main products

Main products

Parts for repairing products of Japanese andforeign implements manufacturers, etc.,
repair, maintenance

Facility construction, agricultural materials,
coin rice milling business, rice cooking
business

Main sales region

Main sales region

Japan, Asia, Europe, and North America

Japan

ISEKI Report 2024

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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

Introduction

ISEKI GroupWe conduct business with priority on “Japan,” “Asia,” “Europe,” and “North America.”

Japan
Other

Cultivating andmowing machinery

25.4 billion yen

Through sales subsidiaries, we sell agricultural machinery andprovide services, as well as offer farm business proposals andsupport to realize highly profitable agriculture.

22.0 billion yen

23%

Sales route19%●

Net sales

113.0 billion yen

Planting
machinery

7.2 billion yen
6%Harvesting andprocessing
machinery

Implements, parts,
and repair fees

15.7 billion yen

42.5 billion yen

14%

38%

11 sales subsidiaries

Since we started business in 1960s, the sales area has expanded tocover the entire Europe. We mainly sell landscaping machinery inthis market where we have a significant presence.

EuropeImplements
and parts, etc.

Sales route (major agents)

11.2 billion yen
34%■ Agri products (for agricultural use)

Net sales

33.2 billion yen

As an integrated manufacturer specializing in agricultural machinery, we haveestablished an integrated system for automating farming of rice and field
crops, and we also have a broad range of product lineup from products forhobby to ones for professionals.

●

France: ISEKI France (consolidated subsidiary)
Germany: ISEKI Germany (consolidated subsidiary)●

U.K.: ISEKI UK & IRELAND●■ Non-Agri products (for landscaping)
Products (mainly
cultivating andmowing machinery)

21.9 billion yen■ Implements, parts, and repair fees

66%

Amid the increase in size of farm business, a greater emphasis has beenplaced on maintenance (readiness of parts and for repair) so as to enablesystematic operations. We have placed a focus on this field, improving service
systems, as a stable revenue base not too much dependent on market trends.

We offer ISEKI-brand products, mainly compact tractors used for landscaping,such as mowing lawns in parks and road cleaning, as well as riding lawn
mowers.

■ Other products
We purchase and sell electric- and gasoline-powered compact products for
managing green space which have a high synergy effect with our products.

■ Other
We handle construction of facilities such as agricultural facilities, agricultural
materials such as fertilizers, and food/kitchen-related products, etc.

Riding lawn mowers used for maintenance, etc. of parks and fields

Manned monitoring-based robot rice transplanters which promote highexpectations for further laborsaving

In each of the ASEAN, East Asian (South Korea and Taiwan), andChinese markets, we offer agricultural machinery using technology
and know-how nurtured through our business in Japan.

Asia
Implements
and parts, etc.

■ ASEAN

1.8 billion yen

In the ASEAN market where future growth is expected, we conduct sales andservices into Thailand and its neighboring countries with IST Farm MachineryCo., Ltd., our consolidated subsidiary, playing a central role.

23%

Net sales

8.1 billion yen

Sales route●

Products

77%

Implements
and parts, etc.

Sales route

1.0 billion yen
7%●

In response to their increased needs for advanced technologies and largescale agricultural machinery, we provide large-sized, high-performance ricefarming machinery, etc. that is in active use in Japan through local sales agents.

U.S. and Canada: AGCO Corporation (OEM)■ Non-Agri products (compact tractors, etc.)

Net sales

14.2 billion yen

IST Farm Machinery Co., Ltd. (consolidated subsidiary)■ East Asia (South Korea and Taiwan)
6.2 billion yen

We supply Massey Ferguson-brand products on an OEM basis
through our business partnership with AGCO Corporation, a major
global manufacturer of agricultural machinery.

North America

Products (mainly
cultivating andmowing machinery)

13.2 billion yen
93%

We sell our products, mainly sub-compact tractors for private users, in entire
North America, including Canada.
We contribute to the improvement of quality of private lives, as ourcompact tractors equipped with a front loader, backhoe, mower, etc. are used
for park management and development, as well as hauling of such materials
as feeds for horses.

Sales route●

South Korea: Local sales agents●

Taiwan: Local sales agents■ China

We locally manufacture and sell tractors, rice transplanters, combine
harvesters, etc. which are adapted to operation in rice paddies. We also sell
agricultural machinery equipped with latest technologies and manufactured
in Japan.
Sales route

Tractors used in Thailand●

Dongfeng Iseki (equity-method subsidiary)

Used for hauling with a front loader

Used for mowing with a mower*Local net sales of Dongfeng Iseki are not included in our consolidated financial statements.

9

ISEKI Report 2024

ISEKI Report 2024

10

Introduction

ISEKI Group

Number of employees (consolidated)

5,457
Development and manufacturing department • • • 1,670
Sales department • • • • • • • • • • • • • • • • • • • • • 3,427
Other division • • • • • • • • • • • • • • • • • • • • • • • • • 360■ Japan: Main associated companies/sales subsidiaries(As of December 31, 2023)● Associated companies● Sales subsidiaries

ISEKI-Matsuyama MFG. Co., Ltd. ◆ISEKI-Kumamoto MFG. Co., Ltd. ◆ISEKI-Niigata MFG. Co., Ltd.
◆ISEKI-Shigenobu MFG. Co., Ltd. ◆ISEKI-Minamiyoshida MFG. Co., Ltd. (*1) ◆ISEKI AGRI Co., Ltd.
ISEKI Logistics Co., Ltd.
ISEKI TLS Co., Ltd.
Kita-Nihon Shodo K. K.

ISEKI Hokkaido Co., Ltd.
■ISEKI Tohoku Co., Ltd.
■ISEKI Kanto Koshinetsu Co., Ltd. ■Gunma ISEKI Sales Co., Ltd.
Ishikawa Shokai Co., Ltd. (*1)
ISEKI Kansai Chubu Co., Ltd.
■Mie ISEKI Sales Co., Ltd.
Nara Iseki Sales Co., Ltd. (*1)
Nishioka Shokai Co., Ltd. (*1)
ISEKI ChuShikoku Co., Ltd.
■ISEKI Kyushu Co., Ltd.
■ISEKI Group’s value creation aims
CONTENTS

Message from our President ........................................................................13

We leverage group-wide strengths at home and abroad to engage in the business.

Value creation process .....................................................................................19

Our products are used in many countries and regions around the world.

Materiality ..............................................................................................................21
ISEKI Group’s operating capital ...................................................................23■ Overseas: Main associated companies/strategic partners[Associated companies]
France
ISEKI France S.A.S. (ISEKI France)
Germany
ISEKI Europe GmbH (ISEKI Europe)(*1)
Iseki-Maschinen GmbH (ISEKI Germany)
U.K.
Premium Turf-Care Ltd. (ISEKI UK & IRELAND)(*1)
ThailandIST Farm Machinery CO., Ltd.
Indonesia
PT. ISEKI INDONESIA ◆China
Dongfeng Iseki Agricultural Machinery Co., Ltd. (Dongfeng Iseki) ◆ (*1, 2)[Strategic partners]
U.S.
AGCO Corporation of AGCO Group (*3) (AGCO)
India
Tractors and Farm Equipment Limited (TAFE) (business alliance)◆ Production sites■Wide-area sales companies (our investment ratio: 100%)*1: Non-consolidated subsidiaries *2: Equity-method subsidiary*3: OEM customer(As of May 31, 2024)■ Production sites/main machine types produced
Associatedcompanies(location)

ISEKI-Matsuyama MFG.
Co., Ltd.
(Japan)Dongfeng Iseki Agricultural
Machinery Xiangyang Factoryand Changzhou Factory(China)Tillers, multipurpose vehicles,
and implements (rotaries,
mowers, etc.)

Tractors and riding lawn mowers

Tractors, rice transplanters,
combine harvesters, highclearance multipurpose vehicles,
and vegetable transplanters

Japan, Asia, Europe, andNorth America

North America, Asia, and Europe

Asia

ISEKI-Niigata MFG.
Co., Ltd.
(Japan)ISEKI-Shigenobu MFG.
Co., Ltd.
(Japan)Main machine
high-clearance multipurpose
types produced

Combine harvesters, and carrot
harvesting machinery

Rice transplanters, vegetabletransplanters, and rice hullers,binders

Main destination Japan, Asia, Europe, andfor shipment North America

Japan and Asia

Japan and Asia

Tractors, riding lawn mowers,
vehicles, and diesel engines

11

PT.ISEKI INDONESIA(Indonesia)

ISEKI-Kumamoto MFG.
Co., Ltd.
(Japan)ISEKI Report 2024

ISEKI Report 2024

12

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 2024

24

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.

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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)

49

ISEKI Report 2024

ISEKI Report 2024

50

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).
●

51

ISEKI Report 2024

ISEKI Report 2024

52

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

Foundation for sustainable growth

Sustainability in ISEKI Group

Stakeholder engagement

Basic Policy (fundamental concept)

Basic Policy (Fundamental concept)

In keeping with the philosophy of our founder, “free farmers from exhausting labor,” ISEKI Group sets forth its corporate philosophy as “We strive tocontribute to the creation of the prosperous and sustainable society through ‘providing innovative products and higher quality of services to thecustomers.’” We will strive for the realization of a sustainable society, “agriculture and landscape,” in cooperation with our stakeholders.

● ISEKI Group strives to build strong relationships of trust with stakeholders by engaging in constructive dialogue with them including directinteraction by senior management.

Major engagements with stakeholders
System for promotion of sustainability
With the aim of centralizing the management of organizations that address ESG-related issues in the Group, we established the ESG Committee inAugust 2022. The Committee is composed of Directors and Corporate Officers and chaired by an Independent Outside Director.
In principle, Committee meetings are held every month. The Committee examines and deliberates sustainability-related initiatives for the Group
as a whole from the perspective of risks and opportunities, and such initiatives include responses to climate change, respect for human rights, andemployee health. In addition, the results of deliberations at Committee meetings are submitted as recommendations to the Board of Directors
and basic policies, materiality, and other important matters are deliberated and determined by the Board of Directors. This framework enables the
management team to strengthen its involvement. Nine working groups (WGs) have also been set up to promote ESG-related activities.

ISEKI Group engages in constructive dialogue with stakeholders to accurately understand and meet changing expectations from society. The
issues, expectations, etc. obtained through various dialogues are fed back to the Directors, management executives, and related departments by
way of distributing reports, etc. to the Board of Directors and other meeting bodies for the purpose of information sharing and reflected in andused for improvement of business activities.
M

Concept behind the engagement

Opportunities for dialogue

Customers

To provide high-quality and safe products and services that satisfy our customers,
ISEKI Group will extend farm business proposals and support, including cultivation
techniques, as well as explanation for the application and safe use of agricultural
machinery. We will also strive to understand the true needs of customers throughdialogue and use this dialogue to improve product development.

Direct dialogue with sales and maintenance staff, User exchange meetings M , Visit M ,Trainings, seminars, Exhibitions and demonstrations M , Proposal and support of farm businesstechnologies, Market research

Shareholders
and investors

We will bolster corporate governance in order to build long-term trusting relationships
with our shareholders and investors. We will engage in constructive dialogue based on
our disclosure policy.

General shareholders’ meeting M , Quarterly briefing sessions (four times a year) M ,Individual meetings M , Information meetings for individual investors and shareholders M ,Facility tours M , Issuance of IR-related tools

Suppliers

We will cooperate with our suppliers to create opportunities for mutual improvement
so that they can lead to mutual business development including fair and equitabletrade towards building a sustainable supply chain.

IR information meetings for vendors M , Dealer meetings M , Superior company tours M ,Inspection and meeting with suppliers M , Business report meeting M , Annual general
meeting of Ishokai M , Visits (Japan, overseas) M

Local
community

We will engage in environmental conservation, activities for community growth anddevelopment, and activities for the nurturing of the next generation so as to enableco-existence with the local communities.

Tours of factories and exhibition halls M , CSR activities such as cleaning activities, Exchange ofviews with local governments, etc. M , Participation in local events M

Employees

We will work on providing a secure and safe workplace, share company informationand support for career development towards creating an employee-friendly workplaceand nurturing human resources.

Internal IR information meetings M , Collective bargaining M , Labor management council M ,Safety and Health Committee, Engagement surveys, Employee meetings M , Various training,
Various commendation meets and contests M , Former employees’ meeting M

Recommendation[Role]In response to a consultation from the Boardof Directors, deliberate on matters related
to the enhancement of ESG and makerecommendations to the Board of Directors

WGs

Consultation

ESG Committee

Board of Directors┃ Promotion system[Purpose] Centralize organizational management
regarding ESG-related issues in generalthrough covering the aspects ofenvironment, human capital, governanceand compliance[Members] ● Chairperson:
Independent Outside Director● Members:
Directors and Corporate Officers● Observers:
Audit & Supervisory Board Members[Purpose]

Set up WGs for executive chains ofcommand and promote ESG[Members]● Members:[WGs]

Heads of relevant departments● Compliance WG

denotes involvement of senior management

Stakeholder● Risk Management WG● Information Disclosure WG● Environmental Management WG● Human Resources WG● Materiality WG● CS Enhancement WG and others

Main agenda items at ESG Committee meetings in FY2023

Number of meetings held
12 times (January to December 2023)

Main agenda items

Dialogues between employees and the management
To disseminate our long-term vision and management strategies to materialize the vision,
we engage in employee communication (hold internal IR information meetings) every year,
where the management has direct dialogues with employees. In 2024, President and each
officer in charge visited each domestic base. President talked directly to employees about
the fundamental structural reforms and the measures for “Project Z” to promote growthstrategies, which were announced in February, and sincerely answered questions from
employees. In this way, the Company strives to face the challenges of transformation with asense of unity. In addition, in order to reflect the initiatives to operations of each individual,
each department held discussion.

● Quantification of materiality indicators (KPIs) and annual plans● Report on results of activities to promote materiality

・Matters related to environmental management activities ・Matters related to TCFD and climate change
・Matters related to customer satisfaction surveys

・Matters related to CSR procurement

・Matters related to human capital・Matters related to evaluation of initiatives for risks

・Matters related to whistleblowing

・Matters related to labor accidents

・Matters related to information disclosure・Matters related to external assessment● Strengthening of risk management and compliance53

ISEKI Report 2024

This gave me an opportunity to rethink what I myself should do to realize
the transformation through Project Z.
It was great to hear explanations from the President.
I would like to know more details on initiatives for the future.
I reaffirmed the importance of the operations I am in charge of, and thenecessity to increase presence of the overseas business.
I want to constantly explore broad effects by activating crossorganizational communication.

ISEKI Report 2024

54

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

Foundation for sustainable growthIntellectual property strategies
Intellectual property policy

Intellectual property management
System for promoting intellectual property activities

Since its foundation in 1926, ISEKI Group has pursued improvements in agricultural efficiency and laborsaving under the philosophyof its founder “freeing farmers from exhausting labor” and has provided numerous advanced agricultural machinery over the period
of about 100 years. In this context, viewing intellectual property and intangible assets as the basis of our management resources, wewill strategically leverage them for the future and promote sustainable business development to practice ISEKI Group’s 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.’”
Intellectual property strategies aligned with management strategies
To put its corporate philosophy into practice, ISEKI Group will seek to create highquality intellectual property and intangible assets in the development of its global
operations and in the advanced technology field, which is a growth market, in
addition to its traditional domains of business foundation. ISEKI Group will execute
its intellectual property strategies aligned with the management strategies byleveraging the created intellectual property and intangible assets as a core in the
pursuit of “from products to services” development.

┃ proposals to all invention proposals

Ratio of advanced technology-related
56%

61%

2021

2022

2023

Invention proposal themes
Invention proposalIntellectual Property Control Department
Patent application and acquisition of rights

Intellectual property management● Intellectual property training and education
We provide our employees with education about intellectual property, including new recruit training and other training commensurate withyears of experience, focusing on a method for coming up with inventions to invigorate their creativity as well as methods for making invention
proposals or responding to the rights of other companies. We also provide education for personnel in charge of practical intellectual property to
improve their skills.

● Technological research presentations
In order to manufacture products that will be able to contribute to the changing market environment in Japan and overseas, technologicalresearch presentations are held to share the outcomes of research and development and invention information and to provide opportunities fordiscussion, including senior management, with the aim of raising the standard of the Group as a whole.

● Creation of intellectual property in landscaping field
Using technologies for agricultural tractors, we have been developing products forlandscaping for Europe, such as mowing lawns in parks, road cleaning, and snow
clearing work. We apply for patents for technologies related to these products toacquire property rights.

Invention awards● Overseas business expansion including monetizing intellectual property
North
America

EuropeAsia● Internal invention awards scheme● National and regional awards for inventions

To invigorate intellectual property creation activities, awards arepresented to young engineers as an awareness-raising exercise.
Internal awards are also presented to promote creation activities
by sharing outstanding inventions within the development
departments. Through the creation of outstanding inventions, wewill pursue the enhancement of ISEKI Group’s competitiveness.

Every year, we nominate inventions that contribute greatly to our businessfor the Commendation for Invention hosted by the Japan Institute ofInvention and Innovation to give an increased incentive to our investors.
As of the end of 2023, ISEKI Group received a total of 234 awards
including 19 national awards for inventions and 215 regional awards forinventions.

Number of invention awards received(The Japan Institute of Invention and Innovation)
National awards for inventions:Regional awards for inventions:
Total:

19
215
234(As of December 2023)

Outcomes of intellectual property activities

Creation of technology that dominates market
ISEKI positions its proprietary technologies on which patents are pending or granted as “Only i” and uses them in its sales activities. Out of the “Onlyi” technologies, those equivalent to the technology that dominates the market are positioned as “Super i.”
We will further create “Only i” or “Super i” technologies to strengthen our competitive advantage and improve profitability.

“Only i” symbol

Planning

Human resources development for intellectual property

Amid the changing environment surrounding Japanese agriculture, advanced
technologies that are employed particularly in smart agricultural machinery anddata use to enable laborsaving and cost reduction are essential to realize agriculture
full of dreams. ISEKI is focusing on the creation of intellectual property relating tosuch advanced technologies.
We will strive to strengthen our advanced technological capabilities with theaim of achieving a ratio of advanced technology-related proposals to all invention
proposals of 60% or more.

Leveraging our intellectual property and intangible assets (including drawings,
know-how, and brands), we are seeking to grant our overseas associatedcompanies and strategic partners licenses through technology transfer to generate
profits in various regions of the world. Through this initiative for licensing, weare enhancing collaboration with overseas strategic partners to find business
opportunities. For example, we are working to expand products for sale throughOEM supply from strategic partners.

Sales

Patent application, acquisition of rights, implementation and management of intellectual property are conducted in accordance with laws andregulations and company rules. Through this, we strive to acquire valid rights, protect trade secrets, and respect the intellectual property rights ofother companies. For example, in valuation of intellectual property, based on our value calculation standards and in light of conventional wisdom,
we make a reasonable evaluation that enables us to determine the value of a technology and calculate the consideration for the transfer of rights
and licensing fees. Intellectual property information in Japan and overseas is digitized using an intellectual property management system for thesmooth and efficient management of intellectual property. Information about strategies and initiatives for intellectual property and intangible
assets is supervised and shared with the management team through reporting to and discussion with the Board of Directors.

39%● Expansion of intellectual property relating to smart agricultural
machinery and data use0Development

Taking into consideration research and development themes selected through consensus among thedevelopment, sales and planning departments, as well as promising technologies, and market trends
and needs, ISEKI Group sets invention proposal themes and strongly drives forward invention proposal
activities. Our engineers in charge of different products come together and carry out invention creation
activities as a group to draw ideas and thereby improve the quality of inventions and horizontallydeploy technologies. We evaluate proposed inventions and select ones from them in consideration ofpotential and feasibility, and the Intellectual Property Control Department applies for patents for theselected ones to acquire property rights.

“Super i” symbol

In 2022, the number of the Company’s patentapplication registrations per specialty field in Japanranked second in the other special machinery field, andthe patent allowance rate of the Company ranked thirdin all industries.
Our proactive efforts to develop, launch andcommercialize new technologies are exemplified by
the high number of patent application registrations per
specialty field, as well as high patent allowance rates.

● Number of patent application registrations per specialty fieldYear
2000–2006 2007–2014 2016–2017 2018 2019 2020 2021 2022
Statistics
Field
Rank

Number of laid-open applications
per specialty field
Agriculture andfisheries
No. 1

Number of patent application registrations per specialty field
Other special machinery
No. 2

No. 1

No. 2

● Patent allowance rateYear
Patent allowance rate*Rank

2004–2010
−
No. 1

2011
91.8%
No. 2

2012–2017
−
No. 1

2018

96.4%
No. 2

2019

97.7%

2020

98.7%
No. 1

2021

97.2%

2022

94.6%
No. 3

*Patent allowance rate = Number of allowed applications / ( Number of allowed applications + Number of rejected applications + Number ofwithdrawn and abandoned applications)
Number of withdrawn and abandoned applications = Number of applications withdrawn or abandoned after notification of reasons for refusal

55

ISEKI Report 2024

ISEKI Report 2024

56

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

Foundation for sustainable growth

Human resource strategies
Promote diversity, equity, and inclusion (DE&I) and enhance education

We will work to optimize human resources
within the Group and enhance training toboost the vitality of the ISEKI Group’s diverse
human resources.

The ISEKI Group strives to foster an environment that enables people with diverse backgrounds and personalities to fully demonstrate
their capabilities.
Optimization of Group human resources
In 2023, we launched the operation of the Group personnel open recruitment system. Our objectives for the system are to improve productivity
and organizational vitality by effectively utilizing Group human resources, and showing respect for employee autonomy to enhance engagement
and career development. We will utilize the talent management system to continue optimizing the Group’s human resources.

VOICE ─ Employees who took advantage of the Group personnel open recruitment system
Kotaro Shimokawa, IST Farm Machinery Co., Ltd.

Masayuki Fukami
Director & Senior Corporate Officer
In charge of Personnel, Corporate Planning, and Investor Relations
Deputy in charge of Compliance

The ISEKI Group is committed to human capital management, where systems and workplace environments are in place to enable employees towork with passion, and each and every employee demonstrating their knowledge, skills, and experience leads to medium- to long-term corporate
value improvement. In light of this, we have set “enhancement of employee engagement” as one of our priority issues (materiality). We are also
working on a variety of measures related to “promotion of diversity, equity and inclusion (DE&I) and enhancement of education” and “improvementof engagement score” to maximize the capabilities of the Group’s human resources.
For the purpose of promoting DE&I and enhancing education, we have introduced the Group personnel open recruitment system to optimize
human resources and raise productivity across the breadth of the ISEKI Group, and cultivate human resources who are willing to take onchallenges and initiate change. Furthermore, in addition to actively recruiting mid-career professionals with superior abilities and experience inglobal and cutting-edge technologies, DX, and other similar fields, we have established a system that will help us secure a diverse workforce. Also,
through the upgrading of employee educational programs utilizing tools such as apps, we support voluntary learning opportunities for employees
and enhance their skill development.
The engagement score is an important, objective indicator of the bond between the company and its employees. Despite the current
discrepancy between the overall satisfaction target and actual results, we believe that, rather than simply improving the score, we must analyze
the factors that caused the discrepancy and work to improve them.
The Group will develop human resources who will play leadership roles toward its 100th anniversary of foundation in 2025 and the next 100
years through scientific human resource management.

ISEKI Group policy for human resources development and policy for workplaceenvironment creation
Policy for human resources development

Policy for workplace environment creation

ISEKI Group believes what contributes to the solution of various
issues is people, who are essential for sustainable business growthand improvement of corporate value.
The Group will direct its efforts toward the securement ofcore human resources to execute its business strategies, such as
cutting-edge technologies and the promotion of globalization.
To be a solution provider for agriculture and landscape, we will
also bring out the full potential of each employee and develop
human resources who actively take on challenges and bring aboutchange, by further enhancing education programs for DX andother purposes.

Based on the Company motto of providing “a stable workplace
to the employees,” ISEKI Group aims to provide a safe and secure
workplace to its employees as well as to create a rewarding
workplace.
On the premise of respect for human rights and thoroughcompliance, we will work to enhance employee engagement andcreate a diverse, sound, and transparent workplace environment
so that we can develop together with our employees.

I transferred to ISEKI & CO., LTD. from domestic sales subsidiary ISEKI Kanto Koshinetsu, and am currently working at sales subsidiary IST Farm Machinery in Thailand. My
motivation for applying was the idea that I might be able to form a new career by combining the language study I engaged in as a student with my experience in domestic sales.
We are committed to developing farmers and rural communities in the ASEAN region and to expanding our overseas business by leveraging the experience gained in domestic
sales in providing products and services.

Development of global talent
We are focused on personnel development toward the further expansion of our overseas business. In addition to the active dispatch of young andmid-career employees to overseas subsidiaries, in 2023 we introduced Study Sapuri ENGLISH, an online English learning application, on top of ourexisting training programs to enhance language learning opportunities.

VOICE ─ Employees active overseas Aina Miyauchi, ISEKI Europe GmbH
After being involved for about three years in the development of riding lawn mowers for Europe in the Tractor Technology Department, I have been based in Germany with ISEKI
Europe GmbH since 2023, in charge of after-sales service operations and market research for product development. I gained new perspectives and broadened my horizons as anengineer by being exposed to diverse languages, thoughts, and ideas. In the future, I would like to leverage the experience I gained having been stationed overseas in designingand developing machines from a global perspective.

Initiatives to promote active participation of women
In FY2023, to motivate female employees to pursue their careers and strengthen bonds among employees, we held two roundtable training
sessions for management position candidates, with 42 participants. We will continue to boost the ratio of female managers by training
management position candidates.

● Ratio of female managers
2020
3.7%

2021
4.2%

2022
4.1%

2023
4.6%

2025 (target)
7%*Data for ISEKI & CO., LTD. (non-consolidated)

Skill development through enhanced educational programs
We support self-development by providing a host of educational programs for the purpose of employee skill development and reskilling. We
reviewed our existing distance education system and launched an online learning platform that allows employees to take approximately 12,000
different courses according to their challenges and objectives. We also expanded content, including an educational app that allows employees to
consume content by audio to take full advantage of their spare time. We also dispatch our employees to graduate schools for working adults (The
Graduate School of Project Design).

VOICE ─ Employees studying at graduate school for working adults
Yo Murayama, North America & Oceania Sales & Marketing Department, Overseas Business Division, ISEKI & CO., LTD.
Following my assignment overseas at PT. ISEKI INDONESIA, I am currently responsible for sales for distributors in North America and Oceania. In 2023, I enrolled in The Graduate
School of Project Design, a graduate school where working professionals can build and plan new businesses. I am inspired by people with varying backgrounds from different
industries and generations, and learn and come to new realizations on a daily basis. I feel that this is a valuable experience. I can only express my gratitude to the company, mycolleagues, and my family for supporting me in balancing study and work. I have one year left in the master’s program, and I will continue to enjoy myself as I give my best
effort in my job and education.

Strengthen mid-career recruitment

Targets● Ratio of female employees hired: 20% or more, active recruitment of women in technical fields● Ratio of female managers: 7% or more (end of 2025)● Increase in the number of foreign nationals in managerial positions (end of 2025)● Ratio of mid-career hires in managerial positions: 7% or more (end of 2025)

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ISEKI Report 2024

With the aim of enhancing our organizational strength, we are reinforcing our mid-career recruitment. The ratio of mid-career hires in managerial
positions in 2023 was 8.5%. Moreover, in 2023, we diversified our recruitment system by starting career registration, return-to-job (reemploymentof former employees), and referral recruitment (employee referral). We will increase the matching rate between our company and applicants, while
also strengthening our organizational capabilities.

● Ratio of mid-career hires in managerial positions
2020
5.3%

2021
5.3%

*Data for ISEKI & CO., LTD. (non-consolidated)

2022
6.4%

2023
8.5%

2025 (target)
7% or more
ISEKI Report 2024

58

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

Foundation for sustainable growth

Human resource strategies

Data related to human capital

Promotion of health & productivity management● Indicators related to human capital
Ratio of female employees

Female-to-male pay ratio

Utilization rate of paid leave(permanent employees)

Retention rate of new
graduates after three years(permanent employees)

Employment rate of people
with disabilities

73.7%

91.7%

66.6%

2.02%

14.7%

*Data for ISEKI & CO., LTD. (non-consolidated)*In the personnel and wage systems, there is no difference based on gender. Differences in the ratio of personnel by job qualification, a high rate of female employees selecting region-specific positions, and differences in
the work system result in a wage difference between male and female employees.

Toward enhancement of employee engagement
ISEKI Group is working on the enhancement of employee engagement to retain talented personnel and create employees who actively engage incorporate growth. We are working primarily on the provision of a secure and safe workplace, support for career development, and development
and utilization of diverse human resources. At the same time, we conduct regular engagement surveys and monthly pulse surveys to assess thestatus of our employees’ engagement.

Engagement survey target and results

February 2025 (target)
Overall satisfaction rate

70.0%

August 2023 (result)

March 2024 (result)

Overall satisfaction rate

51.6%

49.0%

Response rate

80.2%

84.4%

Items with highsatisfaction rate

Workstyle,interpersonal relationshipWorkstyle,environment conducive to growth

Wage system,
personnel system

Wage system,
personnel evaluation system

Issues

Initiatives in response to engagement survey results
The overall satisfaction rate shown by the most recent engagement survey was 49.0%. Unfortunately, there is a huge gap between the result andthe target rate of 70.0%. The survey results show low rates of satisfaction with the items such as wage system, while high rates with workstyle,interpersonal relationship, and environment conducive to growth.
ISEKI Group has worked to enhance its welfare system in an effort to improve the overall satisfaction rate and introduced an open recruitment
system for the entire ISEKI Group to allow employees with high motivation to expand career opportunities. In April 2024, the Group introduced theThanks Point Program to further improve the rates of satisfaction with interpersonal relationship and organizational culture. Although the program
has just been introduced, it helps employees actively communicate with each other across the departments or offices. Regarding our wage
system, which is one of the issues, we will strive to improve the wage level along with improvement of profitability we pursue under Project Z andalso perform an in-depth review of our personnel evaluation system.

Introduction and utilization of 360-degree evaluation
In 2022, the 360-degree evaluation system for managers was introduced to facilitate the growth of personnel in managerial positions and enhanceorganizational capabilities. The system is intended to facilitate further growth of our managers by feeding evaluation results back to them. At
the same time, we utilize evaluation results for planning a human resources development curriculum by taking into account the strengths andweaknesses of our human resources that have been identified by the results.

Initiatives to realize work-life balance

2022

2023

66.6%

*Data for ISEKI & CO., LTD. (non-consolidated)

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ISEKI Report 2024

ISEKI Group health basic policy

Viewing healthy and stable living of individual employees as thedriving force behind the development and business activities
of a corporation, ISEKI Group has engaged in maintaining its
employees’ health since its foundation. Looking ahead to the100th anniversary of its founding in 2025, ISEKI Group has now
declared that it will further promote health & productivity
management in mutual collaboration with ISEKI Health
Insurance Association and ISEKI Labor Union to ensure that all
people playing active roles at the Group can spend healthy andfulfilling days.

We will work to maintain and promote the health of individual
employees and enable the enhancement of employee
engagement and sustainable growth of the Group byimplementing measures focusing on three kinds of health asfollows:❶ Physical health ❷ Mental health ❸ Living healthOccupational safety and health management
Setting up “a healthy and safe workplace” as the code of conduct, ISEKI
Group strives to manage occupational safety and health in a groupwide effort. Iseki Group carries out safety and health activities reﬂecting
the actual situations of each company and office and implements safety
checks at manufacturing subsidiaries to promote awareness-raisingat the sites, thereby striving to reduce accident risks. The Group has
established ISEKI Safety Promotion Center as a place for experiencing
near-accidents and offers employees to have a simulated experienceof specific occupational accidents to improve safety awareness. Since
lost time accidents increased at its manufacturing subsidiaries in 2022,
the Group worked to improve its occupational safety control system byenhancing safety education and equipment inspections. As a result, theindustrial accident severity rate for 2023 improved from the figure in theprevious year.

● Statistics of industrial accidents: severity rate

(%)

2020

2021

2022

2023

0.000

0.004

0.260

0.016

Policies Concerning Safety“Safety takes precedence over everything”– promoting initiatives to achieve “zero”
industrial accidents –Implementation of risk assessment based onrisk-prediction activities
Identifying risks and hazards in operations, taking risk reduction
measures, and thereby preventing accidents from occurring.

Provision of safety education
Thoroughly entrenching awareness of safety once again
through education provided at the Safety Promotion Center so
as to build a framework that prevents any industrial accidents.

Respect for human rights, Prohibition of discriminatory treatment
Basic Policy (Fundamental concept)● Ratio of male employees who took childcare leave

65.3%

Health & Productivity Management Declaration*Severity rate: Number of work days lost per 1,000 working hours*Scope: ISEKI & CO., LTD. and its three factories in JapanISEKI Group is promoting various measures and improving the environment for employees to allow its employees to adopt diverse workstyles thatsuit their stages of life. In particular, when an employee notifies us of childbirth, we let the employee and his or her supervisor know about thechildcare leave system and encourage the employee to take the leave. This is intended to create an environment where both male and female
employees readily take childcare leave and return to their work.

● Status of utilization of paid leave(permanent employees’ average)

ISEKI Group announced the Health & Productivity Management Declaration in 2021 and has
been certified as a health & productivity management outstanding organization (the large
enterprise category) for three consecutive years since 2022. The Group also joined the Health& Productivity Management Alliance in June 2023 with the aim of promoting employees’
health and improving productivity and will continue to implement initiatives to further realize
employees’ well-being through referring to examples of initiatives by other companies.

2022

2023

Ratio

42.1%

72.2%

Average days of leave

32 days

49 days

It is stipulated in ISEKI Group Code of Ethical Behavior to “respect basic human rights and not engage in any act of discrimination or harassmenton the grounds of nationality, race, creed, gender and disabilities.” The Code of Ethical Behavior is distributed to all employees. The Group instructs
them to, among other things, “always respect human rights of others by periodically providing employees with education” and “pay extra attention
to their speech and behavior so as not to commit acts that ignore others’ human rights, such as harassment.”*Data for ISEKI & CO., LTD. (non-consolidated)

ISEKI Report 2024

60

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

Foundation for sustainable growth

Environmental management
Environmental Vision

Major activity results in promoting environmental management

ISEKI Group will aim for the creation of a sustainable society by 2050, including carbon neutrality through “providing innovative products andhigher quality of services to the customers.”

Basic Environmental Policy
ISEKI Group promotes environmental activities that contribute to achieving harmony among nature, society and corporations with the aim ofcreating a sustainable society.

Development ofrecycling-oriented society
Manufacturing resources
Toxic chemical substances

(45)%

○

● Volume of water used: The base year has been shifted due to expansion of the range of sites subject to monitoring to include

global production bases.
Changes● Final volume of waste and total material input: The targets have been raised for us to pursue further reductions.
● Used volume of chemical substances subject to PRTR law: The target is under review since substances subject to the law have

● Chair

General Manager of Corporate Planning Dept.
● Members
General Manager of Corporate Planning Dept., General Manager of Strategic Planning
Section, General Manager of Public & Investor Relations Section, General Manager ofFinancial Dept., General Manager of General Affairs Dept., General Manager of Sales
Planning & Administrative Dept., General Manager of Corporate Business Control Dept.
of Overseas Business Division, General Manager of Administrative Dept. of Development& Production Division, General Manager of Green Innovation Promotion Section, andGeneral Manager of Environmental Control Section (other individuals are called on toparticipate in addressing specific themes as necessary)● Secretariat
Corporate Planning Department and Environmental Control Section[Frequency of meetings]● Mid- to long-term environmental targets: Every quarter, or according to progresswith various themes

Information
sharing,
direction

Reportingof progress& issues

Environmental management meetings
at individual offices

Environmental Management WG

ESG Committee

Board of Directors(36)%

In light of the situation in which results have reached or are about to reach the targets as well as legal amendments, we have revised the targets.

The Environmental Management Working Group (WG) promotes the Basic Environmental Policy throughout the Group, aiming to realize ourEnvironmental Vision by managing progress toward our mid- to long-term environmental targets through compilation of activity results for each
office, and by discussing measures related to the Task Force on Climate-related Financial Disclosures (TCFD) ( P62). Matters discussed by theWorking Group are reported to and deliberated by the ESG Committee ( P53).

Recommendation

Reduction of volume of water used
Reduction of final volume of waste
Reduction of total material input
Reduction of used volume of chemical
substances subject to PRTR law*

*The system and law under which the national government compiles data about the release and transfer of chemical substances and makes the results publicly available each year

System for promoting environmental management

Consultation

Standard
compared with FY2013
Four manufacturingbases in Japan

Revision of FY2030 targets❶ Maintain environmental management system and its functional applications❷ Promote dissemination of business activities and products and services to achieve carbon neutrality❸ Comply with environmental laws, regulations, and standards❹ Conduct environmental education and information disclosure[Members]

FY2023 Targets and result evaluation
Targets
Results
Evaluation
(43)%
(53)%
〇
(64)%
(69)%
○
(17)%
(34)%
〇

Mid-term environmental targets (per net sales)

Assign Environment Control Managers who
promote environmental control activities
in each office■Manufacturing bases● 4 bases in Japan and 3 bases overseas
EMS certification acquisition rate: 100%*■Non-manufacturing bases● 8 sales subsidiaries in JapanEMS certification acquisition rate: 100%
● 10 other bases in Japan and overseas
EMS certification acquisition rate: 90%*EMS: Environmental management systems such as ISO14001 and EcoAction 21

increased due to legal amendments.
Mid- to long-term environmental targets (per net sales)
Reduction of volume of water used
Reduction of final volume of waste
Reduction of total material input
Reduction of used volume of chemical substances subject to PRTR law

Scope
Global production bases

Standard
Compared with FY2014

Four manufacturing basesin JapanCompared with FY2013
Compared with FY2023

FY2030 Targets
(41)%
(71)%
(35)%
Under review*Four manufacturing bases in Japan: ISEKI-Matsuyama MFG. Co., Ltd., ISEKI-Kumamoto MFG. Co., Ltd., ISEKI-Niigata MFG. Co., Ltd., ISEKI-Shigenobu MFG. Co., Ltd.
*Please refer to the Company’s website for the historical results of environmental burden reduction by base.
*The FY2023 figures of used volume of chemical substances subject to PRTR law were calculated on substances that had been subject to control before the legal amendments.

TOPIC

Reduction of CO2 emissions through switching to LNG fuel andintroduction of cogeneration system

In September 2023, the fuels used for boilers and drying furnaces at ISEKI-Matsuyama MFG. Co., Ltd. were
switched from the heavy oil and butane gas to liquified natural gas (LNG), which emits limited CO2. ISEKIMatsuyama MFG. renewed the equipment to LNG boilers and built a cogeneration system to utilize waste
heat produced by a gas engine power generation facility that runs on LNG. This initiative is expected toenable ISEKI to reduce its annual CO2 emissions by approx. 1,400 tons. We plan to eventually switch thefuel for the equipment from LNG to carbon neutral methane (synthetic methane).

Mid- to long-term environmental targets
Mid- to long-term environmental targets
Reduction of CO2 emissions (Scope 1 & 2, compared with 2014)
Entire ISEKI Group
46% reduction by FY2030 (Total)

Toward the realization ofa sustainable society,including carbon neutrality

65% in 2025

┃ Reduction of CO2 emissions (Scope 1 & 2)
Standard−27.3%−33.4%−31.5%

Agriculture is closely linked to the natural benefits (ecological services) produced by biodiversity. ISEKI Group has set down guidelines and strives
to ensure that due consideration is paid to biodiversity in its business activities.

2050

Global production bases 46% reduction by FY2030 (Total)
Eco-product sales in Japan (%)

Initiatives for preservation of biodiversity

Environmental Vision

Backcasting┃ Eco-product ratio in domestic sales
Targets

Targets: global production bases
Results: global production bases
Targets: entire ISEKI Group
Results: entire ISEKI Group

Results

Case study

As one initiative for sustainable agriculture, ISEKI Group is working to promote and expand environmentallysound agriculture including organic farming. The Aigamo-Robo weeding robot (for details, please refer to P38)
suppresses the development and growth of weeds. This promises to reduce the use of herbicides, alleviating theburden on soil and water (i.e., contamination), thereby preserving ecological services.

−36.2%−46.0%

50.3%

51.5%

2022

2023

In March 2024, ISEKI received the highest rating as one of the “Companies doing environment-friendly businessactivities progressively,” 18 times in a row, by the Development Bank of Japan Inc., in receiving loans under the
DBJ Environmentally Rated Loan Program.

39.8%
Carbon neutral

2022

2023

2030

2050

2021

2024

2025

*Entire ISEKI Group: Consolidated business bases of ISEKI Group in Japan and overseas*Global production bases: ISEKI-Matsuyama MFG. Co., Ltd., ISEKI-Kumamoto MFG. Co., Ltd., ISEKI-Niigata MFG. Co., Ltd., ISEKI-Shigenobu MFG. Co., Ltd., PT. ISEKI INDONESIA*The CO2 emission factor changes every year based on the power source composition ratios of the individual electricity companies. (Emission factors for each electricity company [Ministry of the Environment] were used
as a reference.)*Please refer to the Company’s website for information about the eco-product certification system

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ISEKI Report 2024

Aigamo-Robo, an automatic weeding robot

Evaluation by third parties (DBJ Environmental Rating)

58.5%−40.6%

2014

Alleviation of burden on soil and water by reducing the use of herbicides

65.0%

52.0%

−44.9%

Biodiversity Guidelines https://www.iseki.co.jp/sustainability/environment/conservation/ (in Japanese)

Highlyevaluatedpoints❶ ISEKI is performing environmental management throughout the Group including Group
companies and supply chains.
❷ ISEKI is committing itself to contributing to the environment through the widespreaddissemination of products certified as eco-products.
❸ ISEKI is promoting initiatives aimed at solving agriculture-related issues through its businessfrom a mid- to long- term perspective.

2023

ISEKI Report 2024

62

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

Foundation for sustainable growth

Efforts to improve quality and customer satisfaction
Basic Policy (Fundamental concept)

Responses to and support for customers● ISEKI Group works to provide consistent product quality assurance from product planning to sales and after-sales service while reflecting the opinionsfrom the market in product development and improvement so as to offer products developed from the customers’ perspective in a timely manner.
● The Group takes all possible measures for quality control and makes prompt responses in good faith should any quality-related issues arise.

Product development reflecting the voices of customers

Product planning

Development design

Purchase andmanufacturing

Sales and services

Development and optimization of quality at each step

Customers

Grasping the required quality

Opinions, requests andemerging needs┃

Flow of how voices of customers are reflectedin product development

Incorporating into planning quality
Design quality and development of functions
Strengthen collaboration with Japaneseand overseas suppliers
Sales preparation evaluation
Verification and evaluation of product quality

Safe and high-quality
products and services

ISEKI Group has a seamless quality assurance system in place, where
quality assurance verification and evaluation are conducted (design isreviewed) in every step from product planning, development and design
to purchase, manufacturing, sales, and services with the aim of providing
products that are safe and respond to the trust placed by the customers.
In product development, ISEKI Group grasps the requirement
details based on the voice of customers (opinions, requests, andemerging needs) and utilizes them in product planning and build
them into functions in development and design, ultimately reflecting
them in purchase and manufacturing. In each step, the Group carries
out evaluation and verification of quality optimization from various
aspects. ISEKI Group also gathers customer opinions through service
activities to provide operating instructions upon delivery and inquireon the conditions of the delivered products and has built a mechanismthat feeds back those opinions for development and improvement,
reflecting those in developing safe, high-quality products.
At a meeting held by the Quality Improvement Committee every
month, ISEKI checks the status of activities for quality improvement,
reports if there has been a quality deficiency issue, and discusses
matters including measures against the deficiency and recurrence
prevention measures.

Evaluation of customer satisfaction

Quality assurance verification and evaluation (design review) at each step

We strive to respond to inquiries, queries, and comments from
customers correctly, promptly in a sincere manner (target of within
one business day), with the aim of enhancing customer satisfaction.
The valuable opinions from customers are fed back to senior
management and relevant departments and are used to develop
better products, as well as for sales and service activities.
In FY2023, the number of inquiries that came through theCompany’s website was 511. For matters that receive a large numberof inquiries, ISEKI Group discloses them on its website so that othercustomers can make best use of them.

┃ Contents of inquiries regarding products from customers (FY2023)
Other: 15%
Opinion and request:
1%
Document request:
15%

Number of inquiries
that came throughthe website:
511

Products andparts-related: 56%

Technical details:
13%

Development of human resources to improve quality and customer satisfaction
ISEKI Group conducts various education programs, with the aim of developing products and engaging in sales and service activities so that
customers can use ISEKI’s products safely and with peace of mind.

Early nurturing young designers
In the training focusing on the integrated system for automating rice
farming, young designers learn not only models they are responsible
for but also a series of farm work and machine operation processes
from soil maintenance to crop drying processing. This program
helps them to develop products from customers’ viewpoint.

Education to improve service skills
We hold service skills contests that our service staff nationwide areentitled to participate, in addition to encouraging them to obtaincertified qualifications. ISEKI works to improve the Group-wide
technological and service capabilities to provide services that
customers feel reassured.

Standardization of functions created from voices of female farmers
Approximately 40% of farm workers are women and theyplay important roles in farming and community activities.
ISEKI Group participates in the NOGYOJOSHI (female farmers)
project by the Ministry of Agriculture, Forestry and Fishery(MAFF) and has been developing agricultural machinery
products incorporating the opinions and ideas of female

Example of standardization: “Improvements in handle lever and its level”
TroublesAs a person of smallbuild, it is difficult forme to reach thecontrol lever.

farmers. The agricultural machinery incorporating the voices

Revamped functions adopted for“Chocopuchi” tiller
・Lengthened control lever・An increase in handle leveladjustment steps(

Redesigned to allow users to set
the level at one step lower thanthat of previous models

Horizontally deployed
to products of sameclass)
KCR series

of women is user-friendly for many users who have similar
troubles, and ISEKI has horizontally deployed some of thefunctions to its other products and standardized them.
In recent years, such products have attracted attention as
an example of gendered innovations.

The high level of handle
lever makes it hard for ashort person like me tooperate a machine.

Initiatives to ensure safe use
To ensure customers’ safe and comfortable machine operation, ISEKI Group works
to develop products with enhanced security and safety features.
In the service support, ISEKI Group provides operating instructions upon

The handle level can be adjusted
to any of four steps by the
one-touch simple lever.

The BF series of tractors equippedwith safety features such as a seatbelt reminder to urge an operator
to fasten the seat belt and asensing function to detect theoperator’s leaving off the seat andstop the power take-off (PTO)

Responses to quality defects
When an issue occurs in products, ISEKI promptly performs
inspections and repairs of the products giving the utmost priority tocustomers’ safety. When we launch a recall, we notify and report tothe concerned authorities*1 without delay, disclose information, andstrive to draw attention of and provide information to customers.
We share information on quality deficiencies internally in order toprevent the recurrence of the same deficiency.

┃ Number of recalls by fiscal year*2
Number of recalls

2019

2020

2021

2022

2023

2

0

4

1

1

*1 Ministry of Land, Infrastructure, Transport and Tourism, Ministry of Agriculture, Forestry and
Fisheries, Ministry of Economy, Trade and Industry, etc.
*2 Number of recalls filed with the Ministry of Land, Infrastructure, Transport and Tourism●Please find the link below to access important notifications of recalls:

https://www.iseki.co.jp/news/ (in Japanese)delivery of purchased products. In addition, we provide regular inspection andmaintenance services to reduce mechanical trouble during season and support
customers’ planned farm work.
In recent years, ISEKI Group has upgraded service maintenance facilities to
respond to larger-sized machinery associated with an increase in size of farmbusiness, striving to provide quick maintenance services.

63

ISEKI Report 2024

ISEKI Kyushu’s Miyakonojo Service
Workshop, where a facility forlarge-scale maintenance has been
installed

Customer satisfaction surveys
To offer products and services of higher quality, we conduct customer satisfaction surveys targeting customers in Japan. The CS Enhancement
Working Group promotes the activity. The survey results are reported to the ESG Committee, fed back to relevant departments, and utilized for thedevelopment of products and services.

ISEKI Report 2024

64

Introduction

ISEKI Group’s value creation aims

Foundation for sustainable growthBusiness strategies for value creation

Financial and non-financial data

Company information / Stock information

Foundation for sustainable growth

DX promotion

Initiatives for society
Basic Policy (Fundamental concept)

Business model transformation through DX┃ Overall picture of use of digital technology[Services catering to users’ wishes]● Use of data at agricultural
production sites● Use of data at sales floors

Sales andservices
Collected data

Smart agricultural machinery

By focusing on providing not only products, but also the best solutions
leveraging digital technologies—including information and know-how—
ISEKI Group is seeking to transform its business model from products toservices through DX.
According to statistics by the Ministry of Agriculture, Forestry and
Fisheries, the number of agricultural entities engaged in data-based
farming accounted for 26% of the total agricultural population in Japan in
2023, marking an increase of 2.8% from the previous year and increasing
year by year. ISEKI Group will continue contributing to improved agricultural
productivity by supplying smart agricultural machinery leveraging ICT
and robot technology as well as providing services that combine data
particularly obtained from smart agricultural machinery with its know-how
such as farm business technologies. In addition, we will continue to workon business reforms through digitalization in sales, service, development
and at production sites.

Data sharing and utilization

Development
andproduction[Product development using data]● Development of new functions
and quality analysis● Productivity improvement usingdevelopment data

*Ministry of Agriculture, Forestry and Fisheries, “2023 Survey on Movement of Agricultural Structure”

Reinforcement of sales by enhancing
efficiency of sales activities

Improvement of productivity throughdigitalization at production sites

We introduced i-Magazine, a support tool for centralized managementof data about products and parts and information including
quotations and sales journals, at wide-area sales companies in Japan topromptly provide solutions to customers’ issues and lead to work stylereforms for our employees by making sales activities more efficient.

We have visualized complicated operating instructions and automatedpart of inspection processes by introducing an electrical components
inspection system using digital technology. As a result, the numberof man-hours has decreased to less than one tenth of that consumed
in conventional processes while inspection items are increased tostabilize quality.

Local communities

To achieve its social responsibility, together with its suppliers, across the entire supply chain, ISEKI Group’s basic policy isthat “the relationship with suppliers should be fair and equitable and it will not abuse its privileged position in the trade
to give unfair and disadvantageous treatment to suppliers.”
The basic rules of ISEKI Group include “to actively contribute to local communities as a member responsible forsociety.” ISEKI Group works on contributing to society through its business activities aiming for the mid- to long-term
development of local communities.

Promotion of CSR procurement
In order to jointly promote, with its suppliers, procurement activities that take social responsibility into account, ISEKI Group has established
ISEKI Group CSR Procurement Guidelines, promoting CSR procurement. The Group checks the status of suppliers’ initiatives for CSR throughquestionnaire surveys, and reconfirms contents and make improvement proposals, etc. in relation to suppliers whom CSR risks are concernedfor. We work to strengthen cooperation with suppliers through actions such as explaining the state of ISEKI Group’s management and CSR
procurement at business report meetings and IR information meetings for vendors and holding superior company tours. In 2023, we held twobusiness report meetings and six training sessions for major suppliers to our factories in Japan to have opportunities for dialogue.
● Matters requested to suppliers❶ Customer satisfaction and quality assurance❷ Legal compliance and ethical corporate activities❸ Respect for human rights and creation of a healthy and safe workplace❹ Environmental preservation and green procurement❺ Co-existence with local communities and international cooperation❻ Management transparency and accountability

ISEKI Group focuses on the development of DX and digital talents based on the “policy for human resources development” to respond to labor
shortage and a rapid change in the market environment resulting from a decline in work force caused by the declining birthrate and aging population.
Our education is provided at three different levels that consist of the “basic level” aimed at improving and strengthening IT literacy, the “practicallevel” intended to enable trainees to drive DX promotion in their departments, and the “advanced level” at which trainees’ skill is further enhancedwith the creation of a new business in view.
In DX ISEKI Group aims for, it is essential that employees conversant with internal operations at actual sites play an active role. Througheducation at the basic level, we intend to enable our human resources to acquire the skills of solving issues and effectively performing operations
and services and strengthen their skill in using digital technologies. We then provide professional education at the practical and advanced levels tofurther promote the development of DX and digital talents.
Levels

Initiative undertaken in 2023

TargetResultRate of responses to CSR procurement
questionnaire surveys

80%

86%

For details, please refer to the Company’s website.

https://www.iseki.co.jp/sustainability/social/supplychain/ (in Japanese)

Initiatives for complying with the Act against Delay in Payment of Subcontract Proceeds,
etc. to Subcontractors and prevention of corruption
The Group provides continuous education and training
concerning the Act against Delay in Payment of Subcontract
Proceeds, etc. to Subcontractors (the “Subcontract Act”) andcompliance to ensure fair and equitable transactions with
suppliers. Regular reports on the status of our initiatives
for education and training are made from the Compliance
Working Group to the ESG Committee. In FY2023, ISEKI was
subject to no legal action under the Subcontract Act.

Development of DX and digital talents❶ Reaffirmation of what violates the Subcontract Act and compliance withrecurrence prevention measures❷ Explanation on the details of recurrence prevention measures; Ethical Hotline❸ Participation in an outside seminar on the Subcontract Act❹ Compliance education (Code of Ethical Behavior, Casebook of Scandals, etc.)❺ CSR education (CSR procurement guidelines, etc.)

Co-existence with local communities
ISEKI Group has proactively conducted social contribution activities to co-exist with local communities. For the development of local communities,
we are working to contribute to society through business activities.

Activities for contribution to the local
community and environment
We conduct cleaning activities in local communities and at
our offices as part of corporate citizen activities oriented to the
local community and environmental education for employees.

Education activities for next generation
We conduct food and agricultural education for the next
generation through activities such as holding drawing
contests, exhibiting products at food and agricultural events,and holding visiting lectures.

Activities for development of local communities
in collaboration with local governments
We conduct activities to contribute to the realization ofsustainable agriculture through initiatives in collaboration
with local governments and other partners throughout Japan.

Purposes

Advanced

Create new businesses

Practical

Practical

Drive DX promotion in eachdepartment

Basic

Basic

Improve and strengthen IT
literacy

Advanced

Suppliers

Beach cleaning using tractors and specially made
implements

Visiting lecture focusing on agriculture and SDGs

Partnership agreement with Uda City, Nara
Prefecture on creation of production areas for
agriculture in harmony with the environment

For details, please refer to the Company’s website. https://www.iseki.co.jp/sustainability/social/contribution/ (in Japanese)65

ISEKI Report 2024

ISEKI Report 2024

66

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

Foundation for sustainable growth

Message from an Outside Director

Further reinforcing governanceto boost corporate value
Atsushi Iwasaki
Outside Director● Chair of Board of Directors / Chair of Nomination andCompensation Committee / Chair of ESG Committee

I was appointed Chair of the Board of Directors in March 2022.
Despite this being the first time that an Outside Director had
assumed the chairmanship of the Company, the first thing we set
out to accomplish was to reform the Board of Directors.
Step one was to improve agenda setting. I felt that the Board
used to have a large number of items on its agenda and that thetime allotted for each individual item was insufficient. To ensuresufficient time could be dedicated to corporate strategy andother major directional matters, the monetary standard for the
regulations of authority pertaining to the Board of Directors wasraised significantly, and authority was transferred to the Directors’
Operation Committee. Since there was a risk, however, of missing
qualitatively important matters by taking only this action, I myself
observe all meetings of the Directors’ Operation Committee, andwhen I determine that a matter should be brought up for discussion
or reported to the Board, I give instruction as appropriate.
The second is to upgrade the advance explanation. A few days
prior to each Board of Directors meeting, we conduct a pre-briefing
for Outside Directors to ensure that they have a deep understandingof pertinent issues. In many cases, materials from Directors’
Operation Committee meetings were used to provide explanations.
In some instances, though, internal terminology was often used,and number of agenda items for┃ Breakdown
Board of Directors’ meeting■ Discussion ■ Individual and written reports■ Preliminary deliberations and strategy discussions

2

291

325

345

15
163

10
94

67

71

63

70

69

59

2019

2020

2021

2022

2023

ISEKI Report 2024

making it somewhat unclear what was to be discussed. We strive
to ensure that Board meetings operate efficiently by clarifying
issues during pre-briefings and directing additions to the executive
summaries as needed.
The third was the establishment of a new management
strategy discussion. There are many issues that Board members
should discuss, even if they do not actually make a Board meeting
agenda. The time saved by streamlining Board meetings is allocatedto discussions on management strategy. Intellectual property
strategy is one such example. During such management strategy
discussions, the Board does not record minutes and opinions arefreely and openly exchanged.

would you characterize the operation of
Q How
the Nomination and Compensation Committee?
The Company has implemented institutional reforms for both thenomination and compensation systems.
First, with respect to nominations, we have changed thecomposition of the Board of Directors, as approved at theordinary general meeting of shareholders in March 2024. In concreteterms, the number of Directors has been changed from six internal
Directors and three Outside Directors to five internal Directors
with the number of Outside Directors unchanged. Two female
Outside Directors—including one with corporate management
experience—have been appointed to ensure diversity. We
believe that this will allow for discussion from a perspective thatwasn’t possible previously.
Next, with respect to compensation, we revised the Directors’compensation system in March 2022. What had been essentiallyonly fixed compensation will now consist of basic compensation,
performance-linked evaluation compensation, and performancelinked stock-based compensation. The aim is to clearly link Directors
and Corporate Officers to business performance and shareholders’value, and to heighten their awareness of the contribution to
boosting corporate value.
In relation to performance-linked evaluation compensation,interviews with internal Directors by Outside Directors
were instituted as a regular practice. While we have frequent
opportunities to come in contact with executives who work at

The aforementioned major governance reform initiatives are but
one aspect of corporate management. As indicated in our basic
strategy, “enhancement of corporate value by strengthening profits
and reinforcing corporate governance,” it is of utmost importancefor a company to secure appropriate earnings. With regard to
this point, as an Outside Director, I regret that the Company is off
the track of the Mid-term Management Plan formulated in 2021.
Meanwhile, in a sense, I see this positively as a prime opportunity
for real change, and I intend to continue to make various proposals
from my perspective as an Outside Director. I view the following two
points as being of particular significance.
The first is a swift response to changes in the environment.
Our earnest corporate culture is one of our strengths, but we tend
to respond slowly to change. Delays in decision-making can befatal when attempting to expand overseas operations. We haveestablished a structure within which the Board of Directors spends
sufficient time discussing major directions and then delegatesauthority to the executive side once a determination has beenmade. I feel that, when matters are progressing as planned, reports
should be brief. When there are major changes in the environment,
however, the Board of Directors should return to the discussion andundertake bold changes in course.
The second is to further promote selection and concentration.
This is a theme that is typically incorporated into mid-term
management plans and is generally advocated by all companies,
but I’m afraid I must say that our company’s efforts are inadequate.
Decisions on management resource allocation should be based ontimely and appropriate analysis, because it is difficult to generateconsolidated profitability with an omnidirectional strategy that is
considerate of everyone in the Company.
I understand that it can be difficult to navigate the distance
between Outside Directors and the executive side. I believe,
however, that it is of utmost importance to maintain a moderate
sense of tension while communicating sufficiently. The year
2025 marks 100 years since the Company was founded. We arecommitted to making a contribution—however small—to ISEKI’s
sustainable development and to satisfying the expectations of our
stakeholders. We would be grateful for your continued support andencouragement.

┃ Composition of Directors’ compensation *Excluding Outside Directors■ Basic compensation ■ Performance-linked evaluation compensation■ Performance-linked stock-based compensation

Non-monetarycompensation

Monetary compensation
60%

tell us about your efforts to revitalize
Q Please
the Board of Directors.

are your expectations for the future of
Q Whatthe ISEKI Group?

the Tokyo headquarters, such opportunities are rare with thosestationed in Matsuyama, a key location of the ISEKI Group. As such,once each year, Outside Directors visit Matsuyama to meet with all
Directors who work there. The results of these interviews are thenfed back to the Nomination and Compensation Committee forassessment.
As you see, we have reformed our nomination and compensation
systems, but we are not finished yet. Based on the opinions of our
stakeholders, we will continue to make improvements.

30%

10%

share with us about your plans to reinforce
Q Please
ESG initiatives.
Following the developmental dissolution of the previous
Management Supervisory Committee and the Sustainability
Committee, the Company newly established the ESG Committee inAugust 2022 as an advisory body to the Board of Directors. I chair
the Committee, and its members include Directors and Corporate
Officers. Audit & Supervisory Board Members serve as observers.
The purpose of the Committee is to manage the organization
centrally by covering issues related to ESG in general, including
environment, human capital, governance, and compliance. Until
now, there have been a number of meeting bodies, such as theSustainability Committee and the Risk Management Control
Committee. These were formed in response to the needs of the
moment. With the establishment of the new ESG Committee, theprevious meeting bodies have been reorganized into working
groups (WGs) to promote ESG. There are currently nine WGs—
some permanent, such as compliance and environment, andsome temporary, such as the 100th anniversary WG. With regard tooperations, we are able to respond flexibly to occasional changes inthe environment. The most important discussions conducted by the
WGs are reported to the ESG Committee to share the information
among its members.

┃ History of governance reinforcement
2020

2021

Number of Outside Directors
Establishment of aninternal control system

2023

Nomination and Compensation Committee

Directors’ nominationand compensation
Improvement of
the effectiveness of
the Board of Directors

2022

Revision of the compensation system
2017 onwards: implementation of an effectiveness appraisal (using an external organization)
Revision of criteria for agenda item submission
Forum for exchange of opinions between
the president and Outside Directors

2016 onwards: 2/11

3/10

Management Supervisory Committee
Sustainability Committee

3/9
Integration into the ESG Committee

ISEKI Report 2024

68

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

Foundation for sustainable growth

Corporate governance
Basic Policy (Fundamental concept)

Main meeting bodies and committees

ISEKI has operated its management system with the purpose of swiftly and accurately responding to changes in the management environment
and maintaining fair management. In addition, achieving stable growth and improvement in corporate value over the medium to long term isthe top priority of our management. In order to maintain a positive relationship with our stakeholders such as shareholders, customers, suppliers,
local communities, and employees, we have endeavored to expand and improve our corporate governance. We acknowledge the importanceof establishing an internal system that provides stakeholders with important information in a timely and appropriate manner and reinforcing
corporate governance on a group-wide basis. Based on that recognition, we have established administrative rules for group companies and areporting structure to maintain fair business practices and share information.

┃ Corporate governance system

Overview

Appointment/Dismissal

Nomination andCompensation Committee
5 members
2 representative directors,
3 independent outside directors(

Consultation/
Recommendation

ESG Committee(

Audit & Supervisory Board Members
4 Audit & Supervisory Board Members
Incl. 3 outside Audit & Supervisory
Board Members()

Overview)

Audit

Independent Public
Accounting firm
Audit

Appointment/Dismissal/Supervision

Audit &
Supervisory
Board

Report/Cooperation

President and Representative Director

Directors’ Operation Committee
All Corporate Officers, appointed Deputy
Division Manager of each division, etc.

Report/Direction

Internal Audit Department

Overview

Compliance and Legal Affairs Department

Command/Supervision

Training/Cooperation

Each division/Associated companies
With regard to business execution, Corporate Officers steadily fulfill their responsibilities for the execution of business they have been made incharge of by the Board of Directors. In principle, the Directors’ Operation Committee, which consists of all Corporate Officers, Deputy Division
Managers designated by the chairperson, and others, meets twice a month. The Committee shares the latest information, and discusses andreceives reports on how we should develop our business, where risks exist, and how we can prevent the risks from manifesting. We thus strive forsound corporate management.

Nomination andCompensation
Committee

Ratio of Outside
Audit & Supervisory
Board Members

75%

HajimeOdagiri

Yukio
NawataMasayuki
Fukami

ShuichiJinno

KazuyaTani

AtsushiIwasakiShoji
TanakaKazuo
Nakayama

17/17

17/17

17/17

17/17

17/17

17/17

17/17

17/17

17/17

Overview

9/9

9/9

−

−

−

−

9/9

9/9

9/9

ESG Committee

12/12

12/12

12/12

12/12

12/12

12/12

12/12

12/12

12/12

Ratio ofIndependent
Outside Directors

60%

ISEKI has established the ESG Committee as a consultative body of the Board of Directors regarding ESG-related issues. It mainly discusses mattersrelated to the enhancement of ESG and submits recommendations to the Board of Directors. Audit & Supervisory Board Members are requested toattend the Committee meetings as observers. We ask for their input as necessary.

ESG Committee
Members

Nomination andCompensation Committee

Internal Directors (Representative Directors)........ 2
Independent Outside Directors ..................................... 3(Attendance)

Shiro
Tomiyasu

compensation of Directors, etc. The Committee deliberates and reports to the Board of Directors on compensation of Directors and Corporate Officers,in addition to matters on nominations, such as proposals of agenda items of general shareholders’ meetings regarding appointment and dismissal of
Directors, selection and removal of Corporate Officers, and appointment and dismissal of Representative Directors.

Chairperson: Independent Outside Director
Members

Attendance to the Board of Directors and other Committee meetings (January to December 2023)

ISEKI Report 2024

Internal Audit & Supervisory Board Member........ 1

ISEKI has established the Nomination and Compensation Committee as a consultative body of the Board of Directors regarding nomination andSubmission of important matters/Report

69

38%

The Audit & Supervisory Board consists of four Audit & Supervisory Board Members, of which three are Outside Audit & Supervisory Board Members.
Audit & Supervisory Board Members attend the Board of Directors meetings and other important meeting bodies. They decide audit policies
independently and carry out audits of our offices and Group companies in cooperation with the internal audit department and the Independent Public
Accounting firm. In addition, they monitor the management and ensure the effectiveness of corporate governance by strictly checking important
agenda items at Directors’ Operation Committee and other meetings and the status of business execution by Directors.

Outside Audit & Supervisory Board Members ...... 3)

Corporate Officers

Board of Directors

Internal Directors .................................................................. 5

Ratio ofIndependent
Outside Directors

Chair: Internal Audit & Supervisory Board Member
Members(

The Board of Directors makes decisions on basic managerial matters, as well as matters specified in laws and regulations and the Articles ofIncorporation. To make prompt decisions, regular Board of Directors meetings are held once a month and extraordinary Board of Directors meetings areheld as necessary.

Audit & Supervisory
Board

Audit

(Business execution system)

Independent external Chair/Chairperson

Independent Outside Directors ..................................... 3(Cooperation)

Directors
Consultation/
Recommendation

Members:
Directors
Corporate Officers

Members

Audit

8 directors
Incl. 3 independent
outside directors

External (incl. Independent)

Appointment/Dismissal

Appointment/Dismissal

Board of Directors)

Internal Chair/Chairperson

Chair: Independent Outside Director

Board of Directors

General shareholders’ meeting

Internal

Chairperson: Independent Outside Director

Directors and Corporate Officers

ISEKI Report 2024

70

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

Foundation for sustainable growth

Corporate governanceDirectors’ compensation system

Composition of the Board of Directors, and Policy on the Appointment of Directors, etc.

Since FY2022, the compensation for Directors of the Company consists of basic compensation (money), performance-linked evaluationcompensation (money), and newly introduced performance-linked stock-based compensation using trust. The overview of the Directors’compensation system after the revision is as follows.

The Company’s Board of Directors is composed of Directors with a diversity of different fields of specialization and experience. Proposals forelection and dismissal of Directors to the General Meeting of Shareholders and selection and removal of Representative Directors are considered inaccordance with the following criteria.

Basic Policy (Fundamental concept)
Toward the realization of ISEKI’s goals/basic business philosophy of contributing to the creation of the prosperous and sustainable society throughproviding innovative products and higher quality of services to the customers, the management executives are responsible for “transforming” ISEKI
Group, leading it to sustainable growth, and striving to improve its corporate value in the medium and long term. To fulfill such responsibilities, thebasic policy of our Directors’ compensation is to adopt a system which can make the compensation function as a sound incentive, making it clearthat compensation of management executives shall be linked to business results including shareholders’ value and medium- and long-term results.

Method ofprovision● Has appropriate personalities as Director● Has outstanding leadership● Has abundant capability, knowledge, and experience in the specialized field● Appointment is considered in a comprehensive manner taking into account the Company’s situation and governance structure at that time

❷ Criteria for the selection of Representative Directors┃ Overview of compensation

Compensation❶ Criteria for the appointment of Directors● Fulfills the appointment criteria for Directors● Has a company-wide perspective as well as abundant capability, knowledge, and experience in corporate management

Percentage in totalcompensation(rough estimate)(Internal)
Directors● Experience in the overseas business is considered

Details

OutsideDirectors● Appointment is considered in a comprehensive manner taking into account the Company’s situation and governance structure at that time

❸ Criteria for dismissal of Directors and the removal of Representative Directors● Upon committing an act that violates laws, regulations, and the Articles of Incorporation● When acknowledged that it is difficult to perform duties due to deteriorating health

Basic compensation

Performance-linked
evaluation compensation

Performance-linked
stock-based
compensation

Money

Money

Shares of theCompany

60%

30%

10%

100%

Monthly pay an amount decided in consideration of job responsibility, etc. ofeach Director.

―

Annually pay an amount decided according to a level of performanceindicator for each business year, as well as a degree of achievement of
indices/targets, etc. set in advance for individual Directors based on
management issues.

―Compensation based on a stock delivery trust system
Deliver shares of the Company, in principle, upon Director’s retirement
according to the number of points awarded to each Director each business
year, based on the share delivery rules provided by the Board of Directors.
A certain ratio of shares of the Company are sold in cash and provided as
money.

The level of total compensation is determined in consideration of levels in the industry or other similar-sized companies.
A total amount of the basic compensation and the performance-linked evaluation compensation shall be within the range resolved at the 98th Ordinary General Meeting of
Shareholders held on March 30, 2022 (no more than 360 million yen per year).
The upper limit of the amount of the performance-linked stock-based compensation shall be within the range resolved at the 98th Ordinary General Meeting of Shareholders
held on March 30, 2022 (148 million yen, maximum amount of total cash to be contributed by the Company as the fund to acquire shares of the Company necessary to deliver to
Directors (excluding Outside Directors) during the coverage period of four years from the business year ended December 31, 2022 to the business year ending December 31, 2025).

The compensation for individual Directors shall be finalized and resolved at a Board of Directors meeting based on reports from the Nomination
and Compensation Committee after deliberation. The Committee is chaired by an Independent Outside Director and mainly composed ofIndependent Outside Directors. When details of compensation, etc. for individual Directors are determined, the Nomination and Compensation
Committee considers multiple matters including consistency with the decision policy. Therefore, the Board of Directors basically respects thereport and deems that the details are consistent with the decision policy.

Audit & Supervisory Board Members’ compensation system (Reference)
The upper limit of Audit & Supervisory Board Members’ compensation was resolved to be no more than 8 million yen per month at the 85th
Ordinary General Meeting of Shareholders held on June 26, 2009. The compensation for individual Audit & Supervisory Board Members isdetermined through discussion among Audit & Supervisory Board Members.

● When acknowledged to have significantly damaged the Company’s corporate value● When acknowledged to have lost the capabilities and quality stipulated by the appointment or selection criteria

The appointment of Corporate Officers is based on comprehensive consideration from the perspective of whether they will be able to execute
management and business duties accurately and responsibly in accordance with the basic management policy decided by the Board of Directors.
Proposals to the General Meeting of Shareholders regarding the election of Audit & Supervisory Board Members are based on comprehensive
consideration from the perspectives of whether candidates possess knowledge and experience in finance, accounting, and their fields ofspecialization, and whether they understand all aspects of the Company’s business.
Proposals to the General Meeting of Shareholders regarding the election of Outside Directors and Outside Audit & Supervisory Board Members
are based on comprehensive consideration from the perspectives of whether candidates possess abundant knowledge and experience in theirrespective fields, and whether they will be able to utilize this knowledge and experience to strengthen the Company’s supervisory function, in
addition to the independence requirements stipulated under the Companies Act. In addition to the independence criteria prescribed by the Tokyo
Stock Exchange, the Company requires Outside Directors and Outside Audit & Supervisory Board Members to satisfy its Independence Standards
for Outside Directors/Audit & Supervisory Board Members. In addition, the Company selects candidates for the position of Outside Director or
Outside Audit & Supervisory Board Member who will be able to accurately advise and supervise the Company’s management, with an emphasis
on a high degree of specialization and abundant experience.

Cross-Shareholdings
The Company believes that maintaining and strengthening long-term, stable business relationships with trading partners through the process ofmanufacturing and selling agricultural machinery leads to the enhancement of the Company’s medium- to long-term corporate value and is crucial
to stably deliver “products that satisfy customers” as an integrated manufacturer specializing in agricultural machinery. For this reason, the Company
holds shares in other companies where deemed necessary for the purpose of contributing to the enhancement of the Company’s medium- to longterm corporate value through the maintenance and reinforcement of harmonious business relationships vital for the Company’s business activities.
The significance of each shareholding, in terms of factors such as its benefits and┃ Changes in cross-shareholdings (listed stock)risks, and with reference to the cost of capital, is validated each year by the Boardof Directors. Where, as a result of this validation, it is deemed that a shareholding■ Monetary amount of shareholdings [on market value basis]* (Millions of yen)
Number of stocks held
is not meaningful because it cannot be expected to contribute to enhancing the23
22
Company’s medium- to long-term corporate value, the sale of that shareholding will
20
20
19
be considered.

Criteria for the exercise of voting rights
The Company makes comprehensive decisions regarding the exercise of voting rights
associated with each shareholding, based not only on the management policy andbusiness status of the issuing company and whether exercising voting rights will leadto the enhancement of the Company’s medium- to long-term corporate value, but also
through dialogue and other communication with the issuing company, as necessary,concerning whether this would contribute to the common good of shareholders.

71

ISEKI Report 2024

6,425
4,968

2019

4,327

2020

4,774

5,047

2021

2022

2023

*The monetary amount of shareholdings increased due to an increase in share prices

ISEKI Report 2024

72

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

Foundation for sustainable growth

Messages from newly appointed Outside Directors

Corporate governance

Toward the improvement of the effectiveness of the Board of Directors
To further facilitate the roles of the Board of Directors, ISEKI has implemented a self-appraisal and analysis program for individual senior officers
since 2017. The appraisal is done through a third-party organization, adopting methods for canvassing personalized opinions with individualquestionnaires and individual interviews for all Directors and Audit & Supervisory Board Members.

TargetMain items for appraisal

All Directors and Audit & Supervisory Board
Members● Members and operation of and discussions at Board of Directors meetings● Monitoring function for Board of Directors meetings● Support system for Directors and Audit & Supervisory Board Members

Methodology of questionnaire● Training● Dialogue with shareholders (investors)

Anonymous survey● Own efforts and review

Methodology of interview

Efforts for analysis of results and solution of issues

Individual interview to targeted subjects by athird-party organization● Analysis of the results of questionnaires and interviews at a third-party

organization● Debriefing sessions organized by a third-party organization● Implementation of initiatives toward a solution┃ (Reference) Results of questionnaire
Please see below for some of the results of FY2023 questionnaire.
The questionnaire about “members of Board of Directors meetings” was given in the form of an open-ended question. “Operation of Board of
Directors meetings” and “discussions at Board of Directors meetings” were assessed on a scale of one to five.
YoY change

Members ofBoard of Directors
meetings(open-ended question)● The appointment of Directors who have experience in manufacturing department is desired● The development and appointment/promotion of female talents to Directors or

managers are required● Timing for submission of matters to and the number of items to be deliberated at the

Operation ofBoard of Directors
meetings

Board of Directors● Timing for advance briefings on matters to be deliberated at Board of Directors meetings,
and contents of the briefings● Quality of presentations at Board of Directors meetings● Setting of KPIs so as to enable the Company to achieve sustainable growth in financial

Discussions at
Board of Directors
meetings

and non-financial aspects● A regular review of business portfolio from the perspective of sustained profitability andcapital cost
● Discussions about the contents and quality of information to be disclosed, methods of

disclosure, etc. toward the enhancement of information disclosure

Initiatives to support Outside Directors and Outside Audit & Supervisory Board Members
The following initiatives are implemented to support Outside Directors and Outside Audit & Supervisory Board Members.

73

Distribution of materials andadvance briefing

We distribute materials for Board of Directors meetings in advance and hold an advancebriefing on important agenda items to be brought up for discussion to the Board of Directors.

Briefing on businesses and office tour for
newly appointed Outside Directors andOutside Audit & Supervisory Board Members

We provide newly appointed Outside Directors and Outside Audit & Supervisory Board
Members with an opportunity of a briefing on ISEKI Group’s businesses and a tour of an
office other than the Group’s Tokyo Headquarters after they assume their offices.

ISEKI Report 2024

My name is Eiko Kisogawa, and I have been newly appointed as an Outside Director. I previously
worked in the life insurance industry, where I was involved in operational reforms based on
customer feedback, executing system projects, establishing processes related to risk management,
and overall corporate management. Though we are in different industries, I believe that thefundamentals of business are the same: how to capitalize on customers’ requests or potential
needs and transform them into products or services, and how to make new proposals beyond theimagination of customers. My intent is to leverage my experience and information to the fullest.
Looking at Japan’s business environment, there are quite a few issues, including climatechange and economic turmoil sparked by wars in other countries. In resolving these global issues,
Japanese companies are expected to play a key role. Naturally, it is important that we continue
to be staying close to our customers from a global perspective and be a company that resolves
social issues, and further increase our significance of existence. As an Outside Director, I will work
to ensure a transparent, rational management decision-making process through multilateral
discussions from an independent, objective standpoint. At the same time, I intend to heighten theeffectiveness of the Board of Directors by confirming the major direction of our corporate strategy
to achieve our unique value creation, and by supervising the execution of the Board’s duties. To
achieve sustainable growth and raise our corporate value over the medium- to long-term, I am
committed to building a more robust management structure based on the corporate philosophy
and corporate culture that we have held in high regard since the Company was founded.

Eiko Kisogawa Outside Director

Key opinions, questions where assessment has been changed● The number of the Board of Directors is large―

Generating singular value through highly transparent,
multifaceted management decisions

As an attorney, a woman, and an “outsider”
My name is Fumiko Kishimoto, and I have recently been appointed as an Outside Director. During
my 24 years as an attorney, I have resolved various disputes—mostly civil cases—ranging frominheritance-related matters for individual clients to legal matters for small and medium-sizedcompanies. Five or so years ago, I began serving as an outside director and as an audit andsupervisory board member for other companies, and am learning about corporate management
in a more earnest way.
Given my background, I realize that what is expected of me as an Outside Director is a
professional perspective on legal matters as an attorney, a female outlook with regard to diversity,and a layperson’s viewpoint—in the most positive sense—in our area of business.
While continuing to work toward a deeper understanding of our company and industry, I
will first sincerely acknowledge the current situation to strengthen the ISEKI Group’s corporate
governance and compliance. I will then determine what is necessary for the Company to achievesustainable growth, and identify current issues. I believe that my role is to monitor risks andopportunities that I am able to see from my perch as an outsider to the Company and the industry.
If I have any questions, I do not hesitate to raise them, and I believe that such efforts will lead to amore active Board of Directors and management with a sense of urgency.
I will do everything possible to make a positive impact on this company with its rich history
while considering the expectations of our shareholders, investors, and other stakeholders, and I
look forward to your continued support.

Fumiko Kishimoto Outside Director

ISEKI Report 2024

74

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

Foundation for sustainable growth

List of officers

Masayuki
Fukami
Director & SeniorCorporate Officer

Shuichi
Jinno
Director & SeniorCorporate Officer

KazuyaTani
Director& SeniorCorporate Officer

Apr. 1992 Joined ISEKI & CO., LTD.
Apr. 2009 Representative Director & President, N. V. ISEKI EUROPE S. A.
Jan. 2015 Representative Director & President, ISEKI France S.A.S.
Oct. 2017 General Manager, Overseas Business Control Department andGeneral Manager, Europe Sales & Marketing Department of theCompany
Jan. 2020 Corporate Officer of the Company
General Division Manager, Overseas Business Division (to present)
Mar. 2020 Director & Corporate Officer of the Company
Jan. 2024 Director & Senior Corporate Officer of the Company (to present)

Independent

Eiko
Kisogawa
Director[Significant concurrent
position]

●

●

●

●

●

●

MARUBUNCORPORATION
Outside Director(Member of the Audit &Supervisory Committee)
OutsideIndependent

FumikoKishimotoDirector●●●[Significant concurrent
positions]●

Attorney
Outside Director(Audit and Supervisory
Committee Member),
NIHON DENGI CO., LTD.
OutsideApr. 1998 Entered the Legal Training and Research Institute, Supreme Court
of JapanMar. 2000 Graduated from the Legal Training and Research Institute, Supreme
Court of Japan
Apr. 2000 Registered as an attorney (Joined Tokyo Bar Association)
Joined Azusa Sogo Law OfficeJun. 2019 Outside Director (Audit and Supervisory Committee Member),
NIHON DENGI CO., LTD. (to present)
Sep. 2021 Representative, Azusa Sogo Law Office (to present)
Mar. 2024 Director of the Company (to present)

●

●

●

●

●

IT/ Data●●

Personnel

Apr. 1984 Joined American Family Life Assurance Company of Columbus(currently Aflac Life Insurance Japan Ltd.)
Apr. 2004 General Manager of Operations Division of American Family Life
Assurance Company of Columbus
Jan. 2010 General Manager of Administration Planning Department 2 ofAmerican Family Life Assurance Company of Columbus
Jan. 2011 General Manager of Policy Maintenance Department of American
Family Life Assurance Company of Columbus
Jan. 2012 Vice President of Policy Maintenance Department, Premium
Accounting Department 1 and Premium Accounting Department 2of American Family Life Assurance Company of Columbus
Jan. 2013 Vice President of Corporate Value Enhancement Program ofAmerican Family Life Assurance Company of Columbus
Jan. 2016 President Chief Executive Officer of Aflac Payment Services Co., Ltd.
Jan. 2018 Vice President of Administration Management Department andCustomer Services Promotion Department of American Family Life
Assurance Company of Columbus
Jan. 2021 Corporate Adviser of Aflac Life Insurance Japan Ltd.
Jun. 2023 Outside Director (Member of the Audit & Supervisory Committee),
MARUBUN CORPORATION (to present)
Mar. 2024 Director of the Company (to present)

Development andmanufacturing●

Overseas businesses●

Sales/
Marketing

IT/ Data

ESG/
Sustainability

Compliance/
Legal affairs/ Audit

Development andmanufacturing

Overseas businesses

Personnel

Certified public
accountant
OutsideApr. 1985 Joined ISEKI & CO., LTD.
Dec. 2004 General Manager, Kanto Sales Department of the Company
Jan. 2007 Representative Director & President, Ibaraki ISEKI Sales Co., Ltd.
Dec. 2008 Executive Managing Director, ISEKI Chugoku Co., Ltd.
Jan. 2011 Executive Managing Director, ISEKI Kyushu Co., Ltd.
Dec. 2011 Representative Director & President, ISEKI Kyushu Co., Ltd.
Jul. 2015 Corporate Officer of the Company
Jan. 2019 Senior Corporate Officer of the Company
Mar. 2019 Director & Senior Corporate Officer of the Company (to present)
Apr. 2019 In charge of Personnel Department of the Company
Deputy in charge of Corporate Planning Department and Public &Investor Relations Section
Deputy in charge of Compliance (to present)
Jan. 2022 In charge of Personnel, Corporate Planning, and Investor Relationsof the Company (to present)
Apr. 1985 Joined ISEKI & CO., LTD.
Apr. 2008 General Manager, Office Automation Department of the Company
Dec. 2011 General Manager, Public & Investor Relations Section of theCompany
Oct. 2013 General Manager, Personnel Department of the Company
Jun. 2015 Director & Corporate Officer of the Company
In charge of Personnel Department
In charge of ComplianceMar. 2016 In charge of Office Automation Department of the Company
Jan. 2017 Deputy in charge of Compliance of the Company
Dec. 2018 In charge of IT Planning Department of the Company
Apr. 2019 Deputy in charge of Financial Department of the Company
Jan. 2022 In charge of Finance, IT Planning, Operation Efficiency
Improvement of the Company
Aug. 2022 In charge of Finance, IT Planning of the Company (to present)
Jan. 2023 Director & Senior Corporate Officer of the Company (to present)●

ESG/
Sustainability

Representative
Director & SeniorCorporate Executive
Officer

Apr. 1987 Joined ISEKI & CO., LTD.
Nov. 2008 General Manager, Vegetable Machinery Engineering Department of
the Company
Dec. 2010 Senior General Manager, Agri-Implements Department of theCompany
Jun. 2014 President, Iseki-Changzhou Mfg. Co., Ltd. Sales Branch OfficeJan. 2016 Corporate Officer and Deputy Division Manager, Business Divisionof the Company
Mar. 2016 Representative Director & President, ISEKI Hokkaido Co., Ltd.
Jul. 2018 Chairman & President, Dongfeng Iseki Agricultural Machinery Co., Ltd.
Jan. 2019 Senior Corporate Officer of the Company
Jan. 2020 General Division Manager, Development & Production Division of
the Company
Mar. 2020 Director & Senior Corporate Officer of the Company
Mar. 2022 Representative Director & Senior Corporate Executive Officer of theCompany (to present)
Nov. 2023 Leader of “Project Z” of the Company (to present)[Significant concurrent
position]

Compliance/
Legal affairs/ Audit

HajimeOdagiri

Director●

Nov. 1990 Joined Century Audit Corporation(currently Ernst & Young ShinNihon LLC)
Mar. 1991 Registered as a certified public accountant
Mar. 1997 Registered as a real estate appraiser
Aug. 2005 Retired from Shin Nihon & Co.
(currently Ernst & Young ShinNihon LLC)
Sep. 2005 President, Iwasaki Certified Public Accountant Office (to present)
Jun. 2013 Director of the Company (to present)
Jun. 2015 Outside Audit & Supervisory Board Member, NH Foods Ltd.
Jun. 2016 Outside Audit & Supervisory Board Member, OLYMPUS
CORPORATION
Jun. 2019 Outside Director, NH Foods Ltd.
Outside Director, OLYMPUS CORPORATION

Outside Directors
AtsushiIwasaki●Finance

Representative
Director
President & Executive
Officer

Apr. 1980 Joined The Dai-ichi Kangyo Bank, Limited(currently Mizuho Bank, Ltd.)
Apr. 2011 Managing Executive Officer, Mizuho Bank, Ltd.
Jun. 2015 Advisor, Chuo Fudosan Co., Ltd.
Jan. 2016 Advisor of the Company
Mar. 2016 Director & Senior Corporate Executive Officer of the Company
Assistant to President
Responsible for Corporate Planning Department
Responsible for Public & Investor Relations Section
Responsible for Personnel Department
In charge of Financial Department
Jan. 2017 Director & Vice President Executive Officer of the Company
In charge of Corporate Planning Department and Public & Investor
Relations Section
Mar. 2019 Representative Director, President & Executive Officer of theCompany (to present)

Corporate management/
Management strategy

Shiro
Tomiyasu

Sales/
MarketingDirectors

Finance

Corporate management/
Management strategy(As of March 31, 2024)●

Independent

Audit & Supervisory Board Members
●

●

●

●

Masato Machida

Yasuji Fujita

Full-time Audit & Supervisory Board Member

Full-time Audit & Supervisory Board Member

Reason for appointment●●

He has advanced knowledge, having experienced in various fields of corporate
planning, information systems, development and manufacturing. Accordingly,
as the Company believed that he would appropriately audit the performance of
duties by Directors, he has been appointed as Audit & Supervisory Board Member.

Reason for appointment

Kentaro Morimoto

Mami Taira

OutsideOutsideHe has extensive experience and a wide range of insight including expertisein finance cultivated through his many years of work at a financial institution.
Accordingly, as the Company believed that he would appropriately audit theperformance of duties by Directors, he has been appointed as Outside Audit &Supervisory Board Member.
OutsideIndependent

Full-time Audit & Supervisory Board Member

Audit & Supervisory Board Member

Reason for appointment

Reason for appointment

He has a wide range of insight, including extensive experience and expertise in finance and agriculture, forestry and fisheries in general, cultivated through his many
years of work at a financial institution. Accordingly, as the Company believed that
he would appropriately audit the performance of duties by Directors, he has been
appointed as Outside Audit & Supervisory Board Member.

She has specialized knowledge and extensive experience related to accounting
and tax practices as a certified public accountant and certified tax accountant.
Accordingly, as the Company believed that she would appropriately audit theperformance of duties by Directors, she has been appointed as Outside Audit &Supervisory Board Member.
[Significant concurrent positions]Certified public accountant, Certified tax accountant, Outside Director (Audit andSupervisory Committee Member), Suzuden Corporation and External Director(Audit & Supervisory Committee Member), FOOD & LIFE COMPANIES LTD.

75

ISEKI Report 2024

ISEKI Report 2024

76

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

Foundation for sustainable growth

Dialogue with shareholders and investors
Opportunities for dialogue and ISEKI’s coordinators

Basic Policy (Fundamental concept)● The Company believes that, in achieving sustainable growth and enhancing its corporate value in the medium to long term, an important
initiative is to build relationships of trust with shareholders and investors by explaining its management policies in detail and engaging inconstructive dialogue with them. Dialogue with shareholders and investors is managed by officers in charge of business administration
departments (the Public & Investor Relations Section, Corporate Planning Department, Financial Department, and General Affairs Department).
These officers and departments actively engage with stakeholders through various opportunities including quarterly briefing sessions. Opinions
obtained from dialogues are used to enhance information disclosures, fed back to senior management, and utilized for our business strategies. We
believe that a series of these steps are essential for sustainable growth and the enhancement of our corporate value in the medium to long term.
● Our basic policy in information disclosure is to “disclose information properly to fulfill social accountability” and “endeavor to promptly disclose
accurate information required from inside or outside of the Group in recognition of the importance of social accountability and thereby
become a company with transparency.” To win fair evaluation from all our stakeholders and ensure management transparency, ISEKI Group
strives for fair, equitable, timely, and appropriate information disclosure keeping with the purpose and meaning of fair disclosure rules.

Dialogue withshareholders andinvestors

Feedback to senior
management

Types of dialogue

All Directors and Audit & Supervisory Board Members

Once

Quarterly briefing sessions

All executive directors

4 timesEnhancement ofcorporate value

Status of dialogue with stakeholders (FY2023)
Parties responsible
for ESG
8.3%

Sell-side
47.2%

Fund managers
27.8%● Online or hybrid of online and face-to-face

Buy-side
52.8%

Analysts
63.9%

Main themes and matters of interest

Performancerelated matters
Management
strategies● Demand trends in businesses

capital efficiency● Management system for business portfolio

77

ISEKI Report 2024

ESG-related
matters● Mid-term measures and progress● Management conscious of capital cost and● Briefing presentation materials and the substance ofquestions and answers posted on the Company’s website
Individual meetings

Director in charge of investor relations, Director in chargeof Finance, General Manager of Public & Investor Relations
Section, and General Manager of Financial Dept.

21 times

Presentation meeting

President and Representative Director, Director in charge ofinvestor relations, and others(held in 2022)

Facility tours/New product presentations

President and Representative Director, Director in charge ofinvestor relations, and others

2 timesFace-to-face

Facility tour for individual shareholders

President and Representative Director, Director in charge ofgeneral affairs, and others

Once

Face-to-face

Respond to inquiries

IR and general affairs departments

As required

Dialogue through the website, phone, email, etc.

(Reference information) Interviews withinstitutional investors and securities analysts

Conducted by an external contractor

5 times

OnlineOnline or face-to-face

Online

ISEKI conducts facility tour for individual shareholders

Share price andshareholder
returnOpinions from shareholders and investors, their interests, and matters of concern learned through dialogue are reported as necessary to the
management executives in a timely manner under the supervision of Public & Investor Relations Section. Information relating to the Company’sbusiness is fed back to related departments as needed to have it reflected in and used for improvement of business activities.
Details

Areas ofresponsibility

Sell-side/
Buy-side● ISEKI Group’s strengths

Face-to-face

Feedback to management executives

Attributes of stakeholders who participated in dialogue

Japan 88.9%

Method of meetings, sessions, etc.

On November 18, 2023, ISEKI conducted a facility tour for individual shareholders at its
Tsukubamirai Office, with the aim of letting its shareholders deepen the understanding of theCompany’s business activities and initiatives.
With 55 shareholders joining the facility tour, the Company explained an overview of ISEKI
Group and its initiatives aimed at promoting environmentally sound agriculture and smart
agriculture. The shareholders watched a demonstration of a robot rice transplanter in addition
to a tour of the exhibition hall at the Dream Agricultural Research Institute and a section formachines sold overseas and vegetable farming machinery.

Reflection inbusiness plans

Japan/Overseas

2023 results

Ordinary general meeting of shareholders

TOPIC

Overseas 11.1%

ISEKI’s coordinators● Status of response to climate change● Status of initiatives related to human capital● Members of Board of Directors● Issues and responses related to share priceand PBR● Direction of shareholder return policy

Individual meetings with investors or analysts
Opinions, requests, etc. from shareholders andinvestors
Indicators related to shares and share priceinformation
Reports on IR activities
Other reports (related to shareholders andinvestors)

Method of reporting

Frequency

TargetAn overview of the interview is reported

Each time

All Directors

Information including an overview of the interviews and the status of shareprice is reported at a meeting of the Public Relations Liaison Committee

Monthly

Directors’ Operation Committee members

Information including an overview of the interviews and the status of shareprice is reported at a meeting of the Board of Directors

Every quarter

Members of the Board of Directors

Opinions from shareholders and investors and topics of great interest arereported at a top executive meeting

Monthly

President and Representative Director, andDirector in charge of investor relations

Information including shareholder composition and trends in shareholdings
by institutional investors and others are reported as necessary

Each time

Directors’ Operation Committee members,
and others

Example that ISEKI incorporated shareholder views learned from dialogues
Opinions, requests, etc.

Revisions or improvements in items
concerning human rights and conflictminerals in the CSR Procurement
Guidelines

Response by ISEKI

We revised the CSR Procurement Guidelines in November 2021. The guidelines clearly indicate
responsible mineral procurement and the prohibition of forced labor and child labor.
ISEKI Group’s CSR Procurement Guidelines

https://www.iseki.co.jp/global/english/sustainability/social/

ISEKI Report 2024

78

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

Foundation for sustainable growth

Risk management
Basic Policy (Fundamental concept)

Risk item● Our risk management regulations define factors potentially leading to physical, economic and reputational losses and disadvantages as risks.
The aim of our risk management is to prevent risks from manifesting and minimize losses, and to contribute to smooth business operations,soundness of assets and maintenance of corporate credit.
● We identify and evaluate risks surrounding the Group and take appropriate measures, such as putting in place management standards andregulations, as well as monitoring and response mechanisms.

Risk management system

Risk mapping

The Risk Management Working Group (WG) periodically identifies and evaluatesrisks, reevaluates magnitude of damage and frequency of occurrence, and examines
countermeasures to foreseeable risks, in accordance with the risk management
regulations to minimize the risk of causing damage or disadvantage to ISEKI Group
under the supervision of Corporate Planning Department.

ISEKI Group manages risks by dividing them bycause, either external factors or internal factors,
and then classifying by the magnitude of damage
when risks become obvious and the potential
frequency of occurrence. Note that the risk
mapping chart indicates the maximum risks.

┃ Risk management system diagram
Recognize new risks and increase risk sensitivity by promoting risk
management across the Company, and collecting and sharing
information necessary for risk management[Matters to be deliberated]

Identify, analyze, and evaluate risks, and consider countermeasures
Report the results to the ESG Committee[Members]● Managers in charge

General Manager of Corporate Planning Dept.

● Members

General Manager of Corporate Planning Dept., General Manager of
Public & Investor Relations Section, General Manager of Internal
Audit Dept., General Manager of Financial Dept., General Manager
of Personnel Dept.,
General Manager of Compliance and Legal Affairs Dept.,
General Manager of General Affairs Dept., General Manager of IT
Planning Dept., General Manager of Administrative Dept. ofDevelopment & Production Division, General Manager of Sales
Planning & Administrative Dept., and General Manager of Corporate
Business Control Dept. of Overseas Business Division● Secretariat
Corporate Planning Department

4

13

17

11
Information sharing
Discussion of countermeasures

Identification of risks
Evaluation of responses to risks

1

2

3

8 10

1

5

6

8 15

7

9 12 13 16

12
4

3

A price hike of raw materials,
difficulty in procurement, andconfusion in the supply chain

4

5

79

Dependency on specificcustomers or suppliersCompetition with othercompanies

ISEKI Report 2024

9

Government regulations onenvironmental issues, etc., andoccurrence of related difficulties• Aging of farm workers• Decreasing number of farm households due to labor shortage• Weakening of purchasing sentiment due to price volatility of agricultural
products● Reduced demand for agricultural machinery due to weak economy

Frequency

High

Risks caused by internal factors

Decrease

Response to risks● Build sales network and formulate strategies while anticipating changes in the market• Divide prefecture-based sales areas into blocks and optimally allocate business bases and personnel
within the blocks• Establish core bases within the blocks to deal with large-scale farmers● Keep pace with the government’s Strategy for Sustainable Food Systems, MIDORI• Propose solutions for farm business, as well as products that contribute to the introduction oforganic agriculture● Risks associated with procurement from suppliers● Pass on soaring raw material prices to product prices● Use multiple suppliers in both procurement and shipment, and ensure multiple transportation means, etc.
● Order early and secure sufficient inventories when the supply of parts, etc. are expected to be delayed● Conduct supplier credit checks, as well as CSR procurement questionnaires that include items on● Decline in profitability associated with significant deterioration of business● Promote and follow up on “Project Z” initiatives● Cost burdens in case of escalated public regulations of environmental issues● Reduce environmental burden of business activities● Risk of hampered product supply due to restrictions on the supply chain and● Collect and analyze the following information from local subsidiaries and share and review such

● Loss of ISEKI Group’s credibility and impediment to its business activities if● Ensure thorough compliance by formulating ISEKI Group Code of Ethical Behavior● Ensure complianceenvironment, or impairment loss caused by market price decline, in relation
to other fixed assets owned by the Groupor market demand in Japan and overseas● Correctional measures undertaken against environmental issues, lawsuits,
and other troubles

production and sales activities• Unexpected changes in each country’s tax systems, laws and regulations,and trade policies• Conflict over Taiwan, in Ukraine, Middle East region, etc.
● Risks that hinder business development mainly in Asia
• Immature level of technologies• Unstable labor-management relationships
any of executives or employees of the Group should conduct any acts that
violate laws and regulations

Risk of natural disasters,
12 unexpected accidents, spread of
infectious disease, etc.

• Natural disasters including earthquakes, typhoons, and floods• Unexpected accidents• Outbreak of infectious diseases

YoYchangeBusiness alliances, joint ventures
13 and strategic investment withother companies

14 Debt● Add higher value in Japan to maintain competitiveness and obtain intellectual property• Production: Monitor regulated substances and other data on environmental burden, and engage inproduction activities that contribute to the reduction of environmental burden• Other than production: Develop products compliant with environment regulations in Japan and overseas,and promote the sale of eco-products, which contribute to the reduction of environmental burden● Properly handle waste at consolidated subsidiaries in Japan and overseas, in accordance with laws andregulations
information with concerned parties• Each country’s employment situation, as well as changes in their tax systems, laws and regulations,and trade policies• Media coverage and government directives concerning geopolitical risks● Review operation forms and supply chains as necessary, based on the information obtained throughthe above channels and the results of analysis of such information• Ensure overall management by Director in charge of Compliance• Promote and follow up on initiatives under the leadership of the Compliance WG● Establish relevant systems, such as the group-wide whistle-blower system (Ethical Hotline) andinternal and external third-party help desks● Diversify risks associated with natural disasters and establish business continuity plans• Take out various insurance against fire, wind and flood damage• Continue to discuss support and alternative ways to carry on with important operations• Establish a response headquarters led by the President, collect information, and give instructions
promptly, if a contingency occurs● Reduce impact on business activities in the event of contingency• Adopt flexible workstyles, such as working from home and staggered attendance• Take advantage of the internet for meetings and event administration● Reduce interest-bearing debt

● Decrease in the Group’s competitiveness due to failure in securing and● Recruit and develop human resources● Stagnation of operations and decline in credibility due to information● Continuously improve the information security management system● Changes in supply and demand arising from changes in system of crops and● Take the following measures under the 2°C scenario

financial institutions are triggered

Ensuring of human resources,
15
shortage of human resources

16 Information security• Communicate regularly with suppliers• Strengthen top-level relationship• Propose solutions along with selling products• Increase future-oriented development themes, such as ICT, automation, and other themes related tosmart agriculture, as well as themes that contribute to carbon neutrality● Increase presence in overseas markets• Launch electrification products for the European market• Supply large-sized products and products equipped with cutting-edge technology to East Asia,
where market characteristics are similar to those in Japan• Operational efficiency improvement and cost reduction through integrating the operations offactories (Matsuyama and Kumamoto)• Integrate sales subsidiaries in Japan to streamline indirect operations and review distribution
systems to lower distribution costs• Keep track of the progress of the above measures at departments in charge of performance
management, and discuss countermeasures if an incident that leads to declined profitability is detected● Increased borrowing costs due to a hike in interest rate
● Increase in borrowings caused by increased inventories● Obligation to pay back loans early if financial covenants in contracts with

developing human resources necessary for businesswaiting time

● Risk of losing competitive advantage against competitors in obtaining

based on the risks and benefits of holding each stock● Ensure close cooperation at each level, from the top management to the working level● Deliberate and discuss in proceeding with business alliances, investment, and lending
in business alliances or joint ventures, hindering the maintenance of the• Deliberate at the Board of Directors and Directors’ Operation Committee meetings
alliances• Deliberation and monitoring by investment management committee● Risk of not obtaining the expected results and/or effects or needing• Discuss measures to minimize the financial impact when intended effects are considered unlikely tomore-than-expected time and expenses with regard to strategic investment
be achieved
including acquisitions

leakage or system halt/breakage, etc. caused by the following incidents• Unauthorized access due to cyberattack• Computer virus infection

respect for human rights● Keep stable partnership and sustain sound partnership through the following measures

intellectual property rights in Japan and competing in other matters• Develop products with high functionality and in compliance with smart
agriculture• Reduce prices following the decreased demand for decreases inagricultural materials● Risk of losing competitive advantage in responding to changes in thebusiness environment, such as diversifying needs and increasing
environmental awareness in overseas countries● Reassess the significance of cross-holding of shares every year at the Board of Directors’ meetings,

decline in stock and market prices● Optimize transportation means such as truck, vessel, and railroad containers and shorten freight● Change of business policy, business depression or bankruptcy of our specificcustomers or suppliers● Impairment loss, loss on valuation, or loss on sale associated with significant• Strictly adhere to set processes, such as the process to examine whether to move on to the nextstage for commercialization (design review)● Carry product liability insurance, etc.

● Risk of the occurrence of a conflict of interest between the parties concerned

Same level● Conduct export transactions in both foreign currencies and Japanese yen● Procure raw materials and parts from overseas● Mitigate short-term risks by taking advantage of buying forward contracts• Higher manufacturing costs due to rapid increases in procurement prices• Decreased production caused by prolonged tightening of supplies• Undermined trust in and reputation of our products caused by supplied
goods● Risk of delayed shipment in shipment and transportation of products• Shortage of shipping containers and trucks (Japan’s 2024 logistics problem)● Establish quality control and quality guarantee systems to offer products that satisfy customers

developed and manufactured by us• Occurrence of serious defects• Loss of trust in the Group and our products

14● Appreciation of Japanese yen resulting in decreased price competitiveness ofexport products● Influence of exchange rate fluctuations in converting financial statements ofour foreign subsidiaries to Japanese yen

Risks derived from international
business

11 Risk of legal violation

16

Increase

Risk description● Risks unique to the agricultural machinery market

Exchange rate fluctuations

Price decline in land and otherfixed assets

YoYchangeResponse to risks● Claim for a large amount of damages, etc. caused by our services or products● Risks that directly or indirectly affect ISEKI Group’s business activities

Low

Major risks that could affect ISEKI Group’s future financial performance are as shown below. We recognize the possibilityof the occurrence of such risks and strive to avoid their occurrence and take proper measures should they occur.

2

8

Small

Typical risks and mitigation measures

Changes in economic conditions
and the environment ofagriculture

Stock market fluctuation

10*The numbers indicate respective risk items in the table below.

1

7

DamageRisks caused by external factors

Risk item

Serious defects in products andservices

Large

Each division/Relevant meeting body

Risk Management WG

ESG Committee

Consultation
Recommendation

Board of Directors[Overview]

6

Risk description

17 Climate change

a reduction in agricultural land, as well as impacts on the Group’s overallbusiness activities including product lineup and sales volume● Scenario where temperature rise is limited to below 2°C• Increase in operation costs due to stricter regulations imposed by thegovernment, etc.
• Increase in procurement costs due to the progress in decarbonization• Loss of business opportunities due to failure to meet the demandassociated with decarbonization● Scenario where temperature rise is 4°C• Damage to production and sales bases, including supply chains, due tointensifying typhoon and flood damage• Decrease in demand for agricultural machinery for rice farming, in
response to deterioration in rice quality and decline in the area of landavailable for rice production• Enhance the capability to create cash flows by improving profitability and reducing inventories• Securitize credits to diversify financing methods● Reduce inventories through efficient stock management following management integration ofwide-area sales subsidiaries in Japan● Prepare for rapid fluctuation of interest rates• Combine various loan conditions such as fixed interest rates• Strengthen mid-career recruitment and introduce referral recruitment and a return-to-job system• Strengthen programs to develop global talent, human resources for DX, etc., in line with businessstrategy• Provide support for career development through the Group’s open recruitment system● Create a sound, employee-friendly workplace environment• Enhance employee engagement by using the talent management system• Establish management regulations (electronic information security, management of information
infrastructure)• Enhance security measures by using a data center and cloud service• Use a service that monitors unauthorized external access● Take out cyber insurance to prepare for contingencies[Impact reduction]• Utilize renewable energy, such as solar power• Power boilers with waste heat from in-house power generation facilities[Business opportunities] • Electrify agricultural machinery• Introduce smart agricultural machinery and robotic agricultural machinerythat improve the efficiency of farm work
• Promote farming methods that contribute to the reduction of methane
emissions from rice paddies• Business alliances with other companies regarding J-Credit initiatives● Take the following measures under the 4°C scenario[Impact reduction]• Continuously review business continuity plans• Review product lineup and sales channels[Business opportunities] • Introduce technology to replace agricultural work with robotic agricultural
machinery• Perform autonomous analysis of weather data and growth data using AI

ISEKI Report 2024

80

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

Foundation for sustainable growthCompliance
Basic Policy (Fundamental concept)

Examples of initiatives undertaken● ISEKI Group will fulfill its responsibilities as a member of society and promote healthy and transparent management.

Whistle-blower system

Compliance system
To prevent misconduct and scandals from occurring, ISEKI Group
ensures thorough compliance under the leadership of theCompliance Working Group (WG), which consists of departments incharge of the overall management of each division. The Director in
charge of Compliance is responsible for the overall management of
the WG. The Compliance and Legal Affairs Department is responsible
for ensuring that Group employees maintain and enhance awarenesstoward ethics, and promoting overall compliance activities. The
Department also administers the Compliance WG as the secretariat.

Monthly reports on compliance activities are made to the ESG
Committee, which is comprised of Directors and Corporate Officers
and chaired by an Independent Outside Director. In addition, theInternal Audit Department audits the status of compliance activities
and reports the results to the Board of Directors, the President andRepresentative Director, Outside Directors, and Audit & Supervisory
Board Members.

Director in charge of compliance[Overview]

Compliance WG

ESG Committee

Board of Directors[Members]
Consultation

Recommendation

Audit results

Report and deliberate compliance-related matters with the aim of promoting
compliance across ISEKI Group● Managers in charge
General Manager of Compliance and Legal Affairs Dept.
● Members
General Manager of Compliance and Legal Affairs Dept., General Manager ofCorporate Planning Dept., General Manager of Public & Investor Relations Section,
General Manager of Internal Audit Dept., General Manager of Financial Dept.,
General Manager of Personnel Dept., General Manager of General Affairs Dept.,
General Manager of Administrative Dept. of Development & Production Division,
General Manager of Sales Planning & Administrative Dept., General Manager ofAgri-plant Dept., and General Manager of Corporate Business Control Dept. ofOverseas Business Division● Secretariat
Compliance and Legal Affairs Department and Corporate Planning Department

Information sharing,
direction

Entire ISEKI Group

Overall management

Initiatives to eliminate anti-social forces

ISEKI Group has a group-wide whistle-blower system (Ethical
Hotline) for the use of all employees, retirees and suppliers. The
aim is to enable early detection of problems within the Company
and minimize risks caused by the occurrence of corporate
scandals. In addition to an internal help desk established in the
Compliance and Legal Affairs Department, an external third-party
help desk independent from management executives has been
set up, in light of the purposes of the Corporate GovernanceCode. The third-party help desk provides support in multiple
languages including English, Chinese, Thai, and Indonesian.
In 2023, the degree to which the whistle-blower system isknown across the Group increased mainly due to an updated
poster for the system and distribution of portable cards toemployees again, and thus the system handled 61 cases. The
cases were responded with consideration given to the protectionof whistle-blowers and privacy of relevant parties, and theirsummaries have been reported to the ESG Committee.

┃ Number of whistle-blowing cases
61Internal Audit Department

38
23

Compliance education and enlightenment activities

In 2023, the Company has revised and distributed the “ISEKI Group
Code of Ethical Behavior” to all employees of the Group to ensure
once again that all business activities meet corporate ethicalrequirements.

● Awareness-raising by issuing “Compliance News”
The Company issues the quarterly “Compliance News” bulletin. Witha focus on priority compliance initiatives, it contains informationsuch as messages from the management team and examples ofpractical measures undertaken by employees. We thus work to raisecompliance awareness among employees.

Training namePresidents of sales subsidiaries

Manager meetings

Managers of affiliated companies
Employees of each rank

● Training by theme
Training name

TargetTraining related to whistle-blower system

All employees

Harassment (abuse of authority) prevention

All employees

Personal information protection

All employees

Basic training for Subcontract Act

All employees*

Training for Subcontract Act

Development departments*

Response to anti-social forces

All employees

Unfair competition prevention

Employees in middle and higher ranks*

Prevention of bribery involving foreign public officers, etc.

Overseas departments, overseas subsidiaries

Facility personnel training

2021

2022

2023

┃ Whistle-blower system diagram

ISEKI Group ensures that all employees of the Group have a fairand equitable relationship with suppliers, which is set out in ISEKI
Group Code of Ethical Behavior.
We have formulated conduct guidelines and a manual forcompliance with the Anti-Monopoly Act and educated our
employees on the Subcontract Act, thereby thoroughly ensuring
fair and equitable transactions as the entire Group.
In addition, initiatives aimed at achieving appropriate pricepass-through, which ISEKI Group has implemented in accordancewith “the Guidelines on Price Negotiation for Appropriate
Pass-through of Labor Costs” published by the Japan Fair Trade
Commission, are monitored by the Compliance WG.
Furthermore, the Basic Rules on the Prevention of Bribery
Involving Foreign Public Officers, etc. have been established toprevent corruption involving foreign public officers, etc. andensure fair transactions. We work to ensure thorough compliancewith the Rules mainly at overseas bases and overseas Group
companies.
In FY2023, the Group was subject to no legal action due tocorrupt practices.

Initiatives for protecting personal information
Whistle-blowing, seeking advice

TargetSales subsidiary president meetings
Rank-based training programs

2020

Reporting

Reporting response

Communication
Reportingresponse

Whistle-blowing,
seeking advice
Reportingresponse

Whistle-blower● Thorough implementation of the “ISEKI Group Code of
Ethical Behavior”● Incorporation into company-wide events and rank-based
training programs

2019

Third-party help desk

<Activities for compliance penetration and enlightenment>

Training activities
Every year, the Company carries out a wide range of training
programs concerning compliance themes in the day-to-day conductof business affairs, especially on points warranting special attention.

6

Internal help desk

Activities for enlightenment

8Compliance WG
ESG Committee

To raise awareness of each individual employee toward compliance,
ISEKI Group is implementing various training programs andenlightenment activities for employees in a planned way.

Initiatives for fair trade and prevention of corruption0■ Number of whistle-blowing cases

Reporting

The ISEKI Group Code of Ethical Behavior sets out that the Groupwill not have any relationship whatsoever with anti-social forces.
To fulfill our social responsibilities for ensuring sound business
operations and eliminating anti-social forces, we have established
the Rules for Response to Anti-Social Forces. Under the leadershipof Representative Directors, we are working on the creation andenhancement of relevant internal systems in cooperation withexternal specialized institutions.
Furthermore, we set out specific procedures in the Anti-Social
Forces Response Manual and offer in-house education programs
to ensure that our officers and employees can respond properly
to anti-social forces.

To ensure proper handling of personal information, ISEKI
Group has established and published the “Personal Information
Protection Policy.” To prevent leakage of and damage to personal
information, the Personal Information Handling Regulations setsout specific ways to handle personal information, as well as theestablishment of appropriate measures for safe management.
We strive for appropriate management of personal information
by ensuring thorough compliance with relevant rules throughperiodic education and awareness-raising for officers andemployees.
Being aware of the importance of the protection of personal
information, we will keep providing relevant information to
officers and employees and working to strengthen the protectionof personal information both in Japan and abroad.

Facility departments*Conducted by ISEKI & CO., LTD. (non-consolidated)

81

ISEKI Report 2024

ISEKI Report 2024

82

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

Financial and non-financial data

Financial and non-financial data
Financial highlights (FY2023)

Consolidated financial summary (Millions of yen)

Net sales

Operating income / Operating margin

Net sales came to 169.9 billion yen, up 3.2 billion yen year on year, hitting a record high.
[Japan]Sales rose due to growth in maintenance revenue, a pillar of therevenue-expenditure structural reform, including spare parts and repair/maintenance, as well as construction of facilities.
[Overseas] Despite a decline in sales in North America and Asia, sales increased inEurope due to firm demand even after the price increases, as well as
ISEKI Germany becoming a consolidated subsidiary in the second half ofthe previous fiscal year. Accordingly, overseas sales increased as a whole,hitting a record high for the third consecutive year.
■Japan net sales (100 million yen)■Overseas net sales (100 million yen)

1,581

1,666

1,699

333

407

539

568

1,177

1,159

1,173

1,126

1,130

Dec. 2019

Dec. 2020

Dec. 2021

Dec. 2022

Dec. 2023

1,498

1,493

321

Ordinary income came to 2.0 billion yen, down 1.6 billion yen year on year.
Profit (loss) attributable to owners of parent decreased by 4.0 billion yen year
on year to 0.03 billion yen due in part to absence of gain on change in equity
and gain on step acquisitions recorded in the same period of the previous year.

■ Ordinary income (100 million yen)
■ Profit attributable to owners of parent (100 million yen)
ROE (%)

11

41
35

1.4%

1.3%
22

20

Dec. 2019

Dec. 2020

Dec. 2021

Dec. 2022

Dec. 2023

Total assets / Net assets / Equity ratio
Total assets increased by 10.6 billion yen year on year to 217.1 billion yen
due to an increase in inventories resulting from a decrease in demand for
agricultural machinery products in Japan and an increase in local inventories
at overseas subsidiaries.
Net assets came to 74.2 billion yen, up 1.8 billion yen year on year due in partto increases in valuation difference on available-for-sale securities and foreign
currency translation adjustment.

2,064
1,874

2,171

1,876

37 41

34.2%

20

17

7

2.1%
1.8%

1,975

31

2.6%

■ Total assets (100 million yen) ■ Net assets (100 million yen)
Equity ratio (%)

6.2%

46
1.1%

■ Operating income (100 million yen)
Operating margin (%)

27

Ordinary income / Profit attributable to owners of parent / ROE

5.1%

Although gross profit increased mainly due to the effect of price revisions,operating income was 2.2 billion yen, down 1.2 million yen year on year due toan increase in selling, general and administrative expenses. Operating margin
declined by 0.8% year on year to 1.3%.

34.5%

32.4%

32.9%

31.9%

0
0.0%

692

624

665

723

742

Dec. 2020

Dec. 2021

Dec. 2022

Dec. 2023

-8.8%
-56
Dec. 2019

Dec. 2020

Dec. 2021

Dec. 2022

Dec. 2023

Cash flows

Interest-bearing debt / D/E ratio

In the cash flows from operating activities, the net cash outflow was 2.4 billion
yen due in part to an increase in inventories and a decrease in notes andaccounts payable-trade.
In the cash flows from investing activities, the net cash outflow was 5.4 billion
yen mainly due to capital investment. As a result, in the free cash flows, the net
cash outflow was 7.8 billion yen.
In the cash ﬂows from financing activities, the net cash inﬂow was 6.7 billion
yen mainly due to an increase in interest-bearing debt.
■Cash flows from operating activities (100 million yen)
■Cash flows from investing activities (100 million yen)
■Cash flows from financing activities (100 million yen)Free cash flows (100 million yen)

105

1.11

67

45

34

20
-21

-23
-71
Dec. 2019

ISEKI Report 2024

-20

-33

-51
-83
Dec. 2020

Dec. 2021

1.04

1.00

121

96

Interest-bearing debt came to 76.9 billion yen, up 8.7 billion yen year on year
mainly due to an increase in loans.
D/E ratio, which shows the soundness of finance, was 1.04 times.

■ Loans (100 million yen) ■ Lease obligations (100 million yen)
D/E ratio (times)

142

83

Dec. 2019-29-63

Dec. 2022

-24

693
84

693
77

608

615

0.93

0.94

621
72

681
70
611

549

769
71
698

-54
-78

Dec. 2019

Dec. 2020

Dec. 2021

Dec. 2022

Dec. 2023

Results of Operations
Domestic sales
Overseas sales
Net sales
Gross profit
Operating income
Ordinary income
Profit (loss) attributable to owners of parent

96th FY

97th FY

98th FY

99th FY

100th FY

(Dec. 2019)(Dec. 2020)(Dec. 2021)(Dec. 2022)(Dec. 2023)

117,717
32,181
149,899
44,507
2,745
1,108
723

115,907
33,397
149,304
43,476
2,084
1,702(5,641)

117,396
40,795
158,192
46,841
4,147
4,687
3,196

112,638
53,991
166,629
49,890
3,534
3,762
4,119

113,060
56,855
169,916
50,359
2,253
2,092
29

8,404
19,67554,1794,900
87,15998,346
1,288
10,717110,352
197,51137,752

10,787
21,78051,847
5,564
89,97986,2871,967
9,193
97,449187,428
36,872

14,85021,53749,871
4,843
91,10384,962
2,290
9,328
96,581
187,684
39,27910,74927,57465,331
5,758
109,41483,9192,309
10,84897,076
206,491
45,5009,901
26,917
72,842
5,660
115,32284,553
2,489
14,737
101,780
217,10241,73439,351

37,46030,21040,29140,642

12,63089,735
21,525
3,059
5,759
8,180
38,524
128,259
52,84014,641
1,770
69,252
197,511

11,814
86,147
24,114
3,144
4,097
7,504
38,861125,00950,346
10,3101,762
62,419187,428

11,852
81,342
24,728
2,912
4,097
8,042
39,780121,123
53,567
11,201
1,792
66,561
187,684

12,397
98,18920,811
3,244
4,097
7,802
35,956
134,146
57,023
10,978
4,342
72,345
206,491

13,08895,46529,167
6,207
4,097
7,948
47,420142,886
56,367
12,955
4,892
74,215
217,102

Cash flows
Cash flows from operating activities
Cash flows from investing activities
Free cash flows
Cash flows from financing activities
Net increase (decrease) in cash and cash equivalents

10,509(7,104)
3,404(2,396)981

9,694(5,167)
4,526(2,179)2,383

14,233(2,039)12,194(8,338)4,048(3,375)(2,984)(6,360)
2,033(4,101)(2,459)(5,416)(7,875)
6,722
(848)

Information Per Share (Yen)Net assets
Profit (loss)
Cash dividends

2,987.2
32.0
30.0

2,683.1(249.6)―2,864.5
141.4
30.0

3,006.7
182.1
30.0

3,065.1
1.3
30.0

34.2
1.1
0.4
3.4
1.00

32.4
(8.8)
(3.0)
3.4
1.11

34.5
5.1
1.7
2.8
0.93

32.9
6.2
2.0
4.0
0.94

31.9
0.0
0.0
5.0
1.04

Financial Position (at the end of the fiscal year)
Cash and deposits
Notes and accounts receivable – trade
Inventories
Other
Total current assets
Property, plant and equipment
Intangible assets
Investments and other assets
Total non-current assets
Total assets
Notes and accounts payable – trade
Short-term loans payable(including current portion of long-term loans payable)
Other
Total current liabilities
Long-term loans payable
Net defined benefit liability
Deferred tax liabilities for land revaluation
Other
Total non-current liabilities
Total liabilities
Shareholders’ equity
Accumulated other comprehensive income
Subscription rights to shares and non-controlling interests
Total net assets
Total liabilities and net assets

Management Indicators
Equity ratio (%)
ROE (%)ROA (%)CCC (months)
D/E ratio (times)

Notes 1 ROE (Return on equity) = Profit/(Equity at the beginning of the fiscal year + Equity at the end of the fiscal year)/2
2 ROA (Return on assets) = Profit/Total assets
3 CCC (Cash conversion cycle) = Days sales outstanding + Days of inventory outstanding − Days payable outstanding
4 D/E ratio = Interest-bearing debt/Net assets

Dec. 2023

ISEKI Report 2024

84

Introduction

ISEKI Group’s value creation aims

Business strategies for value creation

Financial and non-financial data

Foundation for sustainable growth

Company information / Stock information

Financial and non-financial data

Financial and non-financial data

Company information / Stock information

Non-financial highlights (FY2023)

Company information (As of December 31, 2023)

Volume of energy-generated CO2 emissions in production

Environment

We are working to reduce CO2 emission volumes in our production
activities to create a decarbonized society.

Volume of water used in production

Environment

We are working to reduce volume of water used in production to mitigate
environmental burdens.

Company name:

ISEKI & CO., LTD.

Foundation:

August 1926

Head office:700 Umaki-cho, Matsuyama-shi, Ehime-ken, 799-2692 JAPAN

Paid-in capital:

23,344 million yen

Tokyo headquarters:

5-3-14, Nishi-Nippori, Arakawa-ku, Tokyo, 116-8541 JAPAN

Number of employees:

Consolidated: 5,457
Non-Consolidated: 774■ Total volume of water used in domestic manufacturing bases (10,000 tons)
Sales in Japan (ton/100 million yen)

■ Volume of CO2 emissions in global production bases (t-CO2)

42,13037,110Stock information (As of December 31, 2023)

18

36,54031,68029,400

336

15

15

318
273

2019

2020

2021

2022

2019

2023

*Japan: ISEKI-Matsuyama MFG. Co., Ltd., ISEKI-Kumamoto MFG. Co., Ltd., ISEKI-Niigata MFG. Co., Ltd.,ISEKI-Shigenobu MFG. Co., Ltd.
Overseas: PT. ISEKI INDONESIA*The CO2 emission factor for domestic electricity is revised every year based on values published by
the Ministry of the Environment.

Retention rate in three years from joining non-consolidated

Human resources

The retention rate of new graduates in three years is at a high level of above
approximately 90%.

2021

14

239

254

2022

2023

* Japan: ISEKI-Matsuyama MFG. Co., Ltd., ISEKI-Kumamoto MFG. Co., Ltd., ISEKI-Niigata MFG. Co.,
Ltd., ISEKI-Shigenobu MFG. Co., Ltd.

No. of Directors / Ratio of Outside Directors

Governance

From FY2024, the ratio of Outside Directors and the ratio of female Directors
became respectively 38% and 25%.
■ No. of Internal Directors (persons) ■ No. of Outside Directors (persons)Ratio of Outside Directors (%)■ Retention rate (%)

93.3

2020

14

94.1

90.6

89.2

91.7

Ratio of female
Directors

9 (2)
6 (3)

Joinedin 2017

Joinedin 2018

Joinedin 2019

Joinedin 2020

Joinedin 2021

2020

KPI

Water
(quality) /Air / Soil

Reduction of used volume of chemical
substances subject to PRTR law (per net sales)(Compared with 2013)

45.2%

Reduction of volume of water used (per net sales)(Compared with 2013)

53.4%

Reduction of total material input (per net sales)(Compared with 2013)

34.1%

Reduction of CO2 emissions (Scope 1 & 2) (Total)(Compared with 2014)

44.9%

Resource
efficiency& safety

ClimateInitiatives to reduce CO2 emissions (Scope 3)
Waste

Reduction of final volume of waste (per net sales)(Compared with 2013)

Food

Percentage of invention proposals related
to advanced technologies toward higher
agricultural productivity

2023 Results*See below

69.2%

61.0%

Impacts
Employment

Inclusive and soundeconomy69,000,000 shares

Shares issued and outstanding:

22,872,034 shares(excluding treasury stock of 112,959 shares)

Foreign companies
and individuals

Number of shares per trading unit:

100 shares

Number of shareholders:

19,238

33%

2023

2022

Securities
companies

4.84%

1.56%

Other Japanesecompanies

14.85%

Stock Exchange on which its shares are listed: Prime Market of the Tokyo Stock Exchange
Business year:

From January 1 through December 31

Ordinary general meeting of shareholders:Late March every year

Record date:Ordinary general meeting of shareholders /Year-end dividend: December 31 every year

Shareholding ratio

Individual
shareholders
and other42.83%

Financial
institutions

35.92%

Shareholder register administrator and Account Sumitomo Mitsui Trust Bank, Limited
management institution for special accounts: 1-4-1 Marunouchi, Chiyoda-ku, Tokyo

Number of shares held (shares)

Shareholding ratio (%)

The Master Trust Bank of Japan, Ltd. (Trust Account)

Name of major shareholder

2,211,600

9.66

38%

Mizuho Bank, Ltd.

1,070,800

4.68

Iseki kabushiki hoyukai (Company’s Stockholding Co-op.)

981,554

4.29

The Norinchukin Bank

868,785

3.79

Custody Bank of Japan, Ltd. (Trust Account)

865,800

3.78

Sumitomo Mitsui Trust Bank, Limited

800,000

3.49

Iseki eigyo-hansya group syain mochikabukai (Business-selling Group Holdings)

728,200

3.18

The Iyo Bank, Ltd.

580,042

2.53

Sompo Japan Insurance Inc.

434,500

1.89

The Kyoei Fire and Marine Insurance Company, Limited

352,700

1.54

2024

Progress of activities that would have impacts on achieving SDGs (We have concluded a loan contract “Mizuho Positive Impact Finance” since March 2023)
Impacts

Total number of authorized shares:

5 (3)

30%

2021

Status of distribution of shares held by type of shareholder

6 (3)

33%

18%

6310

Major shareholders (top 10)

25%

7 (3)

Company code:

KPI

2023 Results

Utilization rate of paid leave

66.6%

Ratio of managers hired mid-career

8.5%

Ratio of women hired

19.0%

Ratio of female managers

4.6%(Note) Shareholding ratios are calculated after the deduction of treasury stock. The treasury stock does not include 254,700 shares of the Company held by Custody Bank of Japan, Ltd. (Trust Account) as trust property of astock delivery trust for officers.

Share price trends
Share price (yen)Trading volume (1,000 shares)

2,000

6,000

1,500

4,500

Education / Inclusive
and sound economy/ FoodParticipation in the NOGYOJOSHI(female farmers) project

4 timesResource efficiency &safety / Climate / Air

Eco-product ratio in domestic sales

51.5%

1,000

3,000

90ha

500

1,500

Biodiversity andecological services /FoodLand area organically farmed (rice)*Estimated by
ISEKI & CO.,LTD.

0Jan. 2019

Jul. 2019

Jan. 2020

Jul. 2020

Jan. 2021

Jul. 2021

Jan. 2022

Jul. 2022

Jan. 2023

Jul. 2023

0*Refinement of data in Category 1, and promotion of research and development in Category 11

85

ISEKI Report 2024

ISEKI Report 2024

86