TAKEUCHI MFG. CO., LTD.
Q2 Financial Results Briefing for the Fiscal Year Ending February 2024
October 24, 2023

Event Summary[Company Name]

TAKEUCHI MFG. CO., LTD.

[Company ID]

6432-QCODE[Event Language]

JPN[Event Type]Earnings Announcement[Event Name]

Q2 Financial Results Briefing for the Fiscal Year Ending February 2024

[Fiscal Period]

FY2024 Q2[Date]

October 24, 2023

[Number of Pages]

26[Time]

16:00 – 16:30(Total: 30 minutes, Presentation: 30 minutes)[Venue]Webcast[Venue Size][Participants][Number of Speakers]

3
Toshiya Takeuchi
Osamu Kobayashi
Hiroshi Sakai

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Presentation

Kobayashi: I am Kobayashi, General Manager of Business Management Department. Thank you very muchfor taking time out of your busy schedule to participate in our financial results briefing today. I will now explain
the H1 results and full-year forecasts for the consolidated results for the year ending February 2024.
Please see page two. I would like to explain some key points regarding the H1 results compared to the same
period of the previous year. First, in terms of sales volume, both in North America and Europe, the strong
performance continued from the previous period and remained steady. As a result, sales volume in North
America increased by 3.6%, in Europe by 7%, and overall sales volume increased by 5.5%. Note that the higher
rate of increase in Europe is due to the fact that in H1 of the previous year, inventories at European
subsidiaries were insufficient from the beginning of the period, whereas in H1 of the current year, the numberof units allocated for shipment to Europe from the head office was increased, and inventories were built up
to cope with the situation.
Next, with regard to sales and profits, although there was a slowdown in housing demand due to rising interest
rates and high housing prices, and inventory adjustments in the UK due to changes in the supply-demandbalance, demand for our products remained strong, as infrastructure works such as water and gas pipes werestill robust. In addition, due to the increase in sales volume, price hikes, lower transportation costs and a
tailwind from the weak yen exchange rate, consolidated net sales increased 22.3% and consolidated operating
income rose 81.9%, the highest ever for H1 of a fiscal year.
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Please refer to page three. I would like to explain the consolidated financial highlights. Sales and all profits
items were up significantly compared to the previous year, reaching a record high on a half-yearly basis. The
reasons for the increase and decrease in operating profit will be explained later on page seven, while ourpresident will provide further information on the status of orders.

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Please see page four. This slide shows the quarterly changes in sales and operating profits. Sales in both Q1and Q2 under review were high due to the increase in sales volume and price increases on products, as wellas the depreciation of the yen against other currencies. For Q1, both sales and operating profit were thehighest ever recorded for a quarter.

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Please refer to page five. This shows net sales by region. Net sales in North America increased JPY9.417 billion
to JPY56.61 billion. Net sales in Europe increased JPY8.9 billion to JPY44.318 billion. Sales volume increased
3.6% in North America and 7% in Europe, and in both regions, sales were significantly higher than in the same
period of the previous year, mainly due to price increases and the impact of yen depreciation. As for the otherareas, they are as you can see on the slide.

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Please refer to page six. Geographic segment information is as stated and is available for your review.

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Please see page seven. I would like to explain the factors behind the increase and decrease in consolidated
operating profit.
The breakdown is as follows: foreign exchange effects increased profit by JPY3,263 million. The effect ofincreased sales increased by JPY2,278 million. The increase in selling prices raised profit by JPY3,577 million.
In addition, the cost increase in raw material prices costed JPY2,109 million, the start-up of the US plantamounted to JPY778 million, investments in human capital amounted to JPY1,483 million, and transportation
costs related to semi-knockdown production in the US amounted to JPY434 million, all of which contributed
to the decrease in profit. Another increase of JPY2,987 million is due to a decrease in SG&A expenses,
excluding foreign exchange effects. Most of this decrease in SG&A expenses is due to lower transportation
costs.
The JPY434 million in work-in-progress product's transportation costs related to semi-knockdown production
do not change operating profit as they are transferred from SG&A expenses to cost of sales, but become afactor that increases the cost of sales ratio, so they are shown in a separate graph.
As a result, including other factors, operating profit increased JPY7.64 billion to JPY16.969 billion.

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Please see page eight. This is the consolidated balance sheet. Notes and accounts receivable-trade increased
approximately JPY10 billion due to the increase in sales, and fixed assets increased approximately JPY4.8
billion mainly due to the acquisition of the Aoki plant.

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Please turn to page nine. The consolidated statements of cash flows are as stated and are available for yourreview.

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9Next, I will explain our full-year consolidated earnings forecast for the fiscal year ending February 2024. Pleaserefer to page 11.
On October 12, 2023, we revised our full-year earnings forecast. I would like to explain the key points of ourbusiness forecast. First, with regard to the outlook for product demand in this H2, while we expect a softening
in demand in the UK market, demand in the rest of Europe is expected to remain strong, as is demand in the
US. As a result, we expect net sales to increase by 7.9% in North America, 9.6% in Europe and 8.5% in total,compared to the full year.
Until now, electronic components have been in short supply, resulting in prior shipments of work-in-progressproducts that have not yet been fitted with electronic components, but this situation is expected to end in
Q3. As a result, sales to European distributors will be recorded at the time of shipment from Japan, and thetiming for recording sales, which had previously been delayed, will be normalized, resulting in an expected
increase in sales volume compared to the previous forecast.
Another key point is the forecast for record-high performance in terms of both sales and profits thanks torevenue increase effect and improved profitability. In addition to the increase in sales volume as explained
just now, we have revised our full-year forecasts upwards after taking into account additional price increasesin H2 and the impact of the weaker yen on the exchange rate.

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10Please refer to page 12. The following are the full-year forecast highlights compared to the previous year.
Compared to the previous year, we forecast a 4.9% increase in overall sales volume for the Group for the fullyear, with net sales increasing by JPY26,033 million to JPY205,000 million, operating profit increasing by
JPY11,878 million to JPY33,100 million, ordinary profit increasing by JPY11,820 million to JPY33,200 million,
and net income increasing by JPY8,220 million to JPY24,200 million.

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Please see page 13. The full-year sales forecast by region is as shown in the table, and we would like you totake a look at it. The foreign exchange sensitivity in operating profit for H2 is JPY145 million for the US dollar,
less than JPY1 million for the pound sterling, and JPY5 million for the euro.

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Please refer to page 14. I will now explain the factors behind the increase and decrease in the full-year forecastof consolidated operating profit.
The breakdown is as follows: foreign exchange impact of JPY7,121 million, revenue increase effects of
JPY3,998 million, and JPY5,694 million increases in sales price.
We also expect a JPY3,959 million increase in costs due to higher raw material prices, a JPY2,768 million
increase in depreciation and expenses associated with the start of operations at the US and Aoki plants, anda JPY2,959 million decrease in profit due to investments in human capitals, primarily from higher personnel
expenses.
In addition, SG&A expenses, including a decrease of JPY6,667 million in transportation costs, are expected toincrease due to a decrease of JPY4,911 million. The breakdown of the difference between reductions intransportation costs and SG&A expenses includes the provision for product warranties accrued in accordancewith the increase in sales volume, and taxes and public dues in line with the increase in profits. Furthermore,
the increase of JPY968 million in transportation costs related to the semi-knockdown production is shown
separately in the graph as a transfer to cost of sales, as explained earlier on page seven.
As a result of the above, including other factors, consolidated operating profit is projected to increase by
JPY11,878 million to JPY33,100 million.

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Please refer to page 15. Next, I will explain our capital investment plan. The capital investment is expected toamount to JPY9.05 billion for the current fiscal year ending February 2024. The main breakdown is as follows:
JPY5 billion for the acquisition of the Aoki plant upon its completion; JPY1.5 billion for the installation of solar
panels at the US subsidiary and its plant, and slat conveyors in its plant; JPY1.5 billion for the construction of
employee dormitories; and JPY1 billion for the purchase of other fixtures, molds, and other items.
With that, l concludes my explanation, and President Takeuchi will give his presentation after this.

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Takeuchi: I am Takeuchi, President and Representative Director. I will discuss the three topics that you arelooking at. Please refer to page 17.
In the numerical targets of our third medium-term management plan, we are targeting consolidated net salesof JPY240 billion in the final year, i.e., the fiscal year ending February 2025. In terms of operating profit andearnings per share, we expect to significantly exceed the numerical targets of the medium-term management
plan in the current financial year, and to achieve them ahead of schedule. In the final year of the plan, we
hope to maintain the momentum we have built up to date by increasing sales volume through the increased
production capacity at the US and Aoki plants.

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Please see page 18. The Group is working to enhance its production capacity.
The first is about the US plant. Most of our track loaders are sold in the US, but demand has recently been
increasing in Europe as well. In response, the headquarters plant is temporarily prioritizing the finishedproducts of track loaders for Europe over the work-in-progress products using a semi-knock down system for
the US plant. Once the ongoing transfer of excavators' production from the headquarters plant to the Aoki
plant is completed, we hope to increase the production of finished track loaders at the headquarters plant inorder to raise output of track loaders, together with semi-knockdown production at the US plant.
Next is about the Aoki plant. This plant started operation on September 1, and the production of mid-sized
excavators, 4 to 9 tons, has been transferred sequentially from the headquarters plant. The capacity of thethree production hubs, the headquarters plant, the US plant and the Aoki plant, is expected to be roughly 1.5
times higher than the existing level.

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Please refer to page 19. In order to enhance production efficiency, slat conveyors were introduced at the US
plant in May 2023. We have gradually increased production volumes, with improving employee safety,
manufacturing skills and product quality as our top priority. The combined production capacity of track loaders
at the headquarters plant and the US plant, assuming 100% of the production capacity targeted in themedium-term management plan, was roughly 75% as of August 2023, and will be 90% by February 2024 and100% by August 2024, ahead of schedule.

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Please refer to page 20. On September 1, 2023, the Aoki plant started operations. We have long been
explaining to our suppliers about our production expansion plans and asking them to increase their supply as
well. Now we are fully prepared for the start of operations.
Five delivery entrances were set up according to the production process, and the flow line for trucks operatingon the site was designed to be one-way. Furthermore, the plant has separate entrance and exit gates, and theflow line through the site has been built up, with an emphasis on safety and efficiency. On the environmental
front, we have installed a large-scale solar power generation facility at the Aoki plant. Combined with CO2free power, the plant runs on 100% green energy. The production capacity of the Aoki plant, assuming 100%of the production capacity targeted in the mid-term plan, will be roughly at 60% as of February 2024, and at
100% of its capacity by August 2024, ahead of schedule.

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Please refer to page 21. I would like to explain the features of the Aoki plant.
The first one is logistics management. By managing reservations for parts deliveries or product shipments
through our IT system and sharing information between our plant and shipping companies, we can streamline
our delivery operations, reduce truck waiting times and avoid congestion at our plant as well as on nearby
roads. We can also monitor parts and materials delays, allowing us to quickly modify production plansaccording to the situation.
The second is the introduction of robots. We have introduced automatic guided vehicles and painting robots.
This not only improves safety at the manufacturing site, but also saves manpower and labor.
We will make effective use of these features in order to create a safe and comfortable working environment
for all employees.

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Please refer to page 22. Next, I will explain order received and order backlog. What you are seeing is thechanges in sales, order received and order backlog per half-year.
Although the order backlog was temporarily reduced to JPY20.1 billion due to the impact of COVID-19
pandemic, demand for our products recovered very quickly. We have been receiving orders in excess of our
production capacity. Consequently, the order backlog continuously increased and temporarily exceeded theannual sales level.
In H1, for the first time in two and a half years, net sales and orders were reversed, and order backlogs began
to decline. This is due to the fact that the delivery time from order placement to product shipment islengthening as a result of the buildup of order backlogs. To rectify this situation, both customers temporarily
refrained from placing orders and the Group was forced to put orders in excess of its production capacity on
hold, resulting in adjustments to the order placement and order receipt process. Nevertheless, productdemand itself remains strong and while there are growing signs of softening in the UK market, we can expect
product demand in other major European countries and the US to remain as strong as ever.
As I explained earlier, our production capacity will increase by approximately 1.5 times higher than the existinglevel, thanks to the three production sites at our headquarters plant, the US plant and the Aoki plant. By
increasing sales volume and net sales through increased production, we are working to normalize theaccumulated backlogs, as well as to attract new orders.

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Please refer to page 23. The following is an overview of the challenges for electrifying construction machinery.
The first is the battery's cost and performance. The battery-powered construction machinery is more
expensive than a conventional diesel-powered one. Normally, battery accounts for most of increase in its
costs and unless battery price comes down, full-scale promotion is considered to be difficult. In addition,
construction machinery is a heavy-duty vehicle compared with passenger vehicle and requires higher-capacity
battery to deliver maximum instantaneous power. This increases its selling price and requires longer charging
times.
The second is the charging infrastructure. Even in urban areas, charging infrastructure is not in sufficient
supply, and in mountainous areas, there is none. In the case of construction equipment, which also operates
in mountainous areas, 100% electrification is unlikely, and the path to decarbonization can be difficult unlesstechnologies that can replace battery-based systems are put to practical use.
The third is the power generation infrastructure. The current power generation using fossil fuels produces
greenhouse gases during its generation. Therefore, a shift from thermal power to renewable energy sources,
such as solar, wind and hydroelectric power is necessary to achieve a fundamental solution towards
decarbonization.
It is interesting to note here that construction machinery is needed to solve the second and third
infrastructure-related issues. We believe that the demand for our products is expected to grow steadily, notonly in the short term, such as the current and next fiscal years, but also in the med to long term. That is why
the Group is initially working to expand our product line of battery-powered compact excavators under 6 tons.

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Since large hydraulic excavators and track loaders require higher battery capacities, for which the hurdle toelectrification will be higher, we intend to work on this while examining the trend of development for batteries
or other green technologies.

Please see page 24. In our product range, we have launched three new models on the market in 2023. As fora battery-powered model, we only have one at the moment, but we are working to expand our product rangeof battery-powered compact excavators under 6 tons.

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Please see page 25. Next, I would like to explain about shareholder return. Net income per share for thecurrent fiscal year is projected to be JPY507.68, resulting in a payout ratio of 30.1% for an ordinary dividendof JPY153 per share. Adding a commemorative dividend of JPY5 per share for the 60th anniversary of theCompany's founding, the year-end dividend forecast for the current fiscal year is JPY158 per share.
That concludes my explanation, but I would like to share this with you. To our investors, thank you very muchfor your continued support. As I mentioned in our financial results briefing at the end of this past February,
we have celebrated our 60th anniversary on August 21, 2023. We would like to thank our investors andstakeholders for their continued patronage and support.
Today, I was explaining the H1 results for the year ending February 2024, and I would like to conclude bygiving you an overview of the current market situation. Just the other day, I visited the United States to meetwith various dealers in that country. Due in part to the impact of the COVID-19 pandemic, it was about fourand a half years since I last visited the country. In addition, we visited our manufacturing facility in Moore,
South Carolina. Thanks to your support, the operation of the US plant is proceeding as planned, and the
production of the all model semi-knockdown production is being carried out as scheduled.
As for the operational status of construction machinery in the US, we saw construction works being carriedout everywhere around the roads that lead to factories, warehouses and other facilities. The scale of thebuildings was quite large, and dozens of construction machines, including excavators, were used there as well.
To excavate the ground, compact excavators and hydraulic excavators were used, followed by track loaders
to level and pave the site.

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Next, we were able to talk to each of the TAKEUCHI dealers, and when we asked about the situation, we foundthat morale was high among the dealers, and most of them were still interested in expanding their businessin construction machinery, as the construction equipment market is thriving for residential construction andother projects. Many dealers are engaged in both sales and rentals, and since sales are more profitable, they
are focusing their efforts on this area. They said they were very happy that TAKEUCHI's US and Aoki plants areup and running, allowing us to increase production. They gave us strong assurances that they will continue topurchase high-quality TAKEUCHI machinery. After having confirmed this, I returned to Japan with a sense ofrelief.
Meanwhile, in Europe, although there are some differences from country to country, distributors in mostcountries are willing to place more orders, and thus we are aware of the fact that the economy is still booming.
In Europe, track loaders have not attracted much attention so far, but when people try using them, they findthem convenient, and orders are increasing, albeit gradually.
It is also widely understood that as for track loaders, various operations are possible by changing theattachment. This is yet another reminder that global demand for construction machinery is still strong andthat is our mission to meet the demands of our customers.
As I mentioned at the outset, our 60th anniversary is just a passing point, and we will continue to go forward
in order to meet your expectations. I would like to conclude my presentation and kindly ask for your continued
support and cooperation.
[END]______________
Document Notes
1.
2.
3.
4.

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Speaker speech is classified based on whether it [Q] asks a question to the Company, [A] provides ananswer from the Company, or [M] neither asks nor answers a question.
This document has been translated by SCRIPTS Asia.

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