Financial Results for the First Quarter
Fiscal Year Ending December 2018
Investor Relations Presentation Materials
ISEKI & CO., LTD.
Shirou Tomiyasu,
Director & Executive Vice President
May 17, 2018

Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 2018

Index１．Outline of Financial Results for the First Quarter
Fiscal Year Ending December, 2018
２．Recent Development in Domestic and Overseas
Markets
３．Performance Forecast for the Fiscal YearEnding December, 2018
４．TOPIX –Our efforts to promote agribusiness-

Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 20182

１．Outline of Financial Results for the First
Quarter Fiscal Year Ending December, 2018

Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 2018

*The First Quarter Financial Results Highlights
January – March (Y o Y)
Expect a recovery in sales of agricultural machinery from April.
The effects from revenue – expenditure structural reform have continued.

Domestic dealers
Manufacturingsubsidiary inIndonesia(PT ISEKI INDONESIA)

Equity-method
affiliate in China(Dongfeng Iseki)□ Sales of agricultural machinery : (Jan.-Mar.) 96% (Jan.-Apr.) 101%
□ Effects from revenue-expenditure structural reform in direct dealers:
operating income +¥0.1 billion

The company continues making a profit.
Overall business remained in line with the previous year due tomachine model MIX.
□ Revenue of Indonesia business improved: operating Income±¥0.0 billion(Consolidated basis including Indonesia business of the parent and plants in Japan)

Announcement of subsidy delayed.
Deteriorated share of profit or loss of equities using equity method.
□ Share of profit or loss of equities using equity method: Ordinary income-¥0.2 billion

Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 20184

Outline of First Quarter Business Performance(JPY bn,%)

1Q of FY
ended Dec.17

1Q of FY
ending Dec.18

yoychangeDiff.
(Target/Actual)Actual％Actual％Net Sales

36.7

100.0

36.8

100.0

0.1

(5.0)

(Domestic)

28.5

77.8

28.4

77.1

(0.1)

(2.3)

(Overseas)

8.2

22.2

8.4

22.9

0.2

(2.7)

Operating Income

(0.3)

(0.7)

(0.6)

(1.6)

(0.3)

(0.3)

Ordinary Income

(0.4)

(1.0)

(0.9)

(2.5)

(0.5)

(0.4)

Profit (Loss) attributableto owners of parent

(0.6)

(1.7)

(0.3)

(0.9)

0.3

(0.1)

Exchange

US$

113.7

110.1

(3.6)

0.1

rate

Euro

121.5

134.3

12.8

4.3

Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 2018

5

Domestic Sales≫ While demand for agricultural machinery remained relatively weak,sales of rice transplanters increased due to the launch of new products. (Y o Y basis)(JPY bn,)

ActualActualCultivating &Mowing Machinery

7.6

7.2

(0.4)

Tractors ：(0.2)(0.7)

Planting Machinery

1.9

2.2

0.3

Straight-travel assisted rice transplanted effect
Rice trans planters: 0.2

0.1

Harvesting &Processing Machinery

3.0

2.8

(0.2)

Combine harvesters:(0.1)

(0.5)

Total

12.5

12.2

(0.3)

(1.1)

Farming Implements

4.7

4.9

0.2

(0.2)

Spare parts

2.7

2.7

-

(0.1)

Repair fees

1.0

1.0

-

(0.1)

Total

8.4

8.6

0.2

(0.4)

Total

20.9

20.8

(0.1)

(1.5)

Construction of Facilities

2.8

2.7

(0.1)

(0.6)

Others

4.8

4.9

0.1

(0.2)

Total

28.5

28.4

(0.1)

(2.3)

Agricultural Machinery

1Q of FY ending
Dec.18Agricultural Machinery Related

1Q of FY ended
Dec.17yoychangeNote

Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 2018

Diff.
(Target/Actual)6Overseas Sales≫ Revenue remained in line with the previous year due to inventory
adjustment in China and decreased shipment to Indonesia, in spite ofincreased revenue in North America and Europe. (Y o Y basis)※The subsidiary in France only adopts the end of September as its fiscal year end. (The results from Oct. to Dec. are posted for the 1st quarter.)

1Q of FY ended
Dec.17

1Q of FY ending
Dec.18ActualActualyoy
ChangeNote
Disappearance of the effects of partialchanges in business terms with OEM partner(JPY bn,)

Diff.
(Target/Actual)North America

1.0

2.5

1.5

Tractors：1.4(1.4)

Europe

1.9

2.5

0.6

Effects of launching new products
Tractors：0.4

(1.2)

China

1.7

0.7

(1.0)

Local inventory adjustment
Rice trans planters：(0.8)

-

ASEAN

1.3

1.0

(0.3)

Tractors：0.2
Combine harvesters：(0.6)

0.1

Others

1.3

0.9

(0.4)

Tractors：(0.3)

Product Sales Total

7.2

7.6

0.4

(2.6)

Parts & Others

1.0

0.8

(0.2)

(0.1)

Total

8.2

8.4

0.2

(2.7)

Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 2018

(0.1)

7

Operating Income≫ Operating income decreased partly due to temporary factors such as
unprofitable construction of facilities (Y o Y basis)(JPY bn, %)1Q of FY
ended
Dec.17

1Q of FY
endingDec.18ActualActualNet Sales

36.7

36.8

0.1

(5.0)

Gross Profit

10.1

9.9

(0.2)

(0.7)

yoy
ChangeDiff.
(Target/Actual)Gross Profit
Margin

27.5%

27.0%

(0.5%)

1.6%

S.G&A.Expenses

10.4

10.5

0.1

(0.4)

Personnel
expenses

6.1

6.2

0.1

(0.1)

Other
expenses

4.3

4.3

-

(0.3)

Operating
Income

(0.3)

(0.6)

(0.3)

(0.3)

【Factors of YoY change(JPYbn,)】
1Q of FY
ended
Dec.17

Unprofitable
constructionof facilities

Retirement
benefitburdenIncrease inlabor cost

Other

Operating
Income(0.3)(0.3)

1Q of FY
endingDec.18

(0.6)

(0.1)
(0.2)
(0.1)

0.1

【Effects of forex move(JPYbn,)】
Net sales

Cost ofsales

S.G&A.
Expenses

Operating
Income

0.1

(0.1)

-

0

Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 20188

Ordinary Income, Quarterly Net Income≫ Ordinary income decreased due to a worsening in foreign exchange gains orlosses and share of profit or loss of equities using equity method. However, (Y o Y basis)quarterly net income increased by the application of consolidated taxation system.
(JPY bn,)
1Q of FY
ended
Dec.17
Actual1Q of FY
endingDec.18Actualyoy
ChangeDiff.
(Target/A
ctual)

Operating Income

(0.3)

(0.6)

(0.3)

(0.3)

Balance of Financial Income

(0.2)

(0.2)

-

-

Other Non-operating Income

0.1

(0.1)

(0.2)

(0.1)

Ordinary Income

(0.4)

(0.9)

(0.5)

(0.4)

Extraordinary Income

-

-

-

-

Extraordinary Losses

-

-

-

0.1

Income before
Income Taxes

(0.4)

(0.9)

(0.5)

(0.3)

Taxes, Deferred Taxes

(0.2)

0.6

0.8

0.2

Profit(Loss) attributableto owners of parent

(0.6)

(0.3)

0.3

(0.1)

Non-operating Income(Y o Y)
Share of profit or loss ofentities using equity method-¥0.2 billion

Foreign exchange gains orlosses-¥0.1 billion※tax expenses reduced due to the applicationof consolidated taxation system

Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 20189

Balance Sheet (Consolidated)≫ Inventory assets increased due to inventory adjustment by
AGCO in North America. (Compared with the same period last year)(JPY bn,)

As ofMar.17

As of
Mar.18yoychangeAs of
Mar.17

As of
Mar.18yoychangeCash & Deposits

8.7

8.4

(0.3)

Accounts Payables

44.5

44.5

-

Accounts Receivables

33.2

32.3

(0.9)

Interest Bearing Liabilities

77.1

74.9

(2.2)

Inventories

54.2

56.5

2.3

（loans payable）

69.2

68.3

(0.9)

（Merchandise and finished goods）

46.5

48.9

2.4

Other Liabilities

23.4

21.9

(1.5)

Other Current Assets

4.9

4.5

(0.4)

145.0

141.3

(3.7)

Total Current Assets

101.0

101.7

0.7

Net Assets

Non-current Assets

97.4

96.7

(0.7)

65.9

69.1

3.2

Investments and other assets

12.5

12.0

(0.5)

(Retained earnings)

13.1

15.5

2.4

(Investment securities)

6.1

6.3

0.2

(Valuation difference on
available-for-sale securities)

1.1

1.2

0.1

Total Non-current Assets

109.9

108.7

(1.2)

(Foreign currencytranslation adjustment)

0.8

1.0

0.2

Total Assets

210.9

210.4

(0.5)

Total Liabilities and Net
Assets

210.9

210.4

(0.5)

Total Liabilities

Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 201810

2.Recent Development in Domestic andOverseas Markets

Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 2018

Trend of Domestic Market≫Demand remains flat

Agricultural machinery demand [Industry shipment](9 principal machinery, moving annual total)(JPY bn,)

4th emission gas regulation

3rd emission gas regulation

400

・102-177PS▼26-50PS(15/Sep.)▼102-177PS ▼76-102PS ▼50-76PS(13/Nov.)(14/Apr.)(14/Nov.)

・76-102PS▼(17/Sep.)

Sep.

Jun.

350

300

◆Last-minute demand- Emission gas reg.
- Consumption tax hike

250

◆Reactionary decline fromlast-minute demand
200
Mar.

Jun.

Sep.

2013

Dec.

Mar.

Jun.

Sep.

2014

Dec.

Mar.

Jun.

Sep.

2015

Dec.

Mar.

Jun.

Dec.

2016

Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 2018

Mar.

Sep.

2017

Dec.

Mar.
2018

12

Domestic Agricultural Machinery Shipments
and ISEKI’s Performance≫Demand remained in line with the previous year.
Sales by sales companies have been on a recovery track since April.
YoY growth rate for 9 principal machinery categories (moving annual total)*ISEKI estimates(%)

FY2015/3

FY2016/3

FY2017/3

FY2018/3

Industry(Amount of shipment)

67

98

101

100

ISEKI

(Sales amount)

73

107

91

101

Domestic sales companies State of sales of agricultural machinery (YoY growth rate)

Sales amountJan.- Mar.

Apr.

Jan.-Apr.

96

115

101

(%)

* Sales indicate sales amount of agricultural machinery by 12 sales companies as converted into quoted values.
Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 201813

Domestic

Product Appeal Reinforcement≫ Straight-travel assisted rice transplanters is in good demand.
We promote further sales expansion during the demand season.

Straight-travel assisted rice transplanter (Sales started in December, 2017)
ISEKI straight-travel assist system

Our new rice transplanter helps straighttravelling based on the location
information from GPS,enabling simple
and clean planting even forinexperienced operators.

Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 2018

Sales of 8-row planting riding rice transplanter
NP 80(Jan.-Apr. unit base)

2017

2018

14

Domestic Reinforced promotion of dry field/
vegetable farming markets≫Onion transplanter (Hokkaido-model) launched in this spring has been reputed well.

Z” in pursuit of high precision and high efficiency
High-efficiency operation of max. 1.5ha/day at planting speed 0.5-0.8m/second.

Onion transplanter(Jan.-Apr. unit base, Hokkaido)

Our onion transplanted realizes high-precision/high-efficiency planting!
New model “PVT4-Z” has been acclaimed by the customers in main
production areas in Hokkaido!!
Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 2018

2017

2018

15

Domestic Reinforcement of international
competitiveness of agriculture≫National Strategy Special Zone

Niigata-city

Participation to “Smart Agriculture Inter-business Cooperation Demonstration Project”

Drone

Satellite
Precision agriculture .examinedfrom the sky
Cloud type agri-businesssupport system

Leaf color analysis service“IROHA”

Agri-business support system“APPARE”

Agriculture depends on accumulated memories

agri-note

Sensor

ICT agricultural
machineryAgri-support

Realization of Smart Agriculture combining state-of-the-art technologies

Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 201816

Domestic Reinforcement of global
competitiveness of agriculture≫National Strategy Special Zone

Niigata-city

Participation to “Smart Agriculture Inter-business Cooperation Demonstration Project”■ Project outline
The project is to implement quantitative evaluation for labor saving, cost
reduction and quality enhancement by centralizing or integrating data ofinnovative technologies from each company
Rice planting

Automatic fertilization
by variable fertilizing function
By making soil fertility in thefield constant, reduction incost of fertilizer, preventionof plant lodging and quality
improvement of farm
products can be expected.

Growth examination

Additional fertilizer

Harvesting

Confirm growing condition
for each field

High precision fertilizer
application by boom tubular

Assessment of proper
timing and harvesting by
yield combine harvester

Growing condition of farm
products can be visualized
as the “surface” level byaccumulating image data ofwide areas by satellite andpin-pointed spots by drone,

The function of fertilizing
equally in the field bycontrolling the amount of
fertilizer in accordance withthe vehicle velocity.
Soil fertility in the field canbe uniformly maintained.

Sensing information of the
combine can tell you proper
timing of harvesting.
It also can be used to store
the amount of farm products
harvested and the conditionof plant lodging.

Visualization by agri-business control system “Agri-note”.
To enhance global competitiveness of Japanese agriculture
Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 201817

Recent Market Trend in Overseas≫Promote further order intake

FY Dec.18 Forecast(Announced on Feb. 13)
JPY 33.9 billion(JPY bn,)
35

30

25

20

FY Dec.17
ActualJPY 31.1 billion

Orders

15

10

5

0
Jan.

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

※The results of “Parts & Others” are not included.

Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 201818

Market Trend (North America)≫Sales by AGCO are stronger than the market trend.

1. Trend in the market
PTO
horsepower(1000 units, %)Utility tractors

Compact tractors

Large class tractors(40-100HP)(40HP and lower)(100PS and above)

USA

CanadaJan.-Mar.2017

121Jan.-Mar. 201812

Differences (%)

100%

USA

Canada

28

4

1

5

2

29

4

1

4

104%

101%

95%

113%

98%

USA

Canada

13

26

2

1

13

26

104%

100%

101%

(Source: AEM Statistics)

2. Situation of AGCO (OEM partner)(JPY bn)

Unit sales (Jan.-Mar.2018)6

Utility tractors
Compact tractors

5: YoY 115%
: YoY 120%

4Consolidated net sales (ISEKI to AGCO)

Change in business terms

3.1

3

1

: YoY

2.5

2Q

3Q

2.5

2

3. Our situation for sales and orders
Order & shipment(Jan.-Mar. 2018):

2.5
1.0

207% 0: VS. Jan.-Mar.16 108%1Q

FY 2017/Dec.

Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 2018

4Q

1Q
FY 2018/Dec.

19

Market Trend (Europe)≫Promote sales expansion through reinforced product appeal

1. Trend in the market“The general business climate index of the agricultural machinery industry inEurope keeps on a very good level” (Cited from CEMA report released on March 19, 2018)
With respect to landscaping market, while start-up of spring products wasdelayed due to unseasonable weather, it shows a recovery trend from April.
2. Situation of distributors
 Unit sales (Jan.-Mar.2018)(JPY bn)

Consolidated net sales (Europe)5• Distributors: YoY 86%

(Unit sold base)• ISEKI France S.A.S.
(Consolidated subsidiary, amount base): YoY 106%

3.7

4

2.9

3
2

2.2

1.9

2.5

1

3. Current sales and orders at ISEKI
Order & Shipment (Jan.-Jun.2018) : YoY 126%

0
1Q

2Q

3Q

FY 2017/Dec.

Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 2018

4Q

1Q
FY 2018/Dec.

20

Market Trend (Europe: UK)≫Investment in a new distributor to promote further sales expansion

New distributor “PREMIUM TURF-CARE LIMITED”*Investment by ISEKI: 44.5%

The United Kingdom is the major market that follows France and Germany.
Promote increased share by reinforced marketing/ expansion of dealer network

Opening ceremony in April 2018
Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 201821

Market Trend (ASEAN: Thailand)≫ Although our order intake goes below the plan due to inventory
adjustment at the local distributor, their sales remained active.

1. Trend in the market
Rice price is rising for now. Market demand is expected to rise thanks to rice price hike inlight of decreased amount of rice inventory in Thailand.
2. Situation of the local distributor “IST Farm Machinery” (Investment 80% by Mitsubishi Corporation, 20% by ISEKI)(Changed its corporate name from Iseki Sales (Thailand))Number of units sold (ASEAN strategy tractor, Jan.-Mar.): YoY 125%

3. Current sales and orders at ISEKI
Order & Shipment (Jan.-Jun.2018) : YoY 72%

Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 201822

Market Trend (ASEAN: Others)≫ Tender in Indonesia: While combine harvesters decreased, tractors andrice transplanters increased.
■ Indonesia
 Market trend
Promotion of mechanization by government initiative that has been started since 2015
(Government tender) Our situation
Models for the tender vary each fiscal year. While the number of combine harvesters
decreased, tractors and rice transplanters increased from the previous year.
■ Others (Myanmar, etc.)
 Market trend
Market demand is expected to rise asmechanization proceeds.
 Our situation
Aims to expand business domains with IST
Farm Machinery and AGCO

Consolidated net sales (ASEAN)(JPY bn)

2
1.5

1.3

1.5
1.0

1
0.5
0
1Q

2Q

3Q

FY 2017/Dec.

Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 2018

4Q

1Q
FY 2018/Dec.

23

Improved Revenue in Indonesia Business≫Kept profitability as planned. Upgrade the systems to increase the production.

PT. ISEKI INDONESIA(Units, JPY bn)

2014
2015
2016
2017
Results Results Results Results

2018
Target2018
Jan.-Mar.

Production
Volume

1,100

3,900

7,300

8,400

12,0002,700

Net sales

1.4

4.5

7.9

9.6

11.5

2.6

Operatingincome

(0.3)

(0.4)

(0.3)

0.3

0.3 *

0.1

* A ¥0.2 billion unit price revision is planned in 2018, in partnership with the parent company. The real operating incometarget is ¥0.5 billion.

<Planning increased production for PT. ISEKI INDONESIA>
Current production
Capacity

10,000 units/year

2019: 15,000 units/year
2021: 20,000 unit

Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 201824

Trends in Overseas Markets (China)≫ There is a mood of holding off purchases in the market due to delayedannouncement of subsidy and decreased price of rice and wheat while thetotal amount of subsidy remained in the same level as the previous year.
1. Trend in Chinese Market■ National government subsidy(RMB bn)

2012

2013

2014

2015

2016

2017

2018

21.5

21.75

23.8

23.8

23.7

18.6

18.6

Net sales of Dongfeng Iseki(local currency base)

2. Situation of Dongfeng Iseki(RMB million)

300

Unit sales of Dongfeng Iseki (Jan.-Mar. 2018)
As for domestic sales in China, the sales of ricetransplanters decreased due to the effect of delayedannouncement of distribution of subsidy.
As for export to ASEAN, combine harvesters shipped toIndonesia decreased.

250
200

192

180
128

150

82

100

40
50
0
1Q

2Q

3Q

FY 2017/Dec.

Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 2018

4Q

1Q
FY 2018/Dec.

25

3.Performance Forecast For the Fiscal
Year Ending December, 2018

Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 2018

Performance Forecast for FY ending Dec.18≫No change from initial forecast

Performance forecast(単位：億円)FY ended Dec.17
ActualFY ending Dec.18
Forecastyoy
Change2Q

Full year

2Q

Full year

2Q

Full year

Net Sales

80.2

158.4

86.0

164.5

5.8

6.1

Operating Income

2.8

4.0

2.0

4.5

(0.8)

0.5

Ordinary Income

3.4

4.2

1.8

4.3

(1.6)

0.1

Profit attributableto owners of parent

2.2

2.8

1.6

3.2

(0.6)

0.4

※Forex rate assumption：¥110 to the US$,¥130 to the Euro

Foreign exchange sensitivity (Operating Income)FY ending Dec.18
US$

13

Euro

18

(JPY million)

Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 201827

４．TOPIX– Our efforts to promote agribusiness -Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 2018

Support for local revitalization throughpartnerships with governments① Wakayama Pref. “Hata-gombo” (a kind of
burdock) cultivation
2011~ (Revival of the local traditional crop) Introduction of tractors and burdock
harvesting machines② Ishikawa Pref. “Noto-dainagon”(a kind of adzukibeans) cultivation2013~ (Technical proposal of prolific cultivation
technique of adzuki beans) Introduction of low-crop type combine harvesters③ Mie Pref. Mechanized cultivation of sesame
2016~ (Support for expansion of producing
areas of sesame)④ Ibaraki Pref. Mechanized cultivation of
buckwheat2016~ (Local revitalization by local productbuckwheat) Introduction of soybean combine harvesters, riding
tillers, vegetable transplanters, flat-type drying
machines 2 units, molding machines and seeders.

 Introduction of working implements for riding tillers

Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 201829

Support for companies entering different industries①Nankai Farm (Kanagawa Pref.) 2011~②Agurinku (Yamaguchi Pref. ) 2012~“Recycling business of consumables of copying machines” “Consumers’ Cooperative”

Rice, soybeans, vegetables

Rice, wheat, fruit tree

Introduction of tractors, combine harvesters, onion transplanters

Tractors, rice transplanters, drying machines③JR Kyushu Farm Itoshima Farm (Fukuoka Pref.) 2016~“Public transport”

Open field vegetables (carrot, cabbage, Japanese white radish, etc.)

Abandoned fields of cultivation
covered with weeds

Weeding work

Soil disinfection using solar heat as acountermeasure for soil disease

Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 2018

Introduction of tractors, working implements
for tractors, vegetable transplanters, tillers, etc.

30Notes on the Future Forecast• The objective of this presentation document is to provide information and never intends to induce
any action.
• The document was created by ISEKI with currently available information and it involves potential
risks and uncertainties. The forecast may not be consistent with actual results depending on
fluctuation of the economic situation and market trends.
• In using this information, investors are expected to depend on their own judgment. ISEKI is notliable for any losses incurred by investment decision made utilizing the business forecast or
targets given in this document.

ISEKI group is a promotional partner of FOOD ACTION NIPPON.

ISEKI Group joins the nationwide action called “COOL CHOICE”
run by the Ministry of the Environment Government of Japan,
which promotes to make ”smart choices” for the global warming.
As a proposal of “smart choices”, we develop and deliverenvironmental-friendly products like “eco products”.

Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 201831