Financial Results for the First Quarter
Fiscal Year Ending December 2019
Investor Relations Presentation Materials
President Shirou Tomiyasu

May 16,2019Index１．Outline of Financial Results for the First Quarter
Fiscal Year Ending December, 2019
２．Domestic and Overseas Markets
３．Performance Forecast for the Fiscal Year Ending
December 31, 2019
４．Topics
Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 20192

*Points of Today’s Explanation■Results of the First Quarter of the Fiscal Year ending December 31, 2019
<Y o Y>Net sales： Domestic) Decreased as a reaction to major facility works in the same periodof the previous year
Overseas) While sales remained solid in North America and Europe, it
declined due to local inventory adjustments in China and ASEAN.

Operatingincome： In spite of a decline in gross profits due to reduced sales, profit margin was
improved due to disappearance of temporary factors in the previous year.
There was a reduction in selling, general and administrative expenses, but
operating income resulted in -0.2 billion yen.

<Compared to the plan>
While domestic sales was unattained, profits remained almost in line withthe plan due to reduction in selling, general and administrative expenses.
Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 20193

１．Outline of Financial Results for
the First Quarter Fiscal YearEnding December, 2019

Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 2019

Outline of Consolidated Business Performance(JPY bn,%)

1Q of FY
ended Dec.18

1Q of FY
ending Dec.19

YoY
changeDiff.
(Target/Actual)Actual％Actual％Net Sales

36.8

100.0

33.3

100.0

(3.5)

(1.4)

(Domestic)

28.4

77.1

25.4

76.2

(3.0)

(2.0)

(Overseas)

8.4

22.9

7.9

23.8

(0.5)

0.6

Operating Income

(0.6)

(1.6)

(0.8)

(2.2)

(0.2)

0.0

Ordinary Income

(0.9)

(2.5)

(1.1)

(3.3)

(0.2)

(0.1)

Profit (Loss) attributableto owners of parent

(0.3)

(0.9)

(0.4)

(1.4)

(0.1)

(0.1)
.

Exchange

US$

110.1

110.5

0.4

2.5

rate

Euro

134.3

126.3

(8.0)

1.3

Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 20195

Domestic Sales
YoY-¥3.0 billion

Farming implements, spare parts and repair fees continued to perform solidly.
Sales in construction of facilities declined due to disappearance of major construction
works in the previous year.
1Q of FY
ended
Dec.18Actual1Q of FY
endingDec.19ActualCultivating & Mowing
Machinery

7.2

6.7

(0.5)

Planting Machinery

2.2

2.2

Harvesting & Processing
Machinery

2.8

Total

Note

Diff.
(Target/Actual)Tractors: (0.4)(0.7)

【Sales trends for farming implements,
spare parts, repair fees 】

0.0

(0.2)

(Jan.-Mar. JPY bn)

2.8

0.0

0.0

12.2

11.7

(0.5)

(0.9)

Farming Implements

4.9

4.9

0.0

(0.2)

Spare Parts

2.7

2.8

0.1

(0.1)

Repair Fees

1.0

1.0

0.0

(0.1)

Total

8.6

8.7

0.1

(0.4)

Total

20.8

20.4

(0.4)

(1.3)

Construction of Facilities

2.7

0.6

(2.1)

(0.3)

Others

4.9

4.4

(0.5)

(0.4)

Total

28.4

25.4

(3.0)

(2.0)

Agricultural Machinery(JPY bn)

Agricultural Machinery Related

YoYchangeFinancial Results Briefing for the First Quarter Fiscal Year Ending December 31, 2019

8.7
8.6
8.4

8.1

FY2016/12 FY2017/12 FY2018/12 FY2019/12

6

Overseas Sales
YoY-¥0.5 billion

While sales remained solid in North America and Europe, it declined in China and ASEAN
due to local inventory adjustments.
YoYchange1Q of FY
ended
Dec.18Actual1Q of FY
endingDec.19ActualNorth America

2.5

2.8

0.3

Europe

2.5

2.4

(0.1)

(JPY bn)

China

0.7

0.0

Note
Tractors: 0.3

Diff.
(Target/Actual)【Overseas Sales】

(0.2)
0.5

9.5
8.2

(0.7)

Local inventory adjustment,
Rice trans planters: (0.6)

(0.1)
0.2
0.1

ASEAN

1.0

0.6

(0.4)

Local inventory adjustment inThailand,Tractors: (0.3)

Others

0.9

1.1

0.2

Korea：0.2

Product Sales Total

7.6

6.9

(0.7)

0.5

Parts & Others

0.8

1.0

0.2

0.1

8.4

7.9

(0.5)

0.6

Total Sales(Jan.-Mar. JPY bn)

Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 2019

8.4

7.9

FY2016/12 FY2017/12 FY2018/12 FY2019/12

7

Operating Income
YoY-¥0.2 billion

Profit margin of operating income improved due to disappearance of temporary factors in
the previous period. The income was reduced Y o Y by declined gross profits from reduced
sales.
(JPY bn, %)Net Sales

1Q of FY
ended
Dec.18Actual1Q of FY
endingDec.19ActualYoYchangeDiff.
(Target/Actual)

36.8

33.3

(3.5)

(1.4)

Gross Profit

9.9

9.6

(0.3)

(0.4)

Gross Profit
Margin

27.0%

28.9%

1.9%

0.1%

S.G&A.
Expenses

10.5

10.4

(0.1)

(0.4)

Personnel
Expenses

6.2

6.1

(0.1)

(0.2)

Other Expenses

4.3

4.3

0.0

(0.2)

(0.6)

(0.8)

(0.2)

0.0

Operating
Income[Breakdown of YoY Change]
1Q of FY
ended
Dec.18(0.6)※

Decreased grossmargin due todecreased
revenue

Decrease intemporaryfactors last year

Decreased
S.G&A. expenses

(0.6)

0.3

0.1

1Q of FY
endingDec.19(0.8)※temporary factors last year：＋0.2
・Decreased temporary factors such as the application of the principle ofcalculating retirement benefits upon the merger of subsidiaries
・Decreased profitability deterioration due to unprofitable construction work ＋0.1

[Effect of forex fluctuations (JPY bn)]
Net Sales

Cost ofSales

S.G&A.
Expenses

Operating
Income

(0.1)

(0.1)

-

0.0

Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 20198

Ordinary Income, Quarterly Net Income
Ordinary
IncomeYoY-¥0.2 billion

Decreased due to appropriation of investment loss on equity method and foreign-exchange
losses1Q of FY
ended
Dec.18Actual1Q of FY
endingDec.19ActualYoYchangeOperating Income

(0.6)

(0.8)

(0.2)

0.0

Balance of Financial Income

(0.2)

(0.2)

0.0

0.0

Other Non-operating Income

(0.1)

(0.1)

0.0

(0.1)

Ordinary Income

(0.9)

(1.1)

(0.2)

(0.1)

Extraordinary Income

0.0

0.0

0.0

0.0

(JPY bn)

Diff.
(Target/Actual)Non-operating Income (YoY change)

Foreign exchange gains orlosses+¥0.2 billion

Share of profit or loss of entities
using equity method-¥0.2 billion[Share of profit or loss of entities using equity method](JPY bn)

0.0

0.0

0.0

0.0

Income before Income
Taxes

(0.9)

(1.1)

(0.2)

(0.1)

Income Taxes - Deferred

0.6

0.7

0.1

0.0

Profit (Loss) Attributableto Owners of Parent

(0.3)

(0.4)

(0.1)

(0.1)

Extraordinary Losses

FY2018/12

FY2019/12

Change

(0.2)

(0.4)

(0.2)

Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 20199

Balance Sheet (Consolidated)
Trade receivable decreased and inventory increased due to reduced sales.
On the other hand, interest bearing liabilities increased due to increased capital investment
and advances to affiliates.

YoY

As of
Mar.18As of
Mar.19YoY
ChangeAs of
Mar.18As of
Mar.19YoY
ChangeCash & Deposits

8.4

8.1

(0.3)

Accounts Payable - Trade

44.4

43.7

(0.7)

Accounts Receivable – Trade

32.4

28.0

(4.4)

Interest-bearing Liabilities

74.9

76.9

2.0

Inventories

56.5

58.2

1.7

(Loans Payable)

68.3

69.0

0.7

Other Current Assets

2.6

5.8

3.2

(Lease obligations)

6.6

7.9

1.3

(Short-term loans receivable)

0.0

2.8

2.8

Other Liabilities

21.8

22.1

0.3

Total Current Assets

99.9

100.1

0.2

Total Liabilities

141.1

142.7

1.6

Property, plant and equipment

95.6

97.5

1.9

Net Assets

Intangible assets

1.1

1.2

0.1

69.1

67.9

(1.2)

Investments and Other Assets

13.6

11.8

(1.8)

(Retained Earnings)

15.5

15.8

0.3

(Investment securities、Capital)

8.8

7.2

(1.6)

(Valuation Difference on Available-for-sale Securities)

1.2

0.5

(0.7)

Total Non-current Assets

110.3

110.5

0.2

(Foreign Currency Translation Adjustment)

1.0

0.9

(0.1)

Total Assets

210.2

210.6

0.4

Total Liabilities and Net Assets

210.2

210.6

0.4

(JPY bn)

Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 201910

２．Domestic and Overseas Markets

Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 2019

Domestic Agricultural Machinery Market Trends
Domestic
agricultural
machinedemandDomestic demand for agricultural machinery is flat

■Agricultural machinery demand (shipments in the industry)(9 principal machinery, moving annual total)(JPY bn)

280.0
260.0
240.0
220.0
Mar.

Jun.

Sep.

2015

Dec.

Mar.

Jun.

Sep.

2016

Dec.

Mar.

Jun.

Sep.

Dec.

2017

Mar.

Jun.

Sep.

2018

Dec.

Mar.
2019

*9 principal machinery: Tractors, combine harvesters, rice transplanters, tillers, drying machines, rice huskers, binders, harvesters, treatment
Source: Estimated by ISEKI from statistics provided by the Japan Agricultural Machinery Manufacturers Association

Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 201912

Domestic Agricultural Machinery Shipments and
ISEKI’s Performance
Domestic
agricultural
machinedemandISEKI remained in line with the previous year

YoY growth rate for 9 principal machinery categories (moving annual total)*ISEKI estimates

FY2017/3

FY2018/3

FY2019/3

Industry(Amount of shipment)

101%

100%

104%

ISEKI

(Sales amount)

91%

101%

99%

(%)

*9 principal machinery: Tractors, combine harvesters, rice transplanters, tillers, drying machines,
rice huskers, binders, harvesters, treatment
Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 201913

Open Innovation System
Smart
Agriculture

Smart Agriculture Toward provision of the integrated system of smart agriculture
mechanization in wet rice cultivation, we start offering of growth management/growth
diagnosis products.
Offering to start <Growth management/ growth
diagnosis products><ISEKI’s smart agricultural machinery>Un-manned
agricultural machinery(Robot tractor)

Growth management

Fertility
Amount offertilization

Yield ofindividual field

Satellite

Water level
and water
temperature(1) Paddy watch(vegitalia, inc.)water
supplyCooperation

Field information
Work record

Water level/water temperature sensor for wet rice cultivation>Monitoring water level/water temperature from remote place bysmart phones and personal computers
Multi-function type water supplying equipment>Water supply is opened/closed automatically.
Labor saving in water management work and water saving
effect(2) Water circulation(SEKISUI CHEMICAL CO., LTD.)

Growth diagnosis
Image analysis

Confirmation ofdryness
Drying results

Drone
Yield for each field
Moisture

Growth index
Amount of extra
fertilizer*Including those under study

Leaf color analysis cloud service>Record field condition by analyzing drone images.
Facilitate daily check of leaf color, realizing detailed production
management(SkymatiX, Inc.)(4) Appare

Agri-business support service>Diagnose growth condition by analyzing satellite or drone
images. Grasp protein content or moisture content of rice husks.

(KOKUSAI KOGYO CO., LTD.)

Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 201914

Recent Market Trends Overseas
Overseasordersreceived

Almost as planned(JPY bn) 35.0

FY2019/12 Forecast(announced Feb. 13)¥32.6 billion

30.0
25.0

Orders20.0
15.0
FY2018/12 Results

10.0¥28.4 billion

5.0
0.0
Jan.

Feb.

Mar.

Apr.

May

Jun.

Jul.

Aug.

Sep.

Oct.

Nov.

Dec.

*Based on finished products. “Parts & Others” is not included.
Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 201915

Market Trend (North America)
North
America

Sales of both compact and utility tractors by AGCO outperformed the market. Ourorders received also remained solid centering on compact tractors in line with strong
sales by AGCO.

1. Trend in the market(1000 units, %)Category

40HP and lower(Compact tractors)

40HP - 100HP(Utility tractors)

100PS and aboveJan.-Mar.2018

29

13

4

Jan.-Mar. 2019

31

12

4

Differences (%)

109%

97%

94%

(Source: AEM Statistics)

3. Our situation for sales and orders
Order & shipment(Jan.-Jun. 2019)(JPY bn) Consolidated net
sales (ISEKI to AGCO)(JPY bn)

606
505
404

2. Situation of AGCO (OEM partner)
Unit sales (Jan.-Mar.2019)
 Compact tractors : YoY: YoY
 Utility tractors

113%

: YoY

303

3.1
2.5

2.7

2.5

3Q

4Q

2.8

202

117%
100%

101
0
1Q

2Q
FY 2018/Dec.

Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 2019

1Q
FY 2019/Dec.

16

Market Trend (Europe)
EuropeWeather conditions backed up the performance in landscaping market. Our orders received
declined Y o Y as scheduled in anticipation of the model change in the second half.

3. Current sales and orders at ISEKI

1. Trend in the market
With respect to landscaping market, its winter businessremained solid centering on Germany and Northern Europe due
to increased amount of snowfall. We also expect demand forlawnmowers due to favorable weather in early spring. On theother hand, the pace of economic recovery in the Eurozone has
been decelerated as a whole. We watch the prospects carefully
including the issue of exit of the UK from the EU.

Order & Shipment(Jan.-Jun.2019)

Despite influence of the shipping adjustment before the model change (tractors),
local sales remained fairly solid, and we expect a recovery in the second halfthrough the introduction of new products.
(JPY bn)

2. Situation of distributors

505 Unit sales (Jan.-Mar.2019)

404
303

• Local distributors : YoY 110%
(Unit sold base)

: YoY
77%
: Vs plan 100%

Consolidated net sales (Europe)
3.5
2.5

2.4

2.5

3Q

4Q

2.4

202
101
0
1Q

2Q
FY 2018/Dec.

Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 2019

1Q
FY 2019/Dec.

17

Market Trend (ASEAN: Thailand)
ThailandIntensified sales competition due to expansion of sales financing, etc. by our competitors

3. Current sales and orders at ISEKI

1. Trend in the market
Competition has been intensified through progressedsales promotion drive including provision of zero- down
payment for users.

2. Situation of the local distributor “IST Farm
Machinery”

Order & Shipment (Jan.-Jun.2019) : Substantial decline byinventory adjustment• While our order & shipment declined substantially due torestrained purchase by IST, reduction in the tradeinventory progressed.

(Investment 80% by Mitsubishi Corporation, 20% by ISEKI)

Number of units sold (ASEAN strategy tractor,
Jan.-Mar.2019): YoY 88%

Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 201918

Market Trend (ASEAN: Others)
ASEAN
OthersWe promote sales expansion through enhanced sales & service system by ISEKI
Thailand and tie-ups with our partners in other areas.

■Indonesia■Others (Myanmar, etc.)

 Market trend
Promotion of mechanization by government initiative which
has continued from 2015 (Government tender)
While government tender continued in 2019, we took wait
and see attitude toward the presidential election. Sinceelection is over and the present government will continue,
we expect tender in the second half.
 Our situation
We secured orders received as a normal-year until April.
We strengthened sales and service support for our
distributors. In anticipation of future market expansion, we
started establishment of a supply system of repair parts with
ISEKI Thailand as its base.

 Market trend
Demand expected through progress inmechanization
 Our situation
We aim at sales expansion in ASEAN taking
advantage of sales network owned by IST Farm
Machinery and AGCO.
Consolidated net sales (ASEAN)(JPY bn)
（億円）

202
1.4
101

1.0

1.0
0.6

0.5
0
1Q

2Q

3Q

FY 2017/Dec.
Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 2019

4Q

1Q
FY 2018/Dec.

19

PT. ISEKI INDONESIA (Manufacturing subsidiary)
PT. ISEKI
INDONESIA

Number of unit manufactured and operating income for Jan.- Mar. were in line with the plan.
We promote further enhancement of profitability as the base station for earning abroad.
(Units, JPY bn)

2014
Results

2015
Results

2016
Results

2017
Results

2018
Results

2019
Plan

2019
Jan.–Mar.

Production Volume

110

390

730

840

970

1,200

313.5

Operating income

(0.3)

(0.4)

(0.3)

0.3

0.1

0.3

0.05

2017
2017年

2018
2018年

2019
2019年

<Trend of production volume>

2014
2014年

2015
2015年

2016
2016年

Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 201920

Trends in Overseas Markets (China)
Purchasing price of rice and wheat remains at a low level, and it willtake more time before the market recovers.

China

1. National government subsidy
2012

2013

2014

2015

(RMB bn)

2016

2017

2018

2019

21.5 21.75 23.8 23.8 23.7 18.6 18.6 18.0

3. Situation of Dongfeng Iseki In domestic sales in China, sales of ricetransplnters decreased substantially.
(RMB million)

2. Jan.-Mar. 2019 trends in the agricultural machinery industry (Y o Y change, units)

(％)

300
250

*Industry

200

(30)%

150

Rice transplanters (riding)
Combine harvesters (all-purpose, autothreshing)＋ 2%

Tractors (medium- to large sized)＋ 2%*Source: China Association of Agricultural Machinery Manufacturers

Net sales of Dongfeng Iseki (local currency base)

100

188

82

72

70
44

50
0
1Q

Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 2019

2Q

3Q

FY2018/Dec.

4Q

1Q

FY2019/Dec.

21

３．Performance Forecast for the
Fiscal Year Ending
December 31, 2019

Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 2019

Performance Forecast for the Fiscal Year Ending
December 31, 2019
Performance
forecast

No change from initial forecast

Performance forecast(JPY bn)
FY ended Dec.18 Actual

FY ending Dec.19 Forecast(Announced on February 13, 2019)

Y o Y Change

2Q

Full year

2Q

Full year

2Q

Full year

Net Sales

82.2

156.0

81.8

164.0

(0.4)

8.0

Operating Income

2.2

3.2

1.9

4.0

(0.3)

0.8

Ordinary Income

1.8

2.6

1.6

2.6

(0.2)

0.0

Profit attributable toowners of parent

1.6

1.1

1.4

1.6

(0.2)

0.5

※Forex rate assumption:¥108 to the US$、¥125 to the Euro

Foreign exchange sensitivity(million JPY , operating income basis)
FY2019/12
US$

7

Euro

15
Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 201923

４．Topics

Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 2019

Domestic: G20 Niigata Agriculture Ministers’ Meeting

To be held May 11 – 12 in Niigata City
(1) Overall theme“Toward sustainability of Agro-Food Sector- Emerging issues and good practices”(2) Major issues to be discussed
1) Fostering of next generation and innovative bearers ofagriculture and new technologies
2) Measures for profit improvement of farmers and others
focusing on Food Value Chain as a whole
3) Corresponding methods of parties concerned towardachievement of SDGs

Toward sustainable agriculture”Smart Agriculture” is discussed as asolution to the issues

Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 201925

Domestic: G20 Niigata Agriculture Ministers’ Meeting Introduction of Smart Agriculture[Site visit]






Demonstration of robot tractor
Demonstration of automatic driving ricetransplanter(NARO*)
Exhibition of variable fertilizing rice transplanter
Introduction of inter-business cooperation
demonstration projects
Demonstration of agrochemical spraying by drones, etc.
*NARO: Research Center for Agricultural Information Technology

 Introduction of Agro-women Projects

Dreamful “Agro-women”
support projectAgro-women PJ

Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 201926

DBJ Environment Responsibility Rating Finance

Acquisition of the highest rating for 13 consecutive times
The highest rating was given by Development Bank of Japan for
13 consecutive times being evaluated as “Consideration for theenvironment is particularly advanced”.

DBJ Environment Responsibility Rating<Evaluation points in the latest rating>1) Value creation processes through the business have been disclosed based on the trend of
information disclosure.
2) Striving for the sophistication through its engagement toward establishment of sustainable supply
chains.
3) Continuing support for farmers both inside and outside of the country through provision of fresh
solutions.
Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 201927

Examples of Evaluation Points
Point: Continuing support for farmers both inside and outside of the country throughprovision of fresh solutions in light of structural changes of agriculture
Structural changes in agriculture

Provision of fresh solutions• Smart agricultural machinery• Dwindling agriculture
population• Large scaling• Crop conversion, etc.

• Smart agricultural machinery
Robot tractor, yield combine , straight-travel assisted
rice transplanter/ variable fertilizing rice transplanter,etc.

* GAP (Good Agricultural Practice: Process managementof agricultural production)
Engagement in production process management ofagriculture in order to secure food safety, environment
preservation, labor safety, etc.

• Agri-business software
Proposal of integrated system of rice cultivation
mechanization
Proposal /support toward diffusion of smart agriculture• Support for acquisition of GAP certification

Financial Results Briefing for the First Quarter Fiscal Year Ending December 31, 2019

etc.

28

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 anduncertainties. 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 not liable 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, 201929