Financial Results for the
Fiscal Year Ended December 31, 2018
Investor Relations Presentation Materials
ISEKI & CO., LTD.
Akio Kikuchi,
ChairmanFebruary 15, 2019

Financial Results Briefing for the Fiscal Year Ended December 31, 2018

Index
1. Outline of Financial Results for the Fiscal
Year Ended December 31, 2018
2. Recent Development in Domestic andOverseas Markets
3. Performance Forecast for
the Fiscal Year Ending
December 31, 2019
4. Mid-term Management Plan
Financial Results Briefing for the Fiscal Year Ended December 31, 20182

*Presentation Highlights■Business Performance for the Fiscal Year
Ended December 31, 2018
Decreased revenue and income
Overseas: Growth engine: China and ASEAN business stagnant:■Forecast for the Fiscal Year Ending
December 31, 2019
Moderate recovery in spite of increased
revenue and income forecast■2020 Mid-term Management Plan
Numerical targets extended about 2 years
・Basic strategies remains the same
Financial Results Briefing for the Fiscal Year Ended December 31, 20183

1. Outline of Financial Results for the
Fiscal Year Ended December 31, 2018

Financial Results Briefing for the Fiscal Year Ended December 31, 2018

Outline of Consolidated Business Performance(JPY bn, %)FY2015/12

FY2016/12

Results*1 Results

FY2017/12

Results%

FY2018/12

Results%

YoY
ChangeDifference(forecast/results)*2

Net Sales

156.8 153.1 158.4 100.0 156.0 100.0 (2.4)

1.0(Domestic)

125.4 121.0 123.1

77.7

122.8

78.7

(0.3)

0.9

(Overseas)

31.4

32.1

35.3

22.3

33.2

21.3

(2.1)

0.1

Operating Income

0.2

2.5

4.0

2.5

3.2

2.0

(0.8)

±0.0

Ordinary Income

0.4

1.6

4.2

2.7

2.6

1.7

(1.6)

±0.0

0.9

2.8

1.8

1.1

0.7

(1.7)

(0.3)

Profit (Loss) Attributableto Owners of Parent

Exchange
Rate
(JPY)

US$

119.9 108.6

112.1

110.2

(1.9)

0.2

Euro

134.9 120.1

126.8

130.9

4.1

0.9

*1: FY2015/12 consisted of 9 months due to a change in the fiscal year-end,
and has been adjusted and calculated for 12 months.

*2: Difference (forecast/results) is a comparison withthe forecast announced on November 12, 2018.

Financial Results Briefing for the Fiscal Year Ended December 31, 2018

5

Domestic Sales≫Sales increased due to the launch of new rice transplanters
Farming implements, spare parts, repair fees remains strong(JPY bn)
YoY Change

Difference(forecast/results) *2

FY2017/12

FY2018/12

Results*1

Results

Results

Results

Cultivating & Mowing
Machinery

30.1

27.6

28.2

27.4

(0.8)

Tractors: (0.6)

1.0

Planting Machinery

9.9

9.1

8.5

9.2

0.7

Rice transplanters: 0.4
Transplanters: 0.3±0.0

Harvesting & Processing
Machinery

21.9

20.9

20.4

20.0

(0.4)

Combine harvesters: (0.2)

(0.3)

Total

61.9

57.6

57.1

56.6

(0.5)

0.7

Farming Implements

18.0

19.0

19.7

20.2

0.5

(0.3)

Spare Parts

14.1

14.4

14.7

14.8

0.1

(0.1)

Repair Fees

4.9

5.2

5.4

5.6

0.2

±0.0

Total

37.0

38.6

39.8

40.6

0.8

(0.4)

Total

98.9

96.2

96.9

97.2

0.3

0.3

Construction of Facilities

5.5

5.1

6.6

5.7

(0.9)

0.3

Others

21.0

19.7

19.6

19.9

0.3

0.3

Total

125.4

121.0

123.1

122.8

(0.3)

0.9

Agricultural Machinery

FY2016/12

Agricultural Machinery Related

FY2015/12*1: FY2015/12 consisted of 9 months due to a change in the fiscal year-end,
and has been adjusted and calculated for 12 months.

Note*2: Difference (forecast/results) is a comparison withthe forecast announced on November 12, 2018.

Financial Results Briefing for the Fiscal Year Ended December 31, 20186

Overseas Sales≫Sales decreased due to local inventory adjustment in China and ASEAN(JPY bn)

North America

FY2015/12

FY2016/12

FY2017/12

FY2018/12

YoY Change

Results*1

Results

Results

Results

Note

Difference(forecast/results) *2

10.8

Disappearance of effects ofchanges in business termswith OEM partner

0.1

12.8

10.7

9.1

1.7

Tractors: 1.5

Europe

11.0

9.3

10.7

10.9

0.2

Lawn mowers: 0.2

(0.5)

China

1.1

3.2

3.8

1.0

(2.8)

Local inventory
adjustment,
Rice transplanters: (2.4)

±0.0

ASEAN

1.8

3.0

4.8

3.9

(0.9)

Combine harvesters:
(0.9)

0.2

Others

1.9

2.0

2.7

1.8

(0.9)

Tractors: (0.9)

0.1Product Sales Total

28.6

28.2

31.1

28.4

(2.7)

(0.1)

Parts & Others

2.8

3.9

4.2

4.8

0.6

0.2

Total Sales

31.4

32.1

35.3

33.2

(2.1)

0.1

Overseas Sales
incl. Chinese Business

38.0

37.0

38.7

37.0

(1.7)

(1.5)

Overseas Net Sales Ratio

23.2%

23.4%

23.9%

23.2%

(0.7)%(0.8)%*1: FY2015/12 consisted of 9 months due to a change in the fiscal year-end,
and has been adjusted and calculated for 12 months.

*2: Difference (forecast/results) is a comparison withthe forecast announced on November 12, 2018.

Financial Results Briefing for the Fiscal Year Ended December 31, 20187

Operating Income≫Operating income decreased as a result of a decrease in gross margin due to decreased revenue
and temporary factors such as the application of the principle of calculating retirement benefits
upon the merger of subsidiaries, as well as increased development costs, etc.
(JPY bn, %)Net Sales

FY2017/12

FY2018/12

Results

Results

158.4

Difference(forecast/results) *YoY
Change

156.0

(2.4)

46.2

46.0

(0.2)

(0.5)

Gross Profit
Margin

29.2%

29.5%

0.3%

(0.5)%

S.G&A. Expenses

42.2

42.8

0.6

(0.5)

Personnel
Expenses

24.9

25.4

0.5

±0.0

Operating
Income

17.3

4.0

17.4

0.1

3.2

(0.5)

±0.0

(0.8)

* Difference (forecast/results) is a comparison with the forecast
announced on November 12, 2018.

[Effect of forex fluctuations (JPY bn)]
Net Sales(0.1)

FY2017/12

1.0

Gross Profit

Other
Expenses[Breakdown of YoY Change (JPY bn)]

Cost ofSales

S.G&A.
Expenses

Operating
Income

0.0

0.0

(0.1)

4.0

Decreasedgross
profitDecreased
grossmarginduefromtodecreasedrevenue
revenuedecreased(0.7)

Increased
SG&Aexpenses
expenses
Increased
S.G&A.

(0.6)

Unprofitable construction offacilities(0.2)

Decreased
provision
for loss
Decreased
provision
foron
constructioncontract
contractsloss
fromfrom
construction
previous
fiscalFY
year
previous

0.4

Retirement benefit burden(0.2)

Increased
development
Increased
development
expenses
costs

(0.4)

Revenue-expenditure
structural
The effect of revenue andcost
reformin dealers
structureoverhaulin domestic
dealers
Revenue of Indonesia business
improved

0.2

Other factors Others

0.6

FY2018/12

Financial Results Briefing for the Fiscal Year Ended December 31, 2018

0.1

3.2
8

Ordinary Income and Profit≫Ordinary income decreased due to a worsening in foreign exchange gains or losses
and in the share of profit or loss of entities using the equity method in China(JPY bn)

Results

YoYchangeDifference(forecast/results) *

4.0

3.2

(0.8)

±0.0

Non-operating Income (YoY change)

Balance of Financial Income

(0.7)

(0.8)

(0.1)

(0.1)

Foreign exchange gains
or losses-¥0.3 billion

Other Non-operating Income

0.9

0.2

(0.7)

0.1

Share of profit or loss ofentities using equity method-¥0.8 billion

Ordinary Income

4.2

2.6

(1.6)

±0.0

Technical support fee
from TAFE+¥0.5 billion

Extraordinary Income

0.5

0.1

(0.4)

(0.1)

Extraordinary Losses

(0.9)

(0.5)

0.4

(0.1)

Income before Income
Taxes

3.8

2.2

(1.6)

(0.2)

Income Taxes - Deferred

(1.0)

(1.1)

(0.1)

(0.1)

Profit (Loss) Attributable to
Owners of Parent

2.8

1.1

(1.7)

(0.3)

FY2017/12

FY2018/12

Results
Operating Income[Share of profit or loss of entities using equity method](JPY bn)

FY2017/12

FY2018/12

Change

(0.2)

(1.0)

(0.8)

* Difference (forecast/results) is a comparison with the forecast announced on November 12, 2018.
Financial Results Briefing for the Fiscal Year Ended December 31, 20189

Balance Sheet (Consolidated)(JPY bn)
As of
As of
Difference
Dec. 31, 2017 Dec 31, 2018

As of
As of
Difference
Dec. 31, 2017 Dec. 31, 2018

Cash & Deposits

8.0

7.5

(0.5)

Accounts Payable Trade

40.7

39.7

(1.0)

Accounts Receivable Trade

25.1

23.3

(1.8)

Interest-bearing
Liabilities

66.3

69.8

3.5

Inventories

53.4

53.7

0.3

(Loans Payable)

59.6

63.5

3.9

(Merchandise andFinished Goods)

45.4

46.5

1.1

Other Liabilities

23.4

22.8

(0.6)

Other Current Assets

5.2

8.3

3.1

Total Liabilities

130.4

132.3

1.9

Total Current Assets

91.7

92.8

1.1
Net Assets

70.9

68.9

(2.0)

Non-current Assets

96.6

97.9

1.3

Investments and Other
Assets

13.0

10.5

(2.5)

(Retained Earnings)

16.5

16.9

0.4

(Investment Securities)

7.1

5.8

(1.3)

(Valuation Difference on
Available-for-sale
Securities)

1.8

0.4

(1.4)

Total Non-current Assets

109.6

108.4

(1.2)

(Foreign Currency
Translation Adjustment)

1.1

0.9

(0.2)

Total Assets

201.3

201.2

(0.1)

Total Liabilities and Net
Assets

201.3

201.2

(0.1)

Financial Results Briefing for the Fiscal Year Ended December 31, 201810

Interest-bearing Liabilities and Dividends
1. Interest-bearing liabilities(JPY bn)

Balance of interest-bearing liabilities
66.3
69.5
66.8
65.8

80.0
60.0

6.7

6.3

Lease
obligations

56.7

61.4

59.6

63.5

Loans payable/
corporate
bonds

FY2015/3

FY2015/12

FY2016/12

FY2017/12

FY2018/12

9.1

8.1

57.6

9.2

52.2

69.8

7.8

40.0

44.4

20.0
0.0

FY2014/3

D/E Ratio (x)

0.76

0.94

0.97

1.04

0.94

1.01

Equity ratio (%)

34.0%

34.0%

33.0%

32.2%

34.4%

33.4%

Interest-bearing
liabilities (JPY bn)

52.2

66.8

65.8

69.5

66.3

69.8

Net assets (JPY bn)

68.7

71.1

68.1

67.1

70.9

68.9

2. Dividends
Year-end dividend(JPY)

FY2016/12

FY2017/12

FY2018/12 Plan

1.5

30

30

*Effective July 1, 2017, the Company has consolidated shares of its common stock (one-for-ten share consolidation).
Financial Results Briefing for the Fiscal Year Ended December 31, 201811

2. Recent Development in Domestic
and Overseas Markets

Financial Results Briefing for the Fiscal Year Ended December 31, 2018

Domestic Agricultural Machinery Market Trends≫Demand remains bearish and 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.

Dec.

Mar.

Jun.

2015

Sep.

Dec.

Mar.

2016

Jun.

Sep.

Dec.

Mar.

2017

Jun.

Sep.

Dec.

2018

*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■Agricultural machinery demand(Farming implements, trends in vegetable-cultivation machinery, January to December)(JPY bn)

2015

2017

9 principal machinery
categories

245.2

249.0

101.5%

Farming implements,
vegetable-cultivation

52.9

56.3

106.4%

Difference

Increasing demand for farming
implements and vegetablecultivation machinery

Source: Estimated by ISEKI from statistics of the Japan Agricultural Machinery Manufacturers Association

Financial Results Briefing for the Fiscal Year Ended December 31, 201813

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

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

FY2015/12

FY2016/12

FY2017/12

FY2018/12

Industry (Amount of shipment)

84%

103%

99%

100%

ISEKI

94%

90%

102%

99%

(Sales amount)*9 principal machinery: Tractors, combine harvesters, rice transplanters, tillers,
drying machines, rice huskers, binders, harvesters, treatment

Financial Results Briefing for the Fiscal Year Ended December 31, 201814

Domestic Trends in Agricultural Administration■ Ministry of Agriculture, Forestry and Fisheries budget proposal

2018 supplementary budget + 2019 budget: ¥3,031.6 billion(YoY difference: +¥261.5 billion)■ Primary budget allowances for agricultural machinery and facilities
SectionProject nameBudget2019 initial

Smart Agriculture Acceleration Case Study Project¥0.5 bn2018 supp.

Smart Agriculture Technology Development and Case
Study Project¥6.2 bn2019 initial

Within Comprehensive Subsidy for Strong Agriculture andthe Cultivation of Principal Farmers
Supporting Establishment of Management for Advanced
Agriculture
Supporting Cultivation of Regional Principal Farmers¥23.0 bn2018 supp.

Support Program to Strengthen Maintenance andManagement for Principal Farmers

Budget for the projects
to accelerate smart¥5.0 bn
farming2018 supp.

Production Area Vitalization Program¥40.0 bn2018 supp.

Program of Special Measures to Maintain Increased
Profitability for Livestock and Dairy Farming (Livestock
Cluster Program)¥56.0 bn

Financial Results Briefing for the Fiscal Year Ended December 31, 201815

Recent Market Trends Overseas≫Exceeding targets in the period from January to March(JPY bn)

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

35.0

30.0

25.0

20.0

15.0

FY2018/12
Results¥28.4 billion

Orders

10.0

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 Fiscal Year Ended December 31, 201816

Market Trends (North America)≫Sales in FY2018 remains robust owing to favorable sales by AGCO
Sales in FY2019 are expected to increase due mainly to the new models launched last year.

1. Market Trends
PTO
horsepower(Thousand units, %)Compact tractors(40HP and lower)
USA

CanadaJan.-Dec. 2017

142

14

Jan.-Dec. 2018155

Difference (%)

109%

Large class tractors

Utility tractors(40∼100HP)(100HP and above)
USA

Canada

66

17

4

21

6

67

18

4

22

97%

101%

106%

103%

105%

USA

Canada

156

59

7

15

170

60

105%

109%

102%

(Source: ＡＥＭ Statistics)

2. Situation at AGCO (OEM partner)
Unit sales (Jan.-Dec. 2018)
 Compact tractors
 Utility tractors

Consolidated net sales (ISEKI to AGCO)（JPY bn)

15.0

: YoY
: YoY

116%
115% 10.0

3. ISEKI sales and orders
Orders & shipments (Jan.-Mar. 2019)

Changes inbusiness terms

10.8

10.7

12.2

9.1

5.0

: YoY

・Steady in tandem with the sales by AGCO

115%
0.0
FY2016/12

FY2017/12

Financial Results Briefing for the Fiscal Year Ended December 31, 2018

FY2018/12

FY2019/12(Forecast)17

Market Trends (Europe)≫Sales are expected to increase thanks to full-fledged sales by the new
distributor in the U.K. as well as the sales by ISEKI France S.A.S., and to
the launch of new products in the second half of the year.

1. Market trends
Regardless of uncertainties such as Brexit, foreign exchange rates and weather
conditions, the demand in landscaping market for professionals remains solid. So,
sales are expected to be in line with the previous year.

2. Situation for local distributors
 Unit sales (Jan.-Dec. 2018)（JPY bn）

15.0

・Distributors

Consolidated net sales (Europe): YoY 101%

(Unit sold base)

・ISEKI France S.A.S.

: YoY 104%

10.7
10.0

10.9

12.0

9.3

(Consolidated subsidiary, amount base)

5.0

3. ISEKI sales and orders
0.0
Orders and shipments (Jan.-Mar. 2019)

: YoY

81%

FY2016/12 FY2017/12 FY2018/12 FY2019/12(Forecast)・Reduced due to inventory adjustments before the introductionof new model
Financial Results Briefing for the Fiscal Year Ended December 31, 201818

Market Trends (ASEAN: Thailand)≫Sales in FY2018 decreased due to local inventory adjustment
We will overcome the situation by offering support both sales and after-sales
services.

1. Market trends
While the prices of agricultural products remain stable, the consumer mindset has
not been fully recovered yet. There is a possibility of the market demand getting
slightly stronger due to intensifying sales competition.

2. Situation of the local sales company “IST Farm Machinery”[Investment 80% by Mitsubishi Corporation, 20% by ISEKI]

Unit sales in distributor (tractor, Jan.-Dec. 2018) : YoY 88%
Unit sales in dealers (retail) remained in line with the previous year
（JPY bn）

3. Current sales and orders at ISEKI

Consolidated net sales (ASEAN)
4.8

5.0

3.9

4.0

3.0

Orders and shipments (Jan.-Mar. 2019) : Substantial decrease due toinventory adjustment
・Sales of dealer inventory is in progress

0.0
FY2016/12 FY2017/12 FY2018/12 FY2019/12(Forecast)Financial Results Briefing for the Fiscal Year Ended December 31, 201819

Market Trends (ASEAN: Others)≫We will increase sales in cooperation with our partners as well as
strengthen sales and after-sales services by ISEKI (THAILAND).
■Indonesia
 Market trends
Promotion of mechanization by government initiative since 2015 (Government tender). Although thegovernment budget in the provision of tractors is expected to be higher than the last year, it might varydepending on the results of the presidential election in April Our situation
 Our situation
Received average orders until April.
Strengthen support for sales and after-sales services at the distributors. Market demand is expected to
expand in the future, and we will start building a supply system for spare parts in ISEKI (THAILAND).

■Others (Myanmar, etc.)
 Market trends
Market demand is expected to rise as mechanization
proceeds.
 Our situation
Focusing on expanding sales in ASEAN throughthe sales networks of IST Farm Machinery and AGCO.
Financial Results Briefing for the Fiscal Year Ended December 31, 201820

PT. ISEKI INDONESIA (Manufacturing Subsidiary)≫Upgrade systems for increased production. Further strengthen theearnings structure to make more profit in overseas business.
(Units, JPY bn)

2014
Results

2015
Results

2016
Results

2017
Results

2018
Results

2019
TargetProduction
Volume

1,100

3,900

7,300

8,400

9,700

12,000Operating
Income

(0.3)

(0.4)

(0.3)

0.3

0.1

0.3

15,000≪Production volume trends≫
12,0009,700

10,000
8,400
7,300

5,000
3,900

1,100
0
2014

2015

2016

2017

2018

Financial Results Briefing for the Fiscal Year Ended December 31, 20182019 [Target]

21

Market Trends (China)≫ Sluggish due to the delay in the announcement of subsidies by the
Chinese government and decreased prices of rice & wheat in 2018
１. National government subsidy(RMB bn)

2012

2013

2014

2015

2016

2017

2018

2019

21.5

21.75

23.8

23.8

23.7

18.6

18.6

Unannounced

2. Jan.-Dec. 2018 trends in the agricultural machinery industry (YoY change, units)(%)*Industry
Rice transplanters(walk-behind, riding)(31)%

Combine harvesters(all-purpose, auto-threshing)(22)%

Tractors (medium- to large-sized)(21)%*Source: China Association of Agricultural Machinery Manufacturers
Financial Results Briefing for the Fiscal Year Ended December 31, 201822

Market Trends (China: Dongfeng Iseki)≫FY2018/12: Both Chinese domestic sales and exports decreased.
FY2019/12: Work together with the Dongfeng Group to strengthen
operational systems.

1. Situation of Dongfeng Iseki■ Net sales of Dongfeng Iseki (local currency basis) ■ Dongfeng Iseki sales (Jan.-Dec. 2018)
 Sales of rice transplanters decreasedin China.
 As for exports to ASEAN, combine
harvesters shipped to Indonesia
decreased.

（RMB million）

1,000

619

540

494
500

386

0
FY2015/12 FY2016/12 FY2017/12 FY2018/12

 2019Work together with the DongfengGroup to strengthen operational
systems for product development,
manufacture, sales, and after-sales
services.

Financial Results Briefing for the Fiscal Year Ended December 31, 201823

Market Trends (Others)≫South Korea: Launching tractors and combine harvesters
for the high-performance machinery market■South Korea
 Market trends
The market for high-performance machinery is becoming mainstream as farming
population declines.
 Our situation
Through the sales channels of the Tong Yang Moolsan (TYM) Group, the top agricultural
machinery manufacturer in South Korea, we launched the TJ series tractor and the HJ
series combine harvester, the flagship products of the ISEKI brand.
<Launching ISEKI flagship products>

Financial Results Briefing for the Fiscal Year Ended December 31, 201824

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

Financial Results Briefing for the Fiscal Year Ended December 31, 2018

Performance Forecast for the
Fiscal Year Ending December 31, 2019
(JPY bn)

FY2017/12

FY2018/12

FY2019/12

YoY

Results%

Results%

Forecast*%

ChangeNet Sales

158.4

100.0

156.0

100.0

164.0

100.0

8.0

(Domestic)

123.1

77.7

122.8

78.7

126.7

77.3

3.9

(Overseas)

35.3

22.3

33.2

21.3

37.3

22.7

4.1

Operating Income

4.0

2.5

3.2

2.0

4.0

2.4

0.8

Ordinary Income

4.2

2.7

2.6

1.7

2.6

1.6

±0.0

Profit (Loss) Attributable to
Owners of Parent

2.8

1.8

1.1

0.7

1.6

1.0

0.5

Exchangerate
Foreignexchange
sensitivity(million JPY, operating income
basis)

US$

112.1

110.2

108.0

(2.2)

Euro

126.8

130.9

125.0

(5.9)

US$

7

Euro

15
*Forecast: Announced on February 13, 2019

Financial Results Briefing for the Fiscal Year Ended December 31, 201826

Consolidated Operating Income and Dividend Forecast
1. Operating income(JPY bn, %)FY2017/12

FY2018/12

FY2019/12

YoY

Results

Results

Forecast*

ChangeNet Sales

158.4

156.0

164.0

8.0

Gross Profit

46.2

46.0

48.2

2.2

Gross Profit
Margin

29.2%

29.5%

29.4%

(0.1)%

S.G&A.
expenses

42.2

42.8

44.2

1.4

Personnel
Expenses

24.9

25.4

26.0

0.6

Other
Expenses

17.3

17.4

18.2

0.8

4.0

3.2

4.0

0.8

Operating
Income3.2

FY2018/12

Increased gross profit
from increased revenue

2.4

Increased
SG&A
Increased
S.G&A.
expenses
expenses(1.4)

Decreased retirement
benefit burden

0.2

Other

2. Dividend forecast

Year-end dividend[Breakdown of YoY change (JPY bn)]

(0.4)

(JPY bn)

FY2017/12

FY2018/12

Results

Plan

FY2019/12
Forecast*

30

30

30

FY2019/12

4.0*Forecast: Announced on February 13, 2019

Financial Results Briefing for the Fiscal Year Ended December 31, 201827

Breakdown of Domestic Sales
FY2017/12

FY2018/12

FY2019/12

YoY

Results

Results

Forecast*

ChangeCultivating & Mowing
Machinery

28.2

27.4

29.1

1.7

Planting Machinery

8.5

9.2

9.4

0.2

Harvesting &Processing Machinery

20.4

20.0

20.1

0.1

Total

57.1

56.6

58.6

2.0

Farming Implements

19.7

20.2

21.3

1.1

Spare Parts

14.7

14.8

15.3

0.5

Repair Fees

5.4

5.6

5.9

0.3

Total

39.8

40.6

42.5

1.9

Total

96.9

97.2

101.1

3.9

Construction of Facilities

6.6

5.7

5.2

(0.5)

Others

19.6

19.9

20.4

0.5

Total

123.1

122.8

126.7

3.9

Agricultural Machinery

Agricultural Machinery Related(JPY bn)*Forecast: Announced on February 13, 2019

Financial Results Briefing for the Fiscal Year Ended December 31, 201828

Overseas Sales Forecast(JPY bn)

FY2017/12

FY2018/12

FY2019/12

YoY

Results

Results

Forecast*

ChangeNorth America

9.1

10.8

12.2

1.4

Europe

10.7

10.9

12.0

1.1

China

3.8

1.0

0.2

(0.8)

ASEAN

4.8

3.9

4.0

0.1

Others

2.7

1.8

4.2

2.4

Product Sales Total

31.1

28.4

32.6

4.2

Parts & Others

4.2

4.8

4.7

(0.1)

Total

35.3

33.2

37.3

4.1

Overseas Sales incl. ChineseBusiness

38.7

37.0

43.0

6.0

Overseas Net Sales Ratio

23.9%

23.2%

25.3%

2.1%

*Forecast: Announced on February 13, 2019

Financial Results Briefing for the Fiscal Year Ended December 31, 201829

4. Mid-term Management Plan

Financial Results Briefing for the Fiscal Year Ended December 31, 2018

Corporate Philosophy and Mid-Term VisionCorporate philosophy
We are contributing to agriculture both in Japanand throughout the world by...
“Delivering the products that satisfy customers”

Mid-term vision
2025 marks 100th anniversary of ISEKI GroupTo establish a firm position both in domestic andworld market

Financial Results Briefing for the Fiscal Year Ended December 31, 201831

Positioning of the 2020 Mid-term Management Plan

Revision to the current Mid-term Management Plan (2016-2020)
To ensure the process of attaining our target, we
reviewed our strategies for the remaining 3 years
in light of changes in the business environment
Current Mid-term Management Plan
2016-2020
Revision ofstrategies

2020 Mid-term Management
Plan (2018-2020)

Financial Results Briefing for the Fiscal Year Ended December 31, 20182025 marks
Iseki’s 100th
anniversary32

2020 Mid-term Management Plan: Basic Strategies

5 basic strategies:

1 Strengthen responsiveness to drastic changes in agriculture in Japan
2 Expand overseas business
3 Strengthen profitability by optimizing development & production
4 Make active capital investment for growth5

Enhance corporate value by reinforcing personnel &corporate governance

Financial Results Briefing for the Fiscal Year Ended December 31, 201833

2020 Mid-term Management Plan: Numerical Targets
FY2017/12
Results

Expansion ofbusiness domains

Improved
profitability

Shareholder
returns

Net sales(consolidated)

FY2020/12
Targets¥158.4 billion ⇒ ¥190.0 billion

Total overseas net
sales ratio *Operating income(consolidated)

ROE
Dividend per share

24%

⇒

40%

¥4.0 billion ⇒ ¥9.0 billion
4.2%⇒ 8.0% or more

¥30

⇒

¥50

*Total overseas net sales ratio: Overseas net sales ratio including equity method affiliates

Financial Results Briefing for the Fiscal Year Ended December 31, 201834

Changes in Market Environment

Overseas

Domestic

Market environment
Structural changes in agricultural sector
moving faster than expected»Consolidation into principal farmers(Scale increased, downward trend in prices,use of hi-tech equipment)»Switch to field crop and vegetable farming

Continued growth in demand,clear downward pressure on prices»North America: Compact machinery(economy) markets firm»Europe: Increased in demand forenvironmental and hi-tech products»ASEAN: Better agricultural productivity,
increased demand spurred by increasedfood production»China: Some markets stalling due tosubsidy cutbacks

Changes from expectation»Future investment strategies, acceleration of
the promotion of smart agriculture by
agricultural administration»Last-minute rush and pullback due toconsumption tax hike(scheduled for October 2019)»Poor crops due to unseasonable weather,extended periods of rain, etc.

Stagnating growth in ASEAN and
China»ASEAN・Thailand: Intensifying sales
competition»China: Downturn in the agricultural
machinery market due to changing
subsidy policies, falling grain prices,etc.

Financial Results Briefing for the Fiscal Year Ended December 31, 201835

Mid-term Plan Progress(Consolidated Net Sales)2020 mid-term sales targets extended to 2022
(JPY bn)

Overseas Domestic Total Net Sales

200.0

Mid-term plan

¥190.0 billion

190.0

Results,
projections

180.0
170.0
160.0
150.0
140.0

¥135.0 billion

130.0
120.0

60.0

¥55.0 billion

50.0
40.0
30.0

2015

2016

2017

2018

2019

2020

2021

Financial Results Briefing for the Fiscal Year Ended December 31, 2018

2022
36

Mid-term Plan Progress(Consolidated Operating Income)2020 mid-term operating income target extended to 2022
(JPY bn)

10.0¥9.0 billion

Mid-term plan
Results,
projections

5.0

0.0

2015

2016

2017

2018

2019

2020

Financial Results Briefing for the Fiscal Year Ended December 31, 2018

2021

2022
37

Initiatives for Basic Strategies

Domestic

Basic strategies
Strengthen responsiveness to drasticchanges in agriculture in Japan»

Establish sales offices focused around large-scale
maintenance centers
Reorganization of wide-area sales companies
10 site to 8 site system» Develop sales and services into wider area»

Increased farming implements, spare parts, repair
fees, etc. Aim to strengthen base against swings inagricultural machinery demand»

Cultivate personnel who can launch and promote thediffusion of large-sized machinery and smart
agricultural machinery» Strengthen proposal and follow-up support» Overhaul revenue and cost structure» Strengthen product development

Expand overseas business

Overseas

Initiatives» Expand business through enhanced
cooperation in strategic partners» Develop and launch products thatmatch market needs» Build up and expand spare parts andafter-sales service businesses» U.K.
India: Investment in new distributors: Technology and business allianceagreement with TAFE

» Begin trial sales in Asia, Central and SouthAmerica, etc.
China: Begin sales of own-brandagricultural machinery» Strengthen system in ASEAN and China

Financial Results Briefing for the Fiscal Year Ended December 31, 201838

Initiatives for Basic Strategies
Basic strategies
Development &Production

Strengthen profitability by optimizing
development and production

Initiatives»

Promote standardizing and unifying designs, reducing thenumber of models(Limited effect due to shipping delays in products foroverseas)»

Improve profitability of products for overseas market»

Productivity reform through efficiency drive»»

Improve profitability and strengthen marketing
capability of China business (Dongfeng Iseki)»»

Further boost profitability of Indonesia business

While undergoing reform, issues remain in China businessCurrently undergoing drastic reform throughstrengthening operational systems
Make steady improvements in the Indonesia business»

Create systems for increased production at overseas
manufacturing sites»

Indonesia production boosted to 15 thousand units(increase of 5 thousand units)

Capital investment in partial in-house production of engine
supplyOthersMake active capital investment for growth» ¥35.2 billion over 3 years» Implement and continue active capital
investment

Enhance corporate value by reinforcing
personnel and corporate governance» Establish operational efficiency projectWork Style Reform including theutilization of IT, aiming for improved
productivity

Financial Results Briefing for the Fiscal Year Ended December 31, 201839

Domestic: Develop Sales and Services into Wider Area

■ Reorganization of sales system
Review sites and personnel allocation to improve productivity
and profitability
・Wide-area sales companies: 10 sites to 8 sites (From Jan. 1, 2019)
ISEKI Kanto + ISEKI Shinetsu = ISEKI Kanto Koshinetsu
ISEKI Kansai + ISEKI Tokai = ISEKI Kansai Chubu
・Establish sales offices focused around large-scale maintenance centers(Sites renovated in 2018) Expanded maintenance facilities at core sites
Hokkaido (Obihiro Maintenance Factory)

Hokkaido (Okoppe Sales Office)Hokkaido (Toma Sales Office)Tohoku (Okitama Chuo Sales Office)Kanto (Chiba Service Center)

Tokai (Gifu Branch)

Chugoku (Bihoku Sales Office)Financial Results Briefing for the Fiscal Year Ended December 31, 201840

Domestic: Overhaul Revenue and Cost Structure■ Expanding sales from farming implements, spare parts, repair fees
Strengthening base against swings in agricultural machinery demand

Sales trends for farming implements, spareparts, repair fees (JPY bn)
38.6

39.8

40.6

37.0

2015

2016

2017

Financial Results Briefing for the Fiscal Year Ended December 31, 2018

2018

41

Capital Investment
Continuing capital investment for growth¥35.2 billion(JPY bn)» Major investments (over 3 years)*Property, plant, and equipment after delivery

Equipping large sales offices of domestic sales
companies:¥8.2 billion

Production facilities (new machinery, enhancement inproductivity):¥15.9 billion

Special investment in information networks:¥1.8 billion

Financial Results Briefing for the Fiscal Year Ended December 31, 201842

Overseas: Tractor Demand
Global tractor demand: approx. 2,200 thousand units (2017)

EuropeApprox.

190

Thousand units

China (>30HP)
Approx.

490

North America

Japan

Thousand units Approx.

Approx.

40
Thousand

250

units

India
Approx.

660
Thousand units

Thousand units

ASEAN
Approx.

60

Thousand units

Other regions
Approx.

510
Thousand units(Source: Agrievolution, VDMA )Note: Agrievolution is an alliance of agriculture equipment manufacturingassociations and organizations of 12 countries and 1 economic region.
VDMA is the Mechanical Engineering Industry Association in Germany.
*Japan and ASEAN estimated by ISEKI

Financial Results Briefing for the Fiscal Year Ended December 31, 201843

Overseas: Enhanced Cooperation with Strategic Partners
Enhanced cooperation with strategic partners,
In addition to the existing sales networks
ISEKI France
ISEKI Europe
IMG ※1
ISEKI U.K.※2

Dongfeng
Motor

AGCO
(North America,
global expansion)(China, ASEAN)

TAFE(India)Mitsubishi
Corporation(Thailand andneighboring countries)

PT RUTAN(Indonesia)※1 Iseki-Maschinen GmbH Deutschland(Germany)※2 Premium Turf-Care Ltd.(ISEKI U.K.& IRELAND)

Financial Results Briefing for the Fiscal Year Ended December 31, 201844

Overseas: Outline of Strategic Partners
Partners

RegionOutline

AGCO

North America,
Central and South Major global operator based in North America.
America, Australia, ISEKI primarily supplies OEM tractors to them.
and others

Mitsubishi
Corporation

ASEAN(Thailand)

Strong business performance in Thailand.
Strong in rural areas with sales of pickup trucks.
80% investment to IST Farm Machinery CO.,LTD.

Dongfeng Motor
Group

China

Chinese state-owned enterprise.
50% investment to Dongfeng Iseki Agricultural
Machinery Co., Ltd.
Agricultural equipment is a focus area of Made in
China 2025.

PT RUTAN

ASEAN(Indonesia)

Major Indonesian agricultural machinery
manufacturer with an extensive sales network.
5% investment to PT. ISEKI INDONESIA.

India

The second largest agricultural machinery
manufacturer in India.
India is the world’s largest tractor market.

TAFE

Financial Results Briefing for the Fiscal Year Ended December 31, 201845

Overseas: Expanding into the Indian Market
Technology and business alliance agreement with TAFE in India
The second largest agricultural machinery manufacturer in India
・ The world’s largest (660 thousand units) tractor market
Sales through TAFE’s network
・ Licensing technology to manufacture and sellmedium-sized tractors
・ Mutual supply of other machinery and parts

Financial Results Briefing for the Fiscal Year Ended December 31, 201846

2020 Mid-term Management Plan: Keyword「

Henkaku (Change)」
Ensuring management transparency
Commitment to earnings
Improving operational efficiency
Financial Results Briefing for the Fiscal Year Ended December 31, 201847

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 Fiscal Year Ended December 31, 201848