Food

Agriculture

New Mid-term Management Plan
(2021-2025)

LandscapeFebruary 15, 2021

Table of Contents

1. Review of Previous Mid-Term
Management Plan
2. Outline of New Mid-Term
Management Plan

New Mid-term Management Plan (2021-2025)2

1. Review of Previous Mid-Term
Management Plan

New Mid-term Management Plan (2021-2025)

Review of Previous Mid-Term Management Plan
■Positioning of previous Mid-Term Management Plan
2016

2017

2019

To establish a firm position both in domestic
and world markets

Mid-Term Management Plan (2016-2020)
The plan for the first 5 years, formulated as an important step toward
approaching our ideal form in 10 years

2020 Mid-Term Management
Plan (2018-2020)
Reviewed strategies for the remaining
3 years in light of changes in thebusiness environment

Changed the year forachieving numerical targets
from 2020 to 2022

2025
ISEKI’s 100th anniversaryΞMid-Term VisionΞ

2018

95th anniversary
2020

Ξ Corporate Philosophy Ξ
We are contributing to agriculture both in Japan and throughout the world by"Delivering the products that satisfy customers"
New Mid-term Management Plan (2021-2025)

4

Review of Previous Mid-Term Management Plan
■Basic strategies and numerical targets

Ξ Five Basic Strategies ΞStrengthen responsiveness to drastic
1 changes in agriculture in Japan

Ξ Numerical Targets Ξ
Expansionof businessdomains

2 Expand overseas businesses
Strengthen profitability by optimizing
3 development & production

Improved
profitability

Net sales(consolidated)¥190.0 billion

Total overseas
net sales ratio*1

40%

Operating income(consolidated)
ROE*2¥9.0 billion

8.0% or more

4 Make active capital investment for growth
5 Enhance corporate value by reinforcing
personnel & corporate governance

Shareholder
Dividend per sharereturns¥50*1: Total overseas net sales ratio: Overseas sales ratio including equity
method affiliates*2: ROE (Return On Equity) = Profit ÷ Equity × 100

New Mid-term Management Plan (2021-2025)

5

Review of Previous Mid-Term Management Plan
■Changes in market environment from initial assumptions

Domestic

Overseas» Future investment strategies, more rapid
acceleration of promotion of smart
agriculture by agricultural administration
than expected» Last-minute rush and greater-thanexpected pullback due to consumption tax
hike» Poor crops due to unseasonable weather,extended periods of rain, etc.
Damage due to typhoons and othernatural disasters

Growth continued to level off in ASEAN
and China» ASEAN・Thailand: bearish market, intensifying
sales competition» China: Downturn in the agricultural
machinery market due to changing
subsidy policies, falling grain prices,
etc., while locally-made products areprominent» Impact of novel coronavirus disease (COVID-19)
New Mid-term Management Plan (2021-2025)

6

Review of Previous Mid-Term Management Plan
■ Numerical targets (results during previous Mid-Term Management Plan)
Sales and profits fell far short of expectations due to deviation from the expected environment, but measures areprogressing steadily.
⇒ It is necessary to shift to a more muscular structure that can reliably generate earnings without being affectedby sales.

<Operating income and ROE><Net sales>(JPY bn)
200

150

（％）

(JPY bn)
Domestic sales

Overseas sales

153.0

158.3

155.9

32.0

35.2

33.1

149.8

149.3

32.1

33.3

190.0

10

55.0

8

6

Operating income

ROE

8.0

9.0

4.2
1.3

1.6

5.0

1.1

100

50

10.0

0.0

121.0

123.1

122.8

117.7

115.9

135.0

4

3.9
2

0
2016

2017

2018

2019

2020

Plan

2.4

3.1

2.7

-5.0

2.0

-8.8

0

-10.0
2016

2017

New Mid-term Management Plan (2021-2025)

2018

2019

2020

Plan

7

Review of Previous Mid-Term Management Plan
■ Major achievements of the basic strategies and issues remaining to be addressed
Major achievements
Strengthen
responsiveness todrastic changes inagriculture in
Japan



Developed sales and services into a wider
area
Reorganized wide-area sales companies:
10 site to 6 site system
 Overhauled revenue and cost structure
Increased revenue from maintenance⇒ Improving profitability of sales companies

Expand overseas
businesses

Strengthen
profitability by
optimizing
development &production

Expanded business through enhanced
cooperation with strategic partners
U.K. and India
 Developed and launched products thatmatch market needs
Compliance with exhaust gas regulations,
hi-tech, compact tractors, etc.
In-house manufacture of enginescomplying with exhaust gas regulations
Reduced costs, increased competitiveness Improved profitability of Indonesia
business
Kept PT. ISEKI INDONESIA profitable

Remaining issues
 Strengthen measures for large-size,
hi-tech vegetable cultivation machinery Further improve the profit structure ofsales companies
 Expand business through further
enhancement of cooperation
 Develop products that meet changing
needs (Europe: electrification; China:
high-end products, etc.)
 Improve profitability of unprofitableproducts in Japan and overseas, andthoroughly review low-cost designs
 Optimize product categorization

New Mid-term Management Plan (2021-2025)8

2. Outline of New Mid-Term
Management Plan

New Mid-term Management Plan (2021-2025)

Corporate Philosophy(Corporate Philosophy)
We strive to contribute to the creation the prosperous andsustainable society through "providing innovative products
and higher quality of services to the customers"(Long-Term Vision)

To be solution provider for"Agriculture and landscape”~Founding Philosophy~
To free farmers from exhausting labor
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Long-Term Vision(Long-term Vision)
To be solution provider for "Agriculture and landscape”
Supporting “the farming full of dreams” and “beautiful landscapes, Creating the sustainable
future of “Agriculture and Landscape”
FarmingFood
production

Agricultural
machinery

Environmental
preservation

Landscapes

Food

Survival

Farmers

SDGs to be realized by the ISEKI Groupthrough its businessToward realization of a sustainable society✔ Supporting resilient agriculture✔ Landscaping for livable villages and towns✔ Environmental conservation for arecycling-oriented society

Foundation
for living

People & Society
New Mid-term Management Plan (2021-2025)

11

Keyword
Keyword: Henkaku (Change)「」
Toward the next 100 years…
New Mid-term Management Plan (2021-2025)

12

Business Environment and Issues

Business issues

Environmental awareness







With- and Post-Covid era, global food issues, climate change risks
Change in business model (from products to services)
Increased environmental awareness (exhaust gas, electric)
Increasing demand for disclosure of non-financial information, SDGs
Response to changes in laws and regulations, compliance

New Mid-term Management Plan (2021-2025)

Realization of technologicalinnovation

 Diverse environments according toeach region
 Enhancement of functionality ⇔ Pricereduction(Diverse needs)
 Intensifying competition

Strengthening of ESG initiatives

 Decline in number of farm households
and increase in scale of farming Crop diversification
 Transition to smart farming, regulatory
reform (WAGRI, open API, digitaltransformation, etc.)
 Price reduction

Improvement of financial
position, expansion of earnings

Overseas

Response to changing demands
and needs

Domestic

13

Basic Strategies(Positioning of the plan)
ISEKI’s 100th anniversary in 2025―laying the foundations for the next 100 years(Basic strategies)

1

2(Targets)

Providing the best solutions
・We will focus on providing not only products but also services fromtangible to intangible.

Customers

Increasing corporate value by strengthening
profitability and governance

Employees,
shareholders,
suppliers

・We will make profitable corporate structure that can surely raise profits
beyond sales ups and downs

Solving business issues
New Mid-term Management Plan (2021-2025)

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Points of the Basic Strategies■Direction of the basic strategies and initiatives
Providing the best solutions

Increase corporate value by strengthening
earnings and governance

Focus on providing services in addition to
products in a transition from products to services.

Transformation to a muscular structurethat can reliably generate earnings
without being affected by sales

Selection &concentration

Business modeltransformation

Improvingprofitability

ESG

Resource
concentration

Focus on service
provision

Toward an operating
margin of 5%

Meaning of our existence
Pursuit of sustainability• Product development andsales strategy integrating
domestic, overseas, anddevelopment & production• Promotion based on
information (digitaltransformation)• Adapt to the new normal• Structural reform through theestablishment of an optimal
production system• Improve management
efficiency from the perspectiveof group-wide optimization• Strengthen initiatives byreviewing ESG materiality
and contribute to the
SDGs• Further increase revenue
from maintenance• Perspective according to business• Introduction of an in-housecompany system

Visualization of
unprofitable businesses• Financial and capital strategies• Full utilization of personnel throughout the group⇒ Optimal allocation of personnel

New Mid-term Management Plan (2021-2025)15

Selection & Concentration: Domestic Market Strategy■3 important measures• Vision (2025)
Sales expansion models Large-scale • Expand large-scale customers• All J series• Smart agricultural
machinery• Vegetable cultivation
machineryStrengthen• Imported farming
initiatives for large- implements

scale farmers

Enhancesales andservice
power

Domestic
business"Change"

Digitaltransformation,
strengthen thesmart strategy

Improve
operatingmarginAccelerate
reformof revenue &cost structure

farmers• Increase sales of the All Japan series

Digitaltransformation,
smart
strategy• Enhance service power〇Utilize digital tools(iｰMagazine, agri-note, etc.)• Increase sales of smart agricultural
machinery

Reform ofrevenue& coststructure• Improve operating margin of sales
companies〇Revenue from maintenance• Block strategy〇Appropriate allocation of bases〇Promote the development of largescale bases

ISEKI, a company with a strong presence through sales and services of agricultural machinery
New Mid-term Management Plan (2021-2025)

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Selection & Concentration: Domestic Market Strategy■Mid-term product strategy
Important items

Product launch image
2025

Large-size products
Smart agricultural machinery
Vegetable cultivation
machinery・Large-size products
・Large-size vegetable cultivation machinery・Smart agricultural machinery・Medium-size mainstay products

2021

・Robot tractors・Low-cost products
・Vegetable cultivation machinery

2020

・Complete full lineup of the All Japan series

Low-cost products

Focusing on launching products
for large-scale farmers

2020
JAPAN ricetransplanterlaunched
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Selection & Concentration: Domestic Market Strategy

As a solution provider for "Agriculture and landscape”,we will contribute to
the needs of local communities around the world through manufacturing.
Asia

Reduce the burden of agricultural workers
and support food production

EuropeCreate clean and livable towns

North
America

Support for enhancing private life
New Mid-term Management Plan (2021-2025)

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Selection & Concentration: Overseas Market Strategy■ 3 key regions

・Major measures by region• Support development of AGCO’s brand strategy
North
America • Launch economy-spec cost-cutting machines

North
America• Restructure the sales network with a view toconsolidation

Expand our share of
the compact tractor
marketEurope• Enhance products including through electrification• Improve efficiency of consumer products andExpand overseas business

EuropeAsia

Increase ourpresence inthe landscaping
marketDeploy ricecultivation-related
machinery developedin Japan

implement procurement• Build a foundation for ASEAN business with IST as
the starting point

Asia• Launch large-size, high-performance agricultural
machinery• Strengthen the service structure

New Mid-term Management Plan (2021-2025)

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Selection & Concentration: Overseas Market Strategy■ North America

 North American compact tractor market expanded steadily (reached over 210,000 units in FY2020).
 Although a temporary rebound from stay-at-home demand is expected, the market will remain stable
over the medium to long term.
USA & Canada Strengthen the cooperative
relationship with our partner
AGCO
 Increase sales and market
share in robust markets
 Improve & expand
profitability

Support development of
AGCO’s brand strategy

Enhance products

Increase market share while improving profitability
Improve low-profitability
products

New Mid-term Management Plan (2021-2025)

Launch economy-spec
cost-cutting machines20

Selection & Concentration: Overseas Market Strategy■ Europe The compact tractor and diesel gardening equipment market in Europe, including Central
and Eastern Europe, expanded gradually.
 Electrification is accelerating due to growing environmental awareness.
Europe Restructure the Europeansales network• Strengthen service and sales
structure• Expand Group earnings throughincreased efficiency
 Maintain and expand market
share in the landscaping market
with high brand recognition• R&D of electrification and lowcost machines to compete with
Indian companies Improve and expand profitability

Restructure the sales
network with a view toconsolidation

Enhance products(electrification)

Improve low-profitability
products

Improve efficiency of
consumer products andimplement procurement

New Mid-term Management Plan (2021-2025)

21

Selection & Concentration: Overseas Market Strategy■ Asia ASEAN: Size of the agricultural market and expectations for growth South Korea & Taiwan: Increasing shortage of agricultural workers due to aging of workforce China: Mixture of low-cost and high-performance agricultural machinery responsible for Asia's largest rice productionAsia Accelerate ASEAN businesswith new IST (Thailand) as
the starting point
 Establish a market presencein the large-size, highperformance agricultural
machinery market throughpartner distributors in South
Korea and Taiwan.
 Business development using
Japanese high-performancerice cultivation machineryand products produced in
China with cost advantages

Lay a foundation for
ASEAN business(IST (Thailand) as
starting point)

Launch large-size,
high-performance
agricultural machinery

Strengthen
the service structure

Enhance products

New Mid-term Management Plan (2021-2025)

22

Selection & Concentration: Product & Development Strategy

Expand earnings through product development focused onregions and products where our strengths lie and growth markets
Overseas

Domestic<Support transition to large-scale farming> Strengthen medium- and large-size, low-price,
smart agricultural machinery and field/vegetable
cultivation products
 Respond to changes in farming styles (contractfarming, lease farming, etc.)<Support brand expansion>
 Strengthen products in Europe and North
America, where our strengths lie
 Strengthen ASEAN products to establish afoothold Establish a brand in China and East Asia

Common strategy<Safety & environmental support>
 Measures to prevent farming accidents
 Expand in-house production of engines that comply
with exhaust gas regulations
 Develop electric products<Front-runner development> Globally strategic machines Electrification and hydrogen utilization to addressenvironmental issues
 Automation, robotization, data utilization, etc.

New Mid-term Management Plan (2021-2025)

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Selection & Concentration: Product & Development Strategy■ Globally strategic machines
 In order to meet the growing demand for agricultural machinery due to food shortages, we will develop themain platforms for tractors, combine harvesters, and rice transplanters, and then introduce globally strategic
machines based on these platforms as well as the regulations and necessary equipment for each region.
Environmental
regulations
Durability
Simple & low price
DesignDevelop a platform that
ensures basic performance

New Mid-term Management Plan (2021-2025)

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Selection & Concentration: Product & Development Strategy■ Electrification
 Launch electric products for professional use in the European landscape maintenancemarket to address environmental issues, using technologies developed through electric
products and research.
 Expand to products for home gardens and greenhouses

For the European landscaping market

Electric tractor prototype (2011)For home gardens and greenhouses

Electric cultivator Elena (2009)
New Mid-term Management Plan (2021-2025)

25

Selection & Concentration: Product & Development Strategy■ Automation, robotization, and data utilization
 To expand the scale of agriculture, we will sequentially introduce smart agricultural
machinery that supports labor-saving and data-driven agriculture, while promoting thedevelopment of Level 3 fully unmanned models for full-scale use.
Ricetransplanters

Tractors

Combineharvesters

Toward full-scalediffusion of
Level 3 models

Level 3
• Remotemonitored• robots

Level 2・Auto steering• Humanmonitored
robotsLevel 1• Straight travelassistance・Auto steering

・Manned robots• Straight travel assistance(turning assistance)
New Mid-term Management Plan (2021-2025)

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Business Model Transformation: Promoting Digital Transformation

Sales & services
Data-driven services
that respond tousers' wishes

Contribution to theagricultural value chain

Data collection from smart
agricultural machinery

Development& production
Data-driven
product
development
New feature development& quality analysis

iｰMagazine
Development of
new services

Smart Agricultural
Machinery Group

Data utilization• Integrated systemof rice cultivation

Sharedutilization
New Mid-term Management Plan (2021-2025)

27

Business Model Transformation: The New Normal
Spread of COVID-19

ISEKI’s mission & vision<Agriculture>
Increasing interest in food
⇒ Stable supply, improved foodself-sufficiency rate
<Work styles>
Response adapted to the new normal《Our response｠<Sales aspect> Online distribution of videos, etc.
 Advertising via social media
 Strengthen online dissemination capabilities throughvirtual demonstrations, etc.
 Strengthen service capabilities through online seminars,etc.
 Develop i-Magazine
 Respond to increased demand for hobby purposes

Renewed recognition ofagriculture and landscaping as
essential businesses
ISEKI, supporting"food, agriculture, and landscapes"<Production aspect> Remote guidance for launching new products atoverseas production plants<Employees’ work styles> New workstyles such as flexible working hours,
telecommuting, and distributed work

New Mid-term Management Plan (2021-2025)

28

Business Model Transformation: Ancillary Services
・Revenue from ancillary services
 Expand parts, repair fees, and farming implements
・Expand large maintenance bases
Domestic＜Domestic sales trends for farming
implements, spare parts, and repair fees＞

39.8 40.6 40.8

42.0

(JPY bn)

・Expand new products such as ICT・Increase the number of service personnel, personnel
development

 Establish parts and service business・Strengthen service capabilities through dealer
Overseas
education
・Strengthen cooperation with European distributors

・Plan and develop new business styles

New Mid-term Management Plan (2021-2025)

29

Improving Profitability: Structural Reform・ Production base for parts and units
・ Product assembly and shipping bases↓■Construct the optimal production system Reorganize the production system
Boost productivity by effectively utilizing
the Group’s personnel and facilities■Review segregation of in-house and external production

Change to external production for some parts produced in-house<In-house production><External production><Domestic suppliers>

Core technologies
for important safetyparts

Streamline the production system<Overseas suppliers>

Further strengthen ties with domestic
and overseas suppliers⇒Reduction of procurement risk

Continue in-house production of important safety parts and core technologies that require skills transfer.
On the other hand, in line with the reorganization of the production system, we will promote
the switch from in-house production of parts to external production to achieve structural reform.
New Mid-term Management Plan (2021-2025)30

Improving Profitability: Improving Management Efficiency

Improve
operational
efficiency

 Increase development efficiency by tightening the development process Streamline indirect departments by strengthening IT, RPA, and sharedservices

Improvesales
efficiency

 Use digital tools in sales activities Reduce transportation costs and inventory by improving
domestic product distribution

Maximize
investment
efficiency

 Cut costs and reduce model types through global common
designs Restructure to achieve an optimal production system

Maximum
utilization of
personnel

 Fully utilize personnel throughout the entire Group Develop a diversity promotion system

New Mid-term Management Plan (2021-2025)31Improving Profitability: Financial & Capital Strategy

Capital investment

Improve
operating margin Operating margin: 5% (2025)• Improve gross profit• Improve fixed cost ratio• Optimization, selection andconcentration

Improve asset
efficiency

Generate
cash flows

Within the scope of
depreciation
Thoroughly implement acapital cost perspective

Operating cash flows

Reduce interestbearing liabilities¥60.0 billion

 D/E ratio: 0.8 times (2025)(5 year cumulative)

 Improve CCC

Shareholder
returns

 Reduce inventory
 Optimize non-current assets

Aiming at ROE of 8%
New Mid-term Management Plan (2021-2025)

Continued stabledividend payments
32

Improving Profitability■ Shift to a more muscular structure that can reliably generate earnings without
being affected by sales

Management target: Operating margin 5%
Optimization
Improve grossprofit margin

Selection &concentration

・Improve profit margin for eachproduct

・Expand revenue frommaintenance・Review unprofitable products

・New business・Optimize product categorization ・ Block strategy

Improve fixed
cost ratio

・Clear out surplus equipment
・Strengthen RPA and sharedservices
New Mid-term Management Plan (2021-2025)

・ Liquidation of unprofitablebusinesses

33

ESG: Realizing SDGs through Business■Relationship between our business and SDGs
Supporting agriculturalresilience
Establishment of smart
agriculture (Japan)

Productivity improvement
through mechanization (India)

Landscaping for livable villages
and towns

農業の生産性向上
食料安定供給Grass cutting (Europe)

Road sweeping (Europe)
排ガス規制対応製品
電動化

Biodiversity conservation andprevention of over-fertilization

Environmental conservation for arecycling-oriented society

Eco-products andenvironmental burden
reduction activities

New Mid-term Management Plan (2021-2025)

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ESG: Identifying ESG Materiality
Materiality (priority issues)
Solving social
issues throughbusiness
activities<ESG Materiality>
Elements that support sustainablevalue creation and growth

Improve brand value

Improving customer satisfaction andcreating quality
Supply chain management
Social contribution and international
cooperation

 Products and services that
contribute to increased
productivity, safety and reduced
environmental burden regarding
agriculture and landscaping
 Encouraging women toparticipate in farming (Project tosupport female farmers)
 Revitalization and developmentof local communities

Enhance engagement

Diversity
Creating a comfortable workplace
Occupational health and safety
management

 Creating diverse personnel
 Providing a safe and rewarding
workplace

Environmental
preservation

Environmental management
Environment-friendly design (ecoproducts)
Reduction of environmental burden(CO2, etc.)

 Reducing greenhouse gas
emissions Contribution to formation of arecycling-oriented society

Increase
corporate value

Strengthening governanceRisk management
Compliance
Information disclosure and constructive
dialogue Increasing corporate value,
stable dividends

Basic strategies
1. Provide the best solutions
2. Increase corporate value by strengthening earnings
and governanceSociety

Environment

Corporate
governanceValue provided to society (examples)

New Mid-term Management Plan (2021-2025)

Related SDGs

35

ESG: Eco Products, Environmental Management
 Introduce an environmental management system (EMS) for the entire group Set and promote mid- and long-term goals to reduce environmental burden

中長期目標

EMS certification status

国内製造所の生産活動におけるCO2排出量削減
2030年
実績削減率

国内売上高におけるエコ商品比率26%削減(2013年度比)

2030年

目標削減率

実績

50%以上

目標

基準

50%
-9%

50%

-11%

-12%

36.6%

36.6%

35%

-26%

37%

■Manufacturing bases<Japan 6 / Overseas 3>

100% certified■Non-manufacturing bases<Domestic sales companies 9>

100% certified<Other bases 9>

4%

35%

37%

2013年

2019年

2020年

2030年

2020

2030

100% certified

4%
2013年

2019年

2020年

2030年

2013

2019

The Group's EMS covers ISO 14001
and Eco Action 21.

Work toward decarbonization (electrification, use of hydrogen, etc.)
New Mid-term Management Plan (2021-2025)

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ESG: HR Transformation and Engagement
 Implement human resource policies based on
business strategies

HRtransformation

 Optimal allocation of the Group’s personnel
 Secure and foster personnel to realize businessstrategies
 Response to advanced technology, global
personnel, domestic farmers, etc.
 Create an attractive and comfortable workplace

Enhanceemployeeengagement

 Conduct engagement surveys
 Enhance the work-life balance Training programs, education, and diversity
 Personnel development for the next 100 years

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ESG: Governance
2019
Board ofDirectors

Establishment of theNomination Advisory
Committee

2020

2021

Reorganization into theNomination andCompensation Committee

Succession planning andreview of compensation system

Implementation of effectiveness evaluation(by an external organization)

Continued implementation ofeffectiveness evaluation

Outside directors: 2 out of 11; Japanese, male onlyInternal
control &complianceRiskmanagement

Enhancement of the reporting system (misconduct,
on-site inspection by government offices, disasters)
Measures to protect personal informationand prevent harassment

Risk Management Control
Committee: once per year-2025

CG Coderevision

Risk Management Control
Committee: 3 times per year

New Mid-term Management Plan (2021-2025)

Increase the ratio ofoutside directors
Consider diversification
Strengthen internal controls atoverseas subsidiaries
Further strengthen personal
information protection
Risk Management Control
Committee: 4 times per year

38

Numerical Targets

Operating margin

5%
Improvementof gross profit
marginReduction of
fixed costs

Improvementof management
efficiency

StructuralreformNew Mid-term Management Plan (2021-2025)

39

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 NIPPONNew Mid-term Management Plan (2021-2025)

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