Medium-TermManagement Plan
(2022–2024)
March 29, 2022
KATO WORKS CO., LTD.
Progress To The Next StageTable of Contents

Progress To The Next Stage

Introduction
Summary of Past Fiscal Years and Business Environment
Positioning of This Medium-Term Management Plan
Basic Policy for the Medium-Term Management Plan
Quantitative Plan

Impact of Improvement Plans on Operating Profit
Improvement Plan Details
Building the Foundation for the Future (Selection and Concentration)

Shareholder Return Policy

2Introduction

Progress To The Next Stage

Background to the Medium-Term Management Plan
Over the 126 years since the establishment, KATO WORKS CO., LTD. has accumulated a wealth of experience and a solid trackrecord as a construction machinery manufacturer. The global brand KATO has thus come to be known as a technology-oriented
manufacturer and won customers’ trust not only in Japan but worldwide.
Amid stagnating domestic demand in Japan and intensifying global competition in recent years, global supply chain disruption,soaring inflation, and volatile international climate have had a significant impact on the KATO Group. Even under such a difficult
business environment, the KATO Group considers it its mission to keep providing the world with high value added products that use
KATO’s advanced technology. To this end, we need to fundamentally review the cost structure, without being bound by conventional
practices, and transform ourselves into a company with a robust, profitable structure.
We have formulated a three-year medium-term management plan (the “Mid-Term Plan”) that includes radical measures. The themeof the Mid-Term Plan is “Transformation into a Lean and Solid Structure.” We consider the three years as a period for thoroughtransformation to excel in the next stage. We will steadily improve profitability, improve the financial structure, and build thefoundation for the future.

We are determined to make further progress into the future by polishing and advancing our business at all times to fulfill ourresponsibility as a construction machinery manufacturer that serves as a social infrastructure. Everyone in the Company will join
forces to continue to be a company favored and supported by all stakeholders.
We have selected the Prime Market in the Tokyo Stock Exchange’s market restructuring. We will make sure to achieve the Mid-TermPlan, thereby improving business performance, increasing corporate value, and meeting the continued listing criteria for the PrimeMarket.
We would appreciate your understanding and continued support and cooperation with regard to our corporate management.
March 29, 2022
Kimiyasu Kato
President and Representative Director
KATO WORKS CO., LTD.

3

Summary of Past Fiscal Years and Business Environment
Summary of Past Fiscal Years(Unit: Billions ofyen)

Net sales
Ratio of production
costs
Operating profit

FY 2019

FY 2020

Progress To The Next Stage

Future Business Environment

FY 2021(Forecast)

77.9

58.5

63.2

88.1%

90.4%

89.3％

 Little change expected in the domestic market
 Change in the competition environment andmarket uncertainty in China

 Supply chain disruption as the world tries tocoexist with COVID-19

(0.3)

(2.8)

(7.0)

 Since the COVID-19 pandemic started, salesin Japan and China, the Company’s mainmarkets, have been stagnating.
 Conventional cost reduction alone cannot
cover the significant drop in net sales.

 Surge in the cost of raw materials, including
fuel and steel

 Uncertainty in semiconductor supply Increase in foreign exchange risks
 Volatile international climate

An extension of existing initiatives is unlikely to bring the Company intothe black. A more radical improvement is necessary.
4Positioning of This Medium-Term Management Plan

Progress To The Next Stage The three years covered by the plan is positioned as a period to prepare to excel, during which theCompany will reduce costs drastically, improve inventory levels, and develop products for the future.
First year

Second year

Third year

FY 2022

FY 2023

FY 2024

Prepare to excel

Excel

Profitability

Financial targets for FY 2024
Net sales: 66.4 billion yen
Cost of sales ratio: 83.2%
Operating profit: 3.1 billion yen
Inventories: 32.7 billion yen
Reap the results of productdevelopment
Make additional investments ingrowing businesses

０A period to persevere to excel
Cut costs of existing models and allocate resources togrowing businesses

Present*KATO Reborn ProjectTime

Return to profitability in the first year withKRP*, HR initiatives, and cost reductions

5

Basic Policy for the Medium-Term Management Plan
Theme ofthe MidTerm Plan

Progress To The Next Stage

Transformation into a Lean and Solid Structure
Three years for a thorough transformation to excel in the nextstage[Basic Policy]
Improve andenhance
profitability Concentrate personnel, facilities, investments, and other resources in corebusinesses, carry out a fundamental reform, and improve profitability.

Improvefinancialstructure Optimize working capital, especially inventories, and increase efficiency inuse of funds.

Build thefoundation forthe future For future growth, concentrate on core businesses in developing new models.

6

Quantitative Plan

Progress To The Next Stage Post an operating profit in FY 2022, the first year of the Mid-Term Plan, andachieve an operating profit margin of 4% in FY 2024.

(Unit: Billions ofyen)

FY 2021(Estimate)

FY 2022(First year)

FY 2023(Second year)

FY 2024(Third year)

Net sales

63.2

64.1

64.4

66.4

Cost of sales
ratio

89.3%

85.4%

83.7%

83.2%

Operating profit

(7.0)

1.3

2.5

3.1

Operating profit
margin(11.1)%

2.0％

3.9％

4.7％

ー31.0

31.8

32.7

Inventories

7Impact of Improvement Plans on Operating Profit

Progress To The Next Stage Accelerate the KATO Reborn Project, which has been in place since last year, introduce
additional measures, and in FY 2024 achieve a roughly 4.8 billion yen improvement inoperating profit.
(Billions of yen)

4.8 billion yen improvement*Including provision of allowance for doubtful accounts (roughly 5.0 billion yen) and loss from revaluation of inventories, etc. (roughly
1.0 billion yen).

8

Improvement Plan Details

Progress To The Next Stage Steadily implement improvement plans across the Company, from development
to production and sales.
(Unit: Billions of yen)
Category

Amount(FY 2024)

Details

Sales

1.30

 Increase sales price Increase sales volume
 Reorganize domestic sales offices

Development0.82

 Drastically reduce costs for existing products Launch new product lines

Production

0.58

 Fundamentally review production costs
 Level out production

HR

1.20

 Solicit voluntary retirement
 Second employees to external organizations

Other0.94

 Reduce fixed costs
 Enhance the after-sales service business etc.

Total

4.84
9

Building the Foundation for the Future(Selection and Concentration)

Progress To The Next Stage Set priorities in each product’s business strategy and concentrate management resourcesin core businesses.
MarketJapanAsia

Product

Selection and concentration

CranesExcavators

 Rough terrain cranes
 All terrain cranes
 Crawler cranes

 Hydraulic excavators
 Mini excavators

Concentrate on core businesses

Launch andexpand newproducts Launch new products ingrowing business fields
and enter the markets innew areas

Europeエリア
USA

製品
Crawler carriers
 Crawler carriers

China

Specially-equippedvehicles
 Vacuum trucks
 Street sweepers
 Snow sweepers

 Enhance profitability andEnhancebusiness
base

選択と集中
service quality to build

Phase outandwithdraw

 Phase out unprofitableproducts

pillars of profits：10

Building the Foundation for the Future(Selection and Concentration)

Progress To The Next Stage Technology and development activities with an eye to medium- to long-term growth

Corporate value

Contribute tosociety withexcellent products

Production of a series of models
equipped with advanced technology

Product base that meets
society’s expectations

Launch of models designed to achieve
the SDGs and CN*

Launch of new global models...

Expanded sales baseEnhancement of existing products’ costcompetitivenessFoundation for high profitability
Selection and concentration*CN: Carbon neutralTime11

Shareholder Returns

Progress To The Next StageThe Company’s basic policy for shareholder returns is to pay out stable dividends to shareholders while
keeping internal reserves necessary for enhancing the business structure as a manufacturer.
We will steadily implement this Mid-Term Plan and, by improving and enhancing profitability andimproving the financial structure, aim to expand shareholder returns beyond conventional stable dividend
payouts.

Improve and enhance profitability
 Increase profits
 Improve management efficiency
 Enhance future profit base

Expansion of shareholder
returns

Improve financial structure Aim for an equity ratio of 50% or higher

Enhance business structure

Stable dividend payout

 Invest in the future (keep necessaryinternal reserves)
From April 2022, the Company will be listed in the Prime Market of the Tokyo Stock Exchange. In addition
to complying with the principles in Japan’s Corporate Governance Code, which is a listing requirement for
the Prime Market companies, we will implement measures to address the aforementioned issues without
delay to increase shareholder returns, and strive to increase shareholder value, including the share price.
12

Notes/Contact

Progress To The Next Stage

Contents on the present plans and the forecasts included inthis material are based on information presently obtained andcertain premises deemed reasonable by the Company. Actual
business results, etc. may be significantly different from them
due to various factors. Therefore, this material does notpromise or guarantee their realization.
Contact

KATO WORKS CO., LTD.
Public Relations Team
1-9-37 Higashioi, Shinagawa-ku, Tokyo, 140-0011
E-mail: ir-kato@kato-works.co.jp

13