Komatsu Ltd IR Day Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Tsubasa Sasaki - UBS Securities Japan Co Ltd - Analyst : Thank you so much for your presentation. My name is Sasaki-san from UBS. I got two questions for you. Number one, page 10, the key components in-house production. I think that's critically important. But my question here is, what are the standards to let you decide on how much component is needed to be in-house produced or outsourced. Because if I look at this, outsourced products can be in-house produced. That enables you to improve the cost competitiveness. But maybe, all in all, that gives you much cheaper and affordable pricing in terms of the cost if you outsource them. So once again, what are the standards that you're looking at to judge which component can be outsourced or produced in-house? And how exactly would you like to improve the mix of in-house production? Do you have any strategies on that? Thank you. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 17, 2025 / NTS, 6301.T - Komatsu Ltd IR Day Unidentified Company Representative Yes, there are various philosophies we try to incorporate. In simple terms, the components that set us apart in terms of technology need to be produced in-house. That's where we started in the first place. But do we have technologies in the first place? We didn't have any technologies around batteries. So pack manufacturers of batteries were acquired. And among which, cell in the battery have been swayed by the volume. So that part needed to be outsourced. But pack process in the batteries and controlling part in the battery, those needed to be in-house produced. And also motor for electric ones. If it's a small vehicle, the volume goes up, and we use outsource to manufacturers, and we try to source them. But if it's a big one, the volume is very low. So they're not really willing to take them. Hybrid component has been proprietarily produced here in Komatsu. So we have technologies. And also at KMC, it's our motor. That technology has been already owned to create a large model. So we try to in-source them internally. And in terms of the rate of development, it's critical. If we produce it in-house and if we consume three or five years, then we will lose the pack of the others. So if we can plug the gap with the money with the time, we will spend the money to buy time. Now what I want to say here is that what exactly we want to put the cars inside our hands. That's the standard. We can purchase the components that anybody can create, and we just try to stay on top of the controlling part. That could be one. And second one is that key component can be in-house produced. And aftermarket, including spare parts, need to be designed to be profitable. For example, even though we in-source the component of the small model, it doesn't really make sense to do that if anybody can do it for aftermarket. If we do in-sourcing of the component for large model, that gives us a profitable business. So there are two standards.

Question: Tsubasa Sasaki - UBS Securities Japan Co Ltd - Analyst : Okay. Thank you. My second question, how do you improve productivity? Because we have 62 factories on global scale and some have higher productivity than the others with mother factory system, how much or how far can you go to improve productivity? Do you have any more distance to go to improve productivity? Thank you. Unidentified Company Representative Thank you. If you think about overseas factories, the utilization ratio and efficiency are important. So we do have KPIs for that. But that varies according to countries. For example, in Asia where labor cost is affordable, even though we seek after efficiency, it doesn't really make sense. Even though we allocate two people, we want to maintain and improve quality in some cases. For example, in India, when we launched, we did that way. So while securing quality and improving efficiency, that's a challenge. So we will have KPI, but what's a priority? That's something we shouldn't lose track of and we try to control them by factory. So that's the instructions we already sent to mother factory. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 17, 2025 / NTS, 6301.T - Komatsu Ltd IR Day And in terms of the cost, the efficiency at factory can be improved by 20%. Other remainder of 80% are coming from purchased goods. And also some of the components that can be in-sourced, how much we can trim the cost? So we try to do the math on the table and diagram. Then we try to have the each factory compare themselves and the localized ratio. And their costs needed to be linked and somehow they try to procure. So that's the one source of the competitive edge. That's activity within which the mother factory is taking center stage.

Question: Sho Fukuhara - Jefferies LLC - Analyst : This is Fukuhara from Jefferies Securities. Thank you very much for the opportunity. I have two questions. My first question relates to slide 11 about the human resources or the talent. So you have the engagement survey score here. So the score is quite high for overseas and global. Why is that the case? Why is it high in comparison to Japan? Unidentified Company Representative Thank you very much for that question. So this is page 11. So the global, the score is 81. That is the most updated number. That is global is 81, and Japan is 71. So why is global higher? That was the question. So we also consulted the research company who conducted this survey. And the overall tendency is whenever we conduct the engagement survey, Japan's score tends to be lower in comparison to the global score. That could be because of national characteristic of Japanese. That could be the case. So that was the finding and advice from the research company. So we should look at not at the absolute, the number of the score, but perhaps we should look at how much of an improvement that we are making. That might be a better way to read these score trends.

Question: Sho Fukuhara - Jefferies LLC - Analyst : Thank you very much for that.

Question: Tsubasa Sasaki - UBS Securities Japan Co Ltd - Analyst : Thank you. This is Sasaki from UBS. I have two questions. Reading Komatsu's report, which was 88 pages, is quite substantial. But it used to be 30 or 40 pages in the past. One burning question for me is that not only the people outside, but also employees will read this because it has been translated into English too. And versus what it has been in the past, you have this report, and as you introduced in the slide at the very beginning, and you try to hear voices and try to have more transparency. Now, after this process of development and editing those reports, have you received any of the feedback or voices from internal employees, such as improved transparency and so forth? Because as Fukuhara-san raised the question, two-thirds of the employees are employed overseas, and you have become a more global company as we go. And I think that this existence of the Komatsu report, per se, serves a critical, important role. How do you see them? Unidentified Company Representative Yes, thank you for your question. Yes, it expands 88 pages. And I appreciate, you appreciate, this 88 pages of Komatsu report. We try to always have the proper number of pages. If it goes too substantial and nobody will read it, if it gets too short, then we are not able to pick up all the voices we should have. So we try to find a good balance of what will be the right pages. And in September, we issue the Komatsu report and try to have the outsiders appreciate and evaluate us, and we try to formulate the editing policy for next year. Now, you touched on the internal voices. I mean, first, the way we collect the voices internally is that once we post this Komatsu report, we try to introduce the Komatsu report on the posts, and we try to have them take surveys. That could be one option. Others could be that this year, we launch a new strategic growth plan. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 17, 2025 / NTS, 6301.T - Komatsu Ltd IR Day We have an internal brochure within which the employees can have access to and read. And that's a digital version. And then on that platform, we try to invite other voices on SGP from employees. And some people raise the SGP content. And also the voices, and expressing their need and desire to go for certain directions of Komatsu. Next year and two years ahead, we might want to focus on the priority activities within the SGP. That could be another item. I mean, we are still in the midst of improving things. What kind of feedback exactly have you received? Well, once your activities are featured, and that motivates people in general. So some people in some regions started to raise hands, and why not you raise in regions next time. And some departments are featured in photo. And those people say, well, it'd be pleasing to be featured, the project that they were engaged in, this is some of the improvement we want to make in the future. Those are the voices we're hearing. And also, I mean, this is universally accessible. So students can have access to it. Whenever students engage in job hunting activities, that's a source of information they can have access to. So HR and recruiting teams wants to take advantage of the Komatsu report more. That's another voice we're hearing.

Question: Tsubasa Sasaki - UBS Securities Japan Co Ltd - Analyst : Thank you. It was clear. Thank you so much. Thank you very much. Maika, some, please. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 17, 2025 / NTS, 6301.T - Komatsu Ltd IR Day Unidentified Participant So this is [Maika] from Nomura Securities. I also have two questions. First of all, this is the new SGP under new president, so I believe there are a lot of topics that were covered. So you chose the word ambition, not really challenge. So ambition was the wording that has been chosen. So from the SGP, what is the ambition? That has been chosen. So it might be different from your role as a sustainability promotion, but how do you intend to really disseminate this idea of ambition? So are there any activities that is ongoing with the SGP? And I'm pretty sure you conducted interview with President Imayoshi. So as you try to release this idea of ambition, how has the management was involved in the formulation of this report? So any sort of takeaways or impression you'd like to share with us as you engaged in the formulation of Komatsu report? Unidentified Company Representative Well, thank you for the question. So ambition is the key word and thank you for raising that point. So ambition, the President Imayoshi has a really strong feeling towards that. So within the Komatsu report, President's message, he actually explains in details what he means. So within the theme of the SGP, of course, is challenge. That is a word we use in the Japanese wordings. So there was a discussion that we could actually translate as it is in challenge. But the English version, we decided to use the word ambition. So basically, this is a continuous, the stance to strive to engage in those challenges. So that is why we have purposely used the word ambition. That was in the theme, driving value is ambition. So where does this ambition as a word come from? So again, the brand -- the message that we have formulated at the time of the centennial anniversary, it is one of the first prime values that we have put in the forefront. So this is the value that we have created over the 100 years. And ambition is one of the key words, and that is why we decided to use that within the theme. And that is the key word that will be engaged in the new SGP. So this is a very strong determination on the part of the new president and the management as a team agreed upon this idea. So there has been a repeated discussion on this issue, and the end product is what you are seeing. So it is indeed the kind of word that is quite persuasive -- excuse me, for everyone. So we have put something that we cherish right in the center of the SGP. So that is how we have explained it. It was in the report as well. Unidentified Participant Understood. So the way you formulate the message, and also you make the comments and how you make it visible. So is there any request from President Imayoshi or from the management as to how you actually really externally disclose this? Anything from the business coordination department? Anything you would like to share with us?

Question: Hirosuke Tai - Daiwa Securities Group Inc - Analyst : Thank you. This is Tai from Daiwa Securities. You touched on recruiting. I don't believe that Komatsu is a lower-ranking company in the recruiting. And in the press conference by Imayoshi-san, he talked about AI and we are living in an age where we try to use AI more. And I think that there are higher costs in recruiting, or in some of the cases you struggle in recruiting who you want. There is more race to the talent who has more knowledge or expertise around AI, and unless you recruit them and you fall short of the next step, that means that you are not able to take back of the investment you are making, which means that you need to recruit more people. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 17, 2025 / NTS, 6301.T - Komatsu Ltd IR Day Do you have any initiatives? I think that you have invested in the F1. Maybe this might be a pleasing distributor, so it would be great if that has been effective enough for recruiting context. But do you have any observations?

Question: Hirosuke Tai - Daiwa Securities Group Inc - Analyst : Okay. You touched on Stanford University. Do you mean that you work with Stanford University for giving a training internally? I guess you're in charge of training, too. You try to be interactive in those universities and program to have a training internally. Is that what you mean?

Question: Hirosuke Tai - Daiwa Securities Group Inc - Analyst : Thank you. Unidentified Company Representative Okay. We are approaching to the allotted time so I'd like to close the session. Ideura-san, thank you so much. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 17, 2025 / NTS, 6301.T - Komatsu Ltd IR Day

Question: Tsubasa Sasaki - UBS Securities Japan Co Ltd - Analyst : Thank you very much, Fujii-san and Hoga-san. Thank you very much. So we'd like to move on to the Q&A session. Thank you very much for today. My name is Sasaki from UBS Securities. I have two questions. So this is slide 3, please. So when we look at this chart, so the mining sector has really been launched in the past two to three years. That is quite visible here. So what exactly happened to this spike in the last two to three years? That is the first question. And also slide 9, you talked about a lot of the exciting prospects. So in terms of mining development in the Middle East, what is the timeframe you have in mind? And when would it start to contribute to your business? And so the background under which why the mining machinery has been growing in the past couple of years, and what would be the timing in contributing to your business? So those are the two questions. Thank you very much. Unidentified Company Representative So Hoga would like to answer your question.

Question: Tsubasa Sasaki - UBS Securities Japan Co Ltd - Analyst : Very referential. Thank you very much for that. Also, the second part about Middle East profitability. How should we consider the profitability of the Middle East business? So mining and bulldozers with a lot of consumables involved. So the margin appears to be somewhat high, but if you can remind us what is the profitability. Unidentified Company Representative So Hoga-san would answer.

Question: Tsubasa Sasaki - UBS Securities Japan Co Ltd - Analyst : Very well understood. Thank you very much for that. Unidentified Company Representative Thank you. Fukuhara-san, go ahead.