The following is excerpted from the question-and-answer section of the transcript.
(Questions from industry analysts are provided in full, but answers are omitted - download the transcript to see the full question-and-answer session)
Question: Tsubasa Sasaki - Mitsubishi UFJ Morgan Stanley Securities Co., Ltd., Research Division - Analyst
: Can you hear me? This is Sasaki from Mitsubishi UFJ Morgan Stanley. I have 2 questions. One is about pricing. I have some follow-up question. With
price hikes, the company has finally recovered cost increases. My question is about future price strategy for mining equipment and the construction
equipment separately if possible. With inflation subsiding today, can we expect that the company can take further price action to increase profit
next year onward? That's my question.
Question: Tsubasa Sasaki - Mitsubishi UFJ Morgan Stanley Securities Co., Ltd., Research Division - Analyst
: The second question is about earnings structure. So my question is -- well, this time, regarding the environment, construction equipment has
slowed down for now, except for U.S. and Japan. But if you think about earnings for this year, it shows only a 30% decline in sales volume mix. So
despite the sluggish sales of construction equipment, high margin is maintained. I suspect that this is supported by high-margin mining equipment
and part sales in construction equipment. So compared with the past, does the company have more resilient structure against macroeconomic
fluctuation? Could you comment on earnings structure, please? So what is your view of the sustainability and the resilience?
Unidentified Company Representative
If you could refer to Page 32 of the handout, at the bottom of the slide, there is sales mix information. For Q2 this year, the share of parts sales is as
high as 52%. So one of the reasons is KMC, who still have some supply chain issue at the moment. Despite the delay of product shipment, they had
brisk sales of remanufactured products from used equipment, which is called the Reman product. So that's the reason for high part sales and high
margin for this year, especially with KMC.
So because of that, the parts sales were relatively high. Especially for Q2 this year, the operating margin was higher, but the overall trend is also
inclined towards higher part sales. Little by little, it's been inching up, so meaning that we have more resilience in earnings structure. A higher ratio
of part sales, as you can see in the top chart of the page, this means that the profit margin increases only gradually, not so sharply. Only little by
little, the margin will change. So whereas in the past, there was much more fluctuation due to economic cycles or cyclicality, so you are right in
saying that our earnings structure is more resilient or stable today.
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