Komatsu Ltd.

Fiscal 2025 net sales were JPY 4,132.8 billion, up 0.7% year on year. Operating income was JPY 567.3 billion, down 13.7%, with an operating margin of 13.7% versus 16.0% a year earlier; net income attributable to Komatsu was JPY 376.4 billion, down 14.4%, and ROE was 11.3%, down 2.9 points. Construction, Mining & Utility Equipment sales were JPY 3,806 billion, up 0.2%, and segment profit was JPY 491.1 billion, down 18%; Retail Finance sales were JPY 126.1 billion, up 2.4%, with segment profit up 24.4% to JPY 36.6 billion; Industrial Machinery & Others sales were JPY 238.8 billion, up 6.8%, with segment profit up 38.5% to JPY 37.9 billion. Free cash flow was an inflow of JPY 249.7 billion, down JPY 56.8 billion year on year; total assets were JPY 6,423.9 billion, and the net D/E ratio was 0.26x. For fiscal 2026, Komatsu guided net sales of JPY 4,118 billion, operating income of JPY 508 billion, net income of JPY 318 billion, ROE of 9.1%, and a dividend of JPY 190 per share; the projected payout ratio is 53.8%, or 85.4% including the JPY 100 billion buyback. Segment guidance for fiscal 2026 calls for Construction, Mining & Utility Equipment revenue of JPY 3.79 trillion and segment profit of JPY 440 billion, Retail Finance revenue of JPY 127.5 billion and segment profit of JPY 36 billion, and Industrial Machinery & Others revenue of JPY 239 billion and segment profit of JPY 37 billion.

The CEO/lead executive commentary emphasized that Komatsu is trying to balance short-term pressure from tariffs and geopolitics with longer-term growth initiatives. Management pointed to the strategic growth plan, including automation, alternative power, remanufacturing, and services, as the way to build customer value and strengthen the business foundation. Tone-wise, the remarks were cautious but constructive: they acknowledged that conflicts and tariffs are hurting near-term profitability, while stressing that the company needs to keep improving the top line and profitability over time.

The CFO said fiscal 2025 net sales reached a record high for the fifth consecutive year, but operating income and net income both declined because volume, mix, inflation and U.S. tariffs outweighed price improvement. He quantified tariff impact at JPY 64.2 billion in fiscal 2025 for Construction Equipment, and said the fiscal 2026 net cost from tariffs is expected to be JPY 37.8 billion after JPY 67.8 billion of costs and JPY 30 billion of refunds. He also noted free cash flow of JPY 249.7 billion in fiscal 2025, said the company has typically generated JPY 250 billion to JPY 300 billion of free cash flow, and said fiscal 2026 should still support the JPY 190 dividend and the JPY 100 billion buyback.

Analysts focused heavily on tariffs, price increases, Middle East disruption, and whether management was being too conservative on North America and mining demand. Management explained that the higher tariff burden in fiscal 2026 reflects a full-year effect, the change in content calculation under tariffs, and the loss of some earlier deferrals; they also said global price increases are being pursued but may not fully offset the tariff burden. On the Middle East, management said it assumed a 60% demand decline in the region and added JPY 90.1 billion of sales impact plus JPY 18.8 billion of cost impact, while noting production risk from raw-material shortages is not yet quantified and therefore was not included in guidance.