ISEKI & CO.,LTD. Q1 FY2025 earnings call

Overall Financial Performance

• The first quarter results exceeded internal company plans, with YoY revenue and profit growth driven by strong domestic performance and sustained high-level overseas performance.
• Long-term structural improvement continues: Iseki has moved past the historical trend of first-quarter operating deficits, with growing overseas revenue driving sustained first-quarter profitability, showing gradual corporate fitness improvement.

Balance Sheet Improvements

• Total assets decreased 12.0 billion yen YoY to 216.2 billion yen. Inventory was reduced by 6.1 billion yen YoY (7.5 billion yen net of the consolidation of new UK subsidiary PREMIUM TURF-CARE (PTC)), showing progress on inventory reduction goals.
• Interest-bearing debt was reduced by 5.3 billion yen YoY, following prior period fixed asset impairment and current period fixed asset sales that further compressed total and fixed assets.

Domestic Market Initiatives

• Rising rice prices since June 2024 have restored farmers' purchasing appetite, following years of reduced purchasing power from falling rice prices and rising input costs. Non-rice agricultural commodity prices are also recovering, supporting broad-based purchasing improvement. Domestic agricultural machinery related sales (January-March) grew 8% YoY, led by implements, with unrecognized contracted orders growing even faster.
• Iseki will implement a domestic price adjustment in July, and is pushing pre-adjustment sales promotion. It is expanding customer reach in high-growth segments including large-scale, advanced technology, environmental, and upland farming.
• The new Aigamo Robo weed control robot is already sold out for its full 2025 sales target, supporting Iseki's push into the environmental/organic farming market. Two Iseki products (variable fertilization rice transplanters, ride-on management precision upland weeders) have been certified for the Japanese Midori Investment Promotion Tax Incentive, allowing farmers to claim special depreciation on 32% of the purchase price.

Overseas Market Initiatives

• In Europe, professional landscape machinery sales through local distributors grew 10% YoY in the first quarter, with overall performance exceeding plan despite broader market demand slowdown concerns, driven by strong sales of low-cost tractors and locally sourced products. PTC in the UK was newly consolidated from January 2025, completing the framework for next-stage European growth; Iseki will pursue expansion via expanded sales territory, broader product offerings, unified inventory management, and better talent utilization.
• In North America, the sub-40hp compact tractor market (Iseki's core market for OEM to AGCO) remained weak at -12% YoY January-March, with AGCO sales slightly underperforming the market. No pre-tariff rush demand was observed, but most of the full year sales plan (70%) is already booked from already cleared inventory, so full year profit impact from US tariff policy is expected to be minor. Iseki will evaluate medium-term options including local assembly with AGCO.
• In Asia, Thailand's market remains difficult, but local subsidiary IST's promotional campaigns have driven positive YoY sales growth, supported by new product launches and expanded corporate sales. South Korea's overall market is shrinking due to declining agricultural workforce, but Iseki's large machinery share is growing; after completing local inventory adjustment, Iseki is supporting local distributors' expanded promotional activities to grow sales.

Structural Reform & ESG

• Project Z, Iseki's core structural reform initiative, is progressing as planned; efficiency gains from development optimization will primarily materialize toward the end of the fiscal year.
• Iseki was recognized as a Certified Health & Management Excellent Large Enterprise for the 3rd consecutive year, and is advancing internal engagement to deepen Project Z adoption across the company.

Total consolidated net sales: 46.1 billion yen, a 2.2 billion yen increase year-over-year (YoY).

• Domestic segment: Total sales grew 2.0 billion yen YoY. Agricultural machinery products were flat YoY; Implements, parts, and repair/maintenance revenue grew 1.4 billion yen YoY; Facility construction revenue grew 0.7 billion yen YoY due to the completion of a large project in the quarter.
• Overseas segment: Total sales grew 0.1 billion yen YoY, accounting for 42.7% of total consolidated revenue. Europe grew 0.5 billion yen YoY on sustained strong performance; North America declined 0.4 billion yen YoY due to continued weak demand for compact tractors; Asia grew YoY, led by South Korea.

Profit performance: Operating profit reached 1.3 billion yen, a 0.6 billion yen increase YoY. Price adjustment contributed +0.4 billion yen, while rising raw material costs had a 0.1 billion yen negative impact, resulting in a net 0.6 billion yen profit increase. Ordinary profit was 0.9 billion yen, flat YoY, as a 0.4 billion yen YoY deterioration in foreign exchange gain/loss offset operating profit growth. Net profit attributable to parent company shareholders was 1.5 billion yen, a 1.0 billion yen increase YoY due to the recognition of gain on fixed asset sales. Exchange rate impact was -0.1 billion yen on sales and zero on operating profit, due to Iseki's hedging and currency balance management. Project Z's efficiency gains and one-time costs offset each other at a net zero impact, in line with plan.

• Full year 2025 consolidated earnings guidance is maintained unchanged from the February 2025 announcement, despite first quarter results exceeding internal plans.
• Management expects domestic market conditions to remain strong in the first half of the fiscal year, driven by restored purchasing appetite from rising rice prices.
• Management confirms that the full year annual plan remains achievable with appropriate countermeasures, even after accounting for downside risks in the second half (including potential rice yield impacts from pest damage, and market reaction to planned price adjustments).
• The full year profit impact from US tariff policy is expected to be minor, per current inventory and order book position.

• Downside risk to full year results from potential lower rice yield/output in the second half of the fiscal year, including risks from pest damage.
• Uncertainty from US tariff policy, though current positioning limits expected near-term impact.
• Continued soft demand for compact tractors in North America, which has driven YoY revenue decline in the region in the first quarter.
• Difficult market conditions in Thailand that continue to pressure regional performance.
• Long-term market shrinkage in South Korea due to declining agricultural workforce.
• Negative impact from recent yen appreciation relative to the prior fiscal year's broad yen depreciation, which has pushed non-operating foreign exchange results from gain to loss, offsetting first quarter operating profit growth.

Q: How has rising rice prices actually changed farmers' agricultural machinery purchasing behavior to drive Iseki's strong first quarter domestic performance? / A: Rice prices have recovered broadly from multi-year lows starting in mid-2024, which directly lifted farmer household income and purchasing power after years of contraction. The recovery is not limited to rice: prices of other major agricultural commodities are also improving, supporting broad-based purchasing appetite across all farm segments. Unfulfilled contracted orders are already growing faster than delivered sales, indicating sustained momentum into the second quarter.