JAPAN REPORT
Komatsu will continue to raise prices substantially in the fiscal year ending March 31, 2024. This will be at the same level as the current fiscal year. The impact of price increases on consolidated operating income is estimated to be in the range of 100 billion yen.
This is approximately 20% of operating income for this fiscal year. Although the impact of high raw material prices will lessen in the next fiscal year, there are concerns about an economic slowdown. While the benefits of the yen’s depreciation will diminish, they will build a profitable structure to further increase the operating profit margin from less than 13% in the current fiscal year.
Komatsu’s prices increase this fiscal year was only about 4%, and the company has determined that there is room for further price increases next fiscal year. In February this year, Komatsu raised prices for all models of construction equipment and forklifts for the domestic market by an average of 10%.
Hitachi Construction Machinery Co., Ltd., announced on April 28 that it will raise global sales prices for all its construction and mining equipment by an average of 8% from April. The rate of increase will vary by region and transaction.
The price increase is expected to be concentrated in developed countries such as Japan, the U.S. and Europe. Parts prices were raised by an average of 5% in January.
Source: The Nikkei
PSR Analysis: Two major Japanese construction equipment manufacturers, Komatsu and Hitachi Construction Machinery, have announced a series of price hikes. While the background is that costs have increased due to soaring fuel and material costs, it is not a simple strategy to cover such cost increases with price hikes.
The general theory is that a large price hike will slow down sales, but the two companies believe that global demand for construction equipment is firm, and they believe that raising sales prices will not slow down sales and will lead to higher profits. Mining companies are expected to continue capital investment, and there is an abundance of large-scale construction projects for roads, bridges, and railroads in both North America and Southeast Asia. While there may be a short-term slowdown in sales if we look only at this full year, demand for construction equipment will make steady progress in the 3-5 year long-term forecast. PSR
Akihiro Komuro is Research Analyst, Far East and Southeast, for Power Systems Research
