Komatsu announced that its consolidated net income for the fiscal year ending March 2026 is expected to decrease by 30% year on year to 309 billion yen. This is lower than the market forecast of 403 billion yen. The U.S. administration’s tariff policy will have a negative impact of $650 Million USD (94.3 billion yen). The exchange rate assumption of 1 yen = 135 yen (compared with 152.8 yen in the previous fiscal year) is also a factor, as it reflects an appreciation of the yen by approximately 8 yen compared with the current market rate.
Of the 943 billion yen, 785 billion yen is attributable to increased production costs due to tariffs, and 158 billion yen is attributable to a decrease in sales volume due to reduced demand.
Komatsu produces about half of its products for the U.S. market in Japan, China and other countries. In its core construction machinery and vehicles business, the company estimates the impact of tariff-related cost increases at 140 billion yen, but has revised this to 78 billion yen after considering existing inventory in the U.S. The impact on industrial machinery is estimated at 5 billion yen.
The impact on sales was analyzed based on nominal GDP. The Chief Financial Officer stated on the earnings call, “Nominal GDP has historically had a strong correlation with construction equipment demand. We have determined that a 1.1% decrease in this growth rate will result in a 2.7% decrease in construction equipment demand.
Looking at sales of construction equipment and vehicles by region, almost all regions are expected to see a decline in sales. North America is expected to decline 13%, while Oceania and Asia (excluding Japan and China), which performed well in the previous quarter, are expected to decline 17% and 14%, respectively. Due to the impact of tariffs and other factors, demand forecasts for the seven major construction equipment products, including hydraulic excavators, are expected to be flat to 5% compared to last year. On a regional basis, North America, where housing starts are stagnating, is expected to see a significant decline of 5% to 10%. Europe and Japan are expected to be flat to down 5% compared to last year.
Source: The Nikkei
PSR Analysis: This report is an example of how changes in US tariff policy will have a major impact on OEMs. Komatsu has traditionally taken a cautious approach to forecasting, but even so, the impact is likely to be very significant. It is ironic that tariffs, rather than factors such as products or market conditions, are having the greatest impact on profits. Is it a healthy competitive environment when areas where companies should be competing based on technological capabilities, sales prowess, and after-sales support are being narrowed by changes in international trade trends? PSR
