Komatsu Ltd
TSE:6301
Komatsu Ltd
Komatsu Ltd., founded in Japan in 1921, has evolved from a small repair shop to a global titan in the field of heavy equipment and industrial machinery. Originally part of the Takeuchi Mining Company, Komatsu carved its own path by developing its machinery, gradually expanding its portfolio beyond mining equipment to include a comprehensive array of construction, forestry, and industrial equipment. The company’s commitment to innovation and quality has anchored its reputation, enabling it to traverse the turbulent economic landscapes of the 20th century and emerge as a leader in equipment manufacturing. Today, Komatsu operates globally, with manufacturing plants in multiple continents, offering a range of products such as hydraulic excavators, bulldozers, and forklifts. These machines are best known for their durability and technological advances, which frequently incorporate automation and sustainability-focused features.
Revenue generation at Komatsu is multifaceted. Primarily, it stems from the sale of heavy machinery, which is used across varied sectors such as construction, mining, agriculture, and forestry. However, it's not just the large upfront sales that drive Komatsu's financial engine. The company has cultivated a robust after-sales service network that includes maintenance, repair services, and spare parts supply, establishing steady revenue streams that persist long after the initial sale. Furthermore, Komatsu invests heavily in research and development, reflecting a commitment to innovation that not only enhances product offerings but also creates additional value through revenue-sharing technologies like automated systems and IoT solutions embedded in their machinery. This diversified approach enables Komatsu to navigate the challenges of fluctuating market demands and economic conditions, maintaining its position as a pillar in the heavy machinery industry.
Earnings Calls
In Q3 fiscal '24, Komatsu achieved net sales of JPY 989.2 billion, up 1.8% year-on-year, with record net income of JPY 108.3 billion, reflecting a 9.7% increase. Operating income rose 4% to JPY 162.6 billion. The company noted weaker demand in rental markets, especially in Japan, forecasting a full-year decline of 0% to -5%. Conversely, North America saw a demand rise of 3%. Meanwhile, sales in industrial machinery surged 11.6% to JPY 146.7 billion. As production costs increase due to rising steel prices, the outlook for fiscal '24 remains at a decrease of 5% to 10% overall.
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This is Horikoshi, the CFO. I will go through the overview of the business results for Q3 fiscal '24. On Page 4 are highlights for Q3 on a 3-month basis. Exchange rates were JPY 148.8 to the dollar, JPY 161.4 to the euro and JPY 99 to the Australian dollar. Year-on-year, the yen strengthened against the dollar but weakened against the euro and Australian dollar.
Net sales increased by 1.8% year-on-year to JPY 989.2 billion, and operating income increased by 4% to JPY 162.6 billion. The operating income ratio went up by 0.3 points to 16.4%. Net income increased by 9.7% to JPY 108.3 billion. Net sales and net income were third quarter record highs. Segment profit, operating income and the operating income ratio were the highest ever for a quarter.
On Page 5, I will go through segment sales and profits for Q3 on a 3-month basis. Sales of Construction, Mining & Utility were JPY 918.2 billion, roughly flat from the corresponding period a year ago. Segment profits decreased by 1.4% to JPY 147 billion, and the segment profit ratio went down by 0.2 points to 16%. Retail finance sales increased by 11.1% year-on-year to JPY 30.2 billion, and segment profit increased by 22.3% to JPY 7 billion.
Industrial machinery and Others net sales increased by 7.5% year-on-year to JPY 49.9 billion, and segment profit increased by about 5.7x year-on-year to JPY 7.3 billion. I will explain the factors behind the changes in each segment later.
Page 6 shows the sales by region in the Construction, Mining & Equipment segment for the 3 months of Q3. Net sales in the construction, mining and utility equipment segment increased by 1.3% year-on-year to JPY 916.1 billion. By region, sales increased in Oceania where sales of mining equipment increased. And in Asia, where demand recovered in Indonesia but decreased in the Middle East, Africa, Japan and other regions.
Page 7 shows the highlights for fiscal '24 Q3 on a 9-month basis. The exchange rates were JPY 152.2 to the dollar, JPY 164.8 to the euro and JPY 100.8 to the Australian dollar. Year-over-year, the yen weakened against the U.S. dollar, euro and Australian dollar.
Net sales increased by 5.8% year-on-year to JPY 2,957.3 billion, and operating income increased by 2.8% to JPY 466.1 billion. The operating income ratio decreased by 0.4 points to 15.8%. Net income increased by 1.9% to JPY 310.1 billion. Net sales segment income, operating income and net income were record highs for Q3 on a cumulative basis. And also for the Noto reconstruction, we have been providing our equipment free of use. On a cumulative basis, the impact has been JPY 1.2 billion as a result.
On Page 8, I will explain the net sales and income for each segment for Q3 on a 9-month basis. Sales of Construction, Mining & Utility Equipment increased by 4.7% year-on-year to JPY 2,748.4 billion, while segment profit decreased by 1.1% to JPY 425 billion, and the segment profit ratio decreased by 0.9 points to 15.5%.
Retail finance sales increased by 23.2% year-on-year to JPY 92 billion, and segment profit increased by 16.6% to JPY 21.8 billion.
Sales of Industrial Machinery & Others increased by 11.6% year-on-year to JPY 146.7 billion, and segment profit increased by approximately 2.6x year-on-year to JPY 15.1 billion. I'll explain the factors behind the changes in each segment later.
Page 9 shares sales by region in the Construction, Mining & Utility equipment segment for the third quarter and 9 months year-to-date. Net sales of construction, mining and utility equipment increased 5.1% year-on-year to JPY 2,740.6 billion. By region, net sales increased in North America, Latin America and Oceania, while it decreased in Europe, Japan and the Middle East. Of the regions where sales increased, sales in North America, Latin America, CIS and Africa decreased on a constant currency basis.
Page 10 shows the factors behind the increase or decrease in net sales and segment income of the Construction, Mining & Utility Equipment segment in the third quarter 9 months year-to-date. Net sales increased by JPY 122.6 billion from the same period of the previous year as a positive impact of weaker yen and improved selling process outweigh the negative impact of decrease in volume.
Segment income decreased by JPY 4.9 billion from the same period of the previous year due to the negative impact of lower volume, higher cost of goods sold and fixed cost, and the negative impact on mix despite the positive impact of weaker yen and sales price improvement. Segment profit margin declined 0.9 percentage points from the same period last year to 15.5%.
Page 11 shows the status of retail finance for the third quarter and 9 months year-to-date. Assets increased from the end of the previous fiscal year due to an increase in new contracts and the effect of weaker yen at the end of the period under review compared to the end of the previous fiscal year.
New contracts increased year-on-year, mainly due to the impact of yen depreciation. Net sales increased by JPY 17.3 billion year-on-year to JPY 92 billion, mainly due to higher interest rate rates received, the positive impact of yen depreciation and an increase in financing receivables. Segment income increased JPY 3.1 billion to JPY 21.8 billion.
Page 12 shows sales and segment income of the Industrial Machinery & Others segment for the third quarter and 9 months year-to-date. Net sales increased 11.6% year-on-year to JPY 146.7 billion. Segment income was JPY 15.1 billion, up 2.6x approximately from the same period last year, and segment profit margin rose 6 percentage points to 10.3%. In the automotive industry, sales of large process and machine tools increased. And in semiconductor industry, maintenance sales of Excimer lasers recovered, pushing up our net sales and profits.
I'll explain now the consolidated balance sheet on Page 13. Total assets were JPY 5,919.2 billion, an increase of JPY 282.6 billion from the end of the previous fiscal year, mainly due to an increase in working capital and impact of yen depreciation at the end of the current period compared to the end of the previous fiscal year. Inventories increased by JPY 126.9 billion from the end of the previous fiscal year because of the impact of weaker yen and increase in inventories for mining equipment.
Shareholders' equity ratio decreased by 1 percentage point from the end of the previous fiscal year to 52.8%. The acquisition of treasury stock, which was resolved at the Board of Directors meeting held on April 26, 2024 was completed by August 8, 2024, amounting to JPY 100 billion. In addition, the company completed the acquisition of JPY 100 billion worth of its own shares by August 8, 2024. On October 30, 2024, we canceled 22,857,500 shares acquired this time. This is equivalent to 2.35% of the total number of shares issued and outstanding before the cancellation. Net D/E ratio is 0.31.
This concludes my part. Next, Mr. Hishinuma will talk about the projections for fiscal '24.
I am Hishinuma, General Manager of the Business Coordination Department. I will explain the projection for fiscal '24 and the conditions in major markets. Page 15 is an outline of our projection for fiscal '24. The projection for fiscal '24 has not changed from the October outlook.
From Page 16, I'll go through the demand trends and outlook for the 7 major products. Demand trends for the 7 major products inclusive of mining equipment are shown here. Fiscal '24 Q3 numbers are preliminary estimates by our company. It appears that the amount of fiscal '24 Q3 decreased by 2% year-on-year. The finance forecast for fiscal '24 is unchanged from the October forecast with a decrease of 5% to 10% year-on-year. The subsequent pages explain the conditions in the major markets.
Page 17 shows the demand trends and forecasts for the Japanese market. Demand in fiscal '24 Q3 apparently decreased by 12% year-on-year, mainly due to decreased demand in rental. Fiscal '24 full year demand has been revised down from October forecast to 0% to minus 5% year-on-year.
Page 18 shows the demand trends outlook for the North American market. Demand for fiscal '24 Q3 apparently increased by 3% year-on-year. Although demand for rental energy decreased, demand for infrastructure remains steady. The full year demand forecast for fiscal '24 has been revised from the October forecast and is now expected to be minus 5% to minus 10% year-on-year. With the inauguration of the second Trump administration in January, we will continue to monitor impact on demand of future policies.
Page 19 shows the trends and outlook for demand in Europe. Demand in fiscal '24 Q3 appears to have decreased by 20% year-on-year. Demand for construction equipment decreased mainly in major markets such as Germany, the U.K. and France. The demand forecast for fiscal '24 on a full year basis is minus 10% to minus 15% year-on-year with no change from the October outlook.
In Europe, interest rates have been cut continuously since June last year, but there are no signs of the recovery in business confidence or demand. The political situation across countries are also in a turmoil and we will continue to monitor future developments.
Page 20 shows the demand trends and forecast for the Chinese market. This page shows the trend of demand for hydraulic excavators excluding mini excavators. For reference, the trend in demand, inclusive of Chinese manufacturers are also presented here. The growth rate in demand shows the figures for foreign manufacturers. It appears that demand in the third quarter of fiscal '24 increased by 26% compared to the same period last year. In addition, it appears that total demand, including Chinese manufacturers, increased by 21% compared to the same period last year.
The forecast for demand for the full year of fiscal '24 has been revised from October forecast and is now expected to be plus 10% to minus -- plus 10% to plus 20% year-on-year. The forecast for total demand including Chinese manufacturers is also expected to be plus 10% to plus 20% year-on-year, and this has not changed from the October forecast. Although there has been a reversal on demand, there has been no change in the situation of stagnant economic activity, due to factors such as the slump in the real estate market, and we'll continue to monitor the situation.
Page 21 shows the demand trends and outlook of the Southeast Asia market. Demand in the third quarter of fiscal '24 appears to have increased by 16% year-on-year. In Indonesia, the largest market, demand for general construction equipment has recovered since the second quarter and is currently exceeding the same period last year. In addition, coal prices in Indonesia have remained firm and the outlook for demand for mining equipment is expected to be the same as the previous year for the full year. The outlook for demand in fiscal '24 is unchanged from the forecast in October with a year-on-year change of 0% to 5%.
Page 22 highlights the trend and outlook of prices of major minerals related to demand for mining equipment. Although prices of major minerals have been fluctuating, they have remained at high levels over the long term.
Page 23 shows the trend in demand in mining equipment. The demand for mining equipment in Q3 of FY 2024 is estimated to have increased by 3% year-on-year. FY 2024 annual demand forecast is unchanged from the October forecast, ranging from 0% to negative 5% year-over-year.
Page 24 shows the net sales of mining equipment. Net sales for the third quarter of FY '24 were JPY 452.8 billion, up 4% over the same period last year. Stripping out the impacts of foreign exchange rate fluctuation, sales increased 4%. The sales forecast for FY '24 is unchanged from the October forecast of the JPY 1,845.7 billion, up 7% over the previous year.
Page 25 shows the forecast of sales of equipment, parts, services and et cetera, in the Construction, Mining & Utilities Equipment segment. Parts sales for third quarter FY 2024 were JPY 250.2 billion, up 5% from the same period of the previous year. The ratio of total aftermarket sales, including services, was 51%, and total aftermarket sales excluding the effects of exchange rate fluctuations were up 2% year-on-year.
The annual parts sales forecast for FY 2024 remained unchanged from the October forecast of JPY 1,024.1 billion, up 5% over the previous year. The ratio of aftermarket sales to total sales, including services, is expected to be 51%.
Now I'll walk you through the topics for the third quarter on Page 37 and beyond. Page 37 and Page 38, PC200i-12 will be explained over the 2 pages. Komatsu has fully remodeled its main stage 20-tonne class hydraulic excavator and launched a new generation model, PC200i-12 with 3D Machine Guidance as default standard equipment in Japan on December 1. A 3D construction at construction sites continues to spread and expand. The PC200i-12 equips 3D Machine Guidance's set standard and helps operator navigate, utilizing 3D data. In addition, the 3D Machine Control function, which automatically controls construction equipment with 3D data, can be selected and put into practice according to the customer's preference.
Page 38. The most important feature of the PC200i-12 is that 3D Machine Control is available option, allowing customers to choose a plan which best suits their needs. In addition, the PC200i-12 incorporates a variety of industry-first features, whether it is operator workload reduction and safety, such as auto swing, 3D boundary control and collision detection braking system.
One more highlight, the new full cylinder engine delivers both increased engine power and significantly reduce fuel consumption. The payload function, which visualizes [ amount ], comes with the standard equipment, significantly improving work efficiency. We can cut maintenance costs for improving maintainability. In addition to Japan market, the new system is expected to be available in North America, Europe, Australia and other markets in FY '2025. Komatsu will standardize 3D construction with a new model.
Page 39. Komatsu exhibited for the first time at CES 2025, the world's largest technology trade show held in Las Vegas from January 7 to 10. Komatsu introduced construction equipment that can be used in extreme environment such as on-demand surface and the water as well as the technological innovation to become carbon neutral by 2050.
The exhibition attracts a large number of visitors and attracts the attention from various media both inside and outside of Japan, providing a good opportunity to communicate Komatsu's initiatives. We are looking forward to next Komatsu exhibition in Osaka-Kansai World Expo, which will start on April 13. We will jointly exhibit with Aoki Asunaro Construction under the theme of underwater construction in the future and introduce our underwater construction.
Well, we are looking forward to seeing you. That's all from me.
Now we would like to take any questions that you may have. From UBS, Mr. Sasaki.
Do you hear me? This is Sasaki from UBS Securities.
Yes, we do. Please go ahead.
I have 2 questions. The first one is about a review about Q3. I do believe the results were pretty good. And you were able to see good progress against your company plan as well. So compared to your assumptions, I'm sure there's various factors like volume and FX. So can you talk about what was good, relatively better or worse and summarize overall?
This is Horikoshi speaking. Thank you for your question. Please wait a moment. So for Q3, regarding sales, it was JPY 5.5 billion higher than planned. As you know, compared to the outlook as of October, we were estimating JPY 140 to the dollar FX rate but it was JPY 148.8. Therefore, FX impact was JPY 53.8 billion. And for volume, it was under -- short of plan by JPY 47 billion. And for selling prices, there was JPY 1 billion shortage compared to plan. So that was for sales.
As for profit for volume or for FX, first of all, the positive impact was JPY 16 billion because of the difference between our assumption and the actual. And also the volume of JPY 47 billion, the impact of sales on sales for profit was JPY 17 billion short of our plan from a profit point of view.
And mix-wise, the positive impact was JPY 10 billion, above expectations. This is due to mining equipment and parts, high SBM ratio products sold well. And also the mix of parts was relatively higher. Also KMC, the aftermarket ratio was relatively high as well. That is why there has been a difference in the mix side of things.
And for selling prices, it was a negative factor of JPY 1 billion. And for production costs and fixed costs, it was better than expectations by approximately JPY 4 billion. So in total, we were greater than planned by approximately JPY 12 billion.
The JPY 47 billion shortage in sales that I mentioned earlier, if you divide it into Construction & Mining equipment, for construction, it was JPY 12 billion, and for mining, it was JPY 35 billion lower than planned. The JPY 12 billion for Construction equipment, due to poor demand, the impact was about JPY 3 billion and JPY 9 billion was pushed out into the second half. And for the shortfall, Europe was worse than planned. And for Japan for broad-based rental and rental overall, the performance was worse than expected. Positives were North America. First of all, demand was stronger than expected. On the other hand, distributor inventory reduction was steady as well.
So on a net basis, it was minus JPY 3 billion. And for JPY 9 billion, that's probably a push out into the fourth quarter we presume. For Mining Equipment, there was a shortfall of JPY 35 billion out of which approximately due to demand decline or due to deals that were pushed out due to customer reasons. That was about JPY 15 billion in impact. And from Q4 onwards, there were some pushouts worth about JPY 20 billion that has been pushed out into the fourth quarter and beyond.
That was very clear. Just an additional question. I always ask about the volume of product mix. On Page 10, the breakdown, can you walk me through that as well for volume, product mix, et cetera, out of the JPY 58.7 billion, right?
Yes. Period volume difference is JPY 35 billion, and regional mix and product mix impact was JPY 16.2 billion negative. And for the rest, the minus impact was about JPY 7.5 billion in the first half of the year. The mix in Others was pretty substantial, and I was saying it for the first half that the mix difference was JPY 21.9 billion, and now it's JPY 16.2 billion for Q3. So we're getting more positive impact. And for other losses, we're didn't see that kind of loss be incurred in the third quarter.
Got it. My second question is about Hishinuma-san's part. The assumptions for construction equipment demand has been revised. Especially for the U.S. and China, you have revised it upwards whilst you revised it downwards for Japan for each region. What was different compared to your original assumptions? Can you give me a more detailed reason why you changed your outlook? That was my second question.
This is Hishinuma speaking. First, for North America. For rental, it has started to go down since the second half of last year. And this kind of trend has not changed. And rental already has been falling since last year. So on a year-over-year basis, the drop off is not as big as we saw in the first half. For the fourth quarter, likewise, the rental demand was already down last year. So even if we see a decline in the fourth quarter this year, the degree of decline is not going to be that substantial.
And in Q2, we revised down our outlook to minus 5% to minus 10% -- we revised it down to minus 10% to minus 15% from minus 5% to minus 10%. This was prior to the presidential elections. So that's why we accounted for this for rental demand as well and revised it down to minus 10% to minus 15%. However, after finishing the third quarter, rental may be in line with assumptions.
But for infrastructure and so forth, it's better than expected. It didn't dip as much as we thought it would. So we still believe demand is going to trend negatively, but rental is likely to not change that much for the fourth quarter, which means that for the full year, the minus 10% to minus 15% decline is going to be too harsh and severe. So we decided to revise it back up to minus 5% to minus 10%. But the minus trend is unchanged.
And for Japan, we also revised the outlook down. We used to say, that demand is going to be flattish. But due to the sales analysis we presented in Q3, the numbers were pretty bad. For Q4, whether -- when you think about whether we could recover back the business, we believe that the negative impact is going to remain and persist. And that is why we revised down the outlook.
And for China, for the foreign companies, when you look at the material for the foreign companies, page-wise that would be on Page 20. When you look at the slide, bottom right, for fiscal '24 and the previous years are shown here. And you could see that trends have remained low and when number changed only by a bit, the numbers tend to change in a big way. So demand is in a recovery trend. However, the rebound has been slightly big. And that is why we decided to expect positive trends. But the broad trend itself has not really changed on an underlying basis.
I'll take the next question from Nomura Securities, Maekawa.
This is Maekawa from Nomura Securities. My first question is in Asia, mainly on Indonesia perhaps. Demand itself, we started to see the change of the tide, and that's the comment you made before and decided to pick up as you stated. But Q3, your net sales perspective, we started to see those. So what are the contribution, the biggest one? And how should we see the demand as we go forward if the things are changing for the next fiscal 2025 and there is some potential for recovery or so? How do you see the Asia market? Could you please focus on the Asia market first?
This is Hishinuma speaking. First of all, first is Asia, especially on Indonesia. In Q2 financial briefing, as I stated, [ first as you ] probably have seen that [indiscernible] performance has been observed. So same goes for Q3, too. However, the big projects and so forth are coming. So that's how we're seeing it. So slightly, the project progress, I would say or the shipment of net sales started to see a little variance. But even with that environment we are under, Indonesia, Southeast Asia, we're not going to the downward trend. That's how we see it. So for Indonesia market, it's expected to be robust as we have seen it, and they are more likely to go for a more positive territory.
Southeast Asia and other countries after elections, Thailand and other regions and countries have seen more positive trend. On a 3-month trend year-over-year basis, we haven't observed any of the significant negatives. So as conventionally have seen negative 5% or plus 5%. That's the range we are assuming. For the next fiscal year '25, we are currently getting the [ work like we have figured ]. We don't necessarily expect the significant changes coming.
Okay. Significant change is not coming, meaning the recovery trend doesn't have significant impact. Is that what you're saying?
Well, the demand units and its numbers, we'll not necessarily see huge volatility. That's what I'm saying.
Okay. So next one, how we should look at the next fiscal year '25? And how we should understand North America market? More than we expected, the Q3 performance was much better, and you revised the performance and assumption upward. As for next fiscal 2025, it's kind of difficult to ascertain the situations around you starting 2025 calendar year, but how should we look at the North American market?
This is Horikoshi speaking. You asked a question on North American market. This time, negative range started to back up again and as Hishinuma already explained, the October announcement was conservative a bit. So we just reversed it.
Yes, to be sure. November, December performance, order started to pick up again for like the ones in Asia and started to [ slack ] again. That said, in the United States market, December, the tax savings scheme has been utilized to place an order. And Europe, America in November, they are planning to increase prices. So there are last minute demand was observed. So after January and beyond, we have to ascertain the development, potential development.
Otherwise, we can't really judge it. So for next fiscal 2025, we can't really be conclusive of what it will look like. The total demand for FY 2025, a new President took office and potential policy could have significant impact. So for the time being, we have to test the water of how much range of negative positive we might have to suffer from or enjoy from.
Okay. Second question, pricing. Caterpillar started to see negative from pricing. But FY 2025, there is no significant drop in pricing. That's how I see it. On your part, the selling prices started to contribute positively, but progress side gets lower. So improvement of selling prices in January, as you said, but how would you like to take the policies or measures for selling prices, including parts? And as far as you can disclose it, could you please make a comment on that?
This is Horikoshi speaking. When we announced it in October, selling prices announced decrease. As I said, the reason was asked, and I said that in the United States, the construction equipment is part of the reason. Yes, to be sure, in North America market, the competition is very firm for selling prices. And for example, for Caterpillar. In this quarter, selling prices a hike was negative. And on the part of Komatsu, it started to come down.
In the case of Caterpillar, 2022, 2023, they jacked up the prices and buy 10-or-some percent or on the part of Komatsu, just 4-or-some percent being a moderate. They jacked up prices and bring it down again. But for our cases, moderately bringing up and in moderate cases, we continue -- moderate trends will continue. That's where we are today.
So for this fiscal year, looking at the total performance, the selling prices, the range can be secured for this fiscal year, as I said in October announcement. Now FY 2025, as Caterpillar said, selling prices hike started to be very tight. That will be part of the reality we have to face with. But for a competitor, there are some gap of the same prices still. So in that sense, there is a potential to improve or increase the selling prices, however.
On the pricing, some of the things will remain. And would it be applied to original equipment or spare parts or whether -- would it be for construction equipment or mining equipment?
Well, for this fiscal year, the biggest chunk is for spare parts and spare parts is a larger portion than the original equipment and mining equipment has much a larger portion than the construction equipment. And construction equipment, original equipment is the smallest proportion. For next fiscal 2025, however, it's more like a similar trend. But at this point in time, as we are creating, working on the business plan, there was no specific comments we can make today.
The next question is from Morgan Stanley MUFG Securities, Mr. Ibara.
Hello. Mr. Ibara from Morgan Stanley. Can you hear me?
Yes.
My first question is about for the construction mining and utility equipment segment. On a cumulative basis, when you compare Q3 and Q4, sales went down slightly and profits increased. And I think it goes back to the mix answer. Q-on-Q. I think I recall that you had walked us through the details in Q3. So if you can do that again, that would be great.
And as we head towards the fourth quarter, can you also share with us your view? Earlier, you were talking about some pushouts for both construction and mining. So if that all comes through in Q4, when you do the math, the numbers for Q4 look a little low. So can you share your views on this? So can you walk us through the Q-on-Q trends from Q2 into Q3, and then Q3 going into Q4.
This is Horikoshi speaking. Exactly to your point, talking about cumulative results up until Q2. The mix impact was quite substantial. And I talked about this in answering Sasaki-san's question, JPY 21.9 billion was the mix impact. And other than that, it was JPY 6.7 billion negative, which was a total of negative JPY 28 billion. And for cumulative Q3, JPY 16.2 billion and JPY 7.5 billion is contracted. So for Q3, because Southeast Asia performed well, or Indonesia, the gains increased from that factor.
For the fourth quarter, what we currently assume is to be in line with -- broadly in line with October outlook. It's just our FX impact that will add on to profits. Up until the third quarter, there was a sales shortfall by approximately JPY 47 billion. At the end of the full year, we expect about JPY 46 billion of a shortfall compared to expectations.
However, I talked about it earlier, the pushouts we saw in Q3. For mining especially, we're expecting a realization of the pushouts. So even with the shortfall of JPY 46 billion for construction equipment, they should deteriorate more. But for mining, we should see performance better. So around JPY 11 billion would be the net number between construction and mining. So that impacts our mix. Apart from FX, it should be a positive factor.
One more question is about where we show the BB ratio, that's on Page 35. For Komatsu America, it seems that -- well, it's the book-to-bill ratio. So of course, it's in relationship to shipments. Three months ago, Horikoshi-san, you were saying that if orders aren't that great, it will affect shipments for next fiscal year. But overall, for CapEx of customers who buy dump trucks goes back to Ogawa-san's remark, but does this happen to be the case where the ratio is not that great or are these trends likely to affect next year's shipments?
To your point, for the super large EDTs, electric dump trucks, the order backlog this fiscal year is gradually falling. So when you just look at this part for next fiscal year, there is a question mark around how things are going to be. However, overall, on a macro basis as we always say, for the mining majors, their CapEx continues to -- they're saying that they're going to continue to increase CapEx steadily. So that is not a concern.
So basically, because it's a large-sized product, the order timing comes in bulks. So I guess there are no major changes in trends.
Correct. Earlier, it was explained that for large-sized equipment, customers changing stack, or the assemblies take place locally before shipments, and there are some delays that occur. And that impact is quite substantial. So we're not expecting a huge decline due to sudden changes.
I'll take another question, [indiscernible].
This is [indiscernible]. Do you hear me speak?
Yes, please, go ahead.
I have two questions. Number one, this time, semiconductor-related demand, industrial machinery and others are pushing up the net profit. And could you please explain the reasons and what it look like for the future? That's my first question.
Sorry, could you please repeat the questions again? I can't really pick up that out.
Well, Industrial Machinery & Other segments. Yes, this time for automotive and semiconductor, both segments increased. Could you please trend behind it? And what would it look like in the future?
Yes. As for automotive segment, Komatsu NTC, Komatsu Industry, and we have 2 companies related to that. Fiscal year 2023, in the first place, automotive investment faced a [ lateral ]. Then as we went into 2024, it has started to appear. That's one thing. And out of 2 companies, the one company called NTC, they are producing engines and so forth. Some automotive battery on EVs and its production equipment is one of the areas they focus and they've been successful for transforming its business. So this is a company for automotive segment, and they are growing with those reasons.
Now for semiconductor sector, Gigaphoton is another company, and we have in Komatsu Group, a deal with that semiconductor. Excimer lasers source was created and produced in this company. The semiconductor sector is so global and doing very well especially for after sales, which are growing very much. So on the part of Gigaphoton as figure forward, net sales are expected to grow further. And actually, in [ content of it ] investment, we made investment and production capacity increased by 2.5x so that we can be ready and embrace ourselves for the future growth.
Okay. On Gigaphoton, you increased it by 2.5x of the production capacity. By one, would you like to increase the net sales of how much? Could you please disclose those information?
Sorry, I don't have -- necessarily have that figure in my fingertips. By 2030, JPY 100 billion and market share of 60% and OE, 25% margin. That's the target.
Okay. Great. My second question. This time, construction equipment, mining equipment and utility, and production costs all increased. And could you please talk about the factors behind it?
Just see Page 10. The production costs increased by JPY 16.2 billion because of the steel prices, which has started to increase because by Q2, it went up a lot. And rubber used in tire started to increase, too. And partner companies, labor cost started to increase, and we need to reflect that into planning of the cost, so the cost significantly increased. But the steel price, higher being rubber, those commodity prices started to edge down a little bit in Q3.
So for that, as you look at the Q3 stand-alone basis, then this production cost started to be positively contributing to our performance. However, for fixed cost starting 2017 to 2021, fixed cost have been flattish regardless of its net sales. So starting FY 2022, deliberately, we increased the fixed cost because of two reasons. Number one, each country inflation rate has been significant. And the electrification and automation of the future are something we need to be ready. So R&D in midterm is a source of investment so that we can be ready for the potential future. So that's why that's all pushed up fixed costs.
Sorry, if you disclosed it, but Industrial Machinery & Others, Automotive and Semiconductor, do you have a breakdown of mix of net sales basis, if you have it?
Well, if you look at Page 12, industrial -- Komatsu Industries, Komatsu NTC, you'll see it in itself.
Oh, sorry. Apologies.
This is especially for automotive and semiconductor. And Gigaphoton is especially for semiconductor. And there is a [ quote ], the company, that [ JPY 13 billion ] of the sales per annum.
We are running out of time. There are 2 people with their hands up. So can you keep your questions to one. Next person is Mr. McDonald from Citigroup Securities.
Can you hear me?
Yes, please go ahead.
So I'll ask one question. For Asia, trends in Asia, Originally, for the fiscal year, JPY 484.5 billion was the sales expectation that you projected several months ago. But according to what you said, Indonesia and other regions may exceed expectations. If that's the case, up until now, we will be reaching levels that are unprecedented. It might be a record highs.
From an economic cycle point of view, I believe that Asia is going to be good for a while. However, you -- the Chinese manufacturers, there are some concerns that they will continue to be a threat. But for sales in Asia, for both construction and mining equipment combined, are you concerned that there may be a slow down? Because I think that risk conditions may last, but what are your view? What is your view?
That is a difficult question. Like I mentioned earlier, the impact from Mr. Trump will probably materialize. And for this fiscal year, Q3 was really good for Indonesia as we said. The reason is because of coal or mining equipment. The demand for coal in the country was good and China's imports were high as well. So coal production reached record highs, and that is why Indonesia was good.
On the other hand, for agriculture and food -- and projects has been delayed, leading to lower demand. And for forestry on the Sumatra Island, the reconstruction efforts of the forest did not develop and grow as much, which led to demand. So for Indonesia, right now, it's just mining that's performing well. As for Thailand, the budget execution up until October was a question mark. But now we've been seeing more progress. So compared to the plan, it's been performing better.
And for Malaysia, we were thinking that the projects will not develop. But actually, conditions improved. So that is why compared to the October plan, we are seeing some bright signs. However, whether this is going to last forever is a question mark.
And also the advancement of Chinese manufacturers, as you always ask, the Chinese market itself has been weak and that is why the OEMs have been proactive. On the Indonesia point of view, their market share has already saturated, somewhat -- meaning the Chinese OEMs. So there's a question mark around what's going to happen in the future. So a sudden increase in market share is not expected like what happened in the past. We believe even if it happened, it's going to be moderate.
So in other words, non-mining in Indonesia for construction equipment and forestry, if it's weak right now, is it going to improve? And for Malaysia, where there's momentum, it might go up even forward. And I do believe you can expect more from India. So if Chinese competition is not going to change in their behavior, I expect that Southeast Asia is going to continue to be strong, and that will lead to higher margins, won't it?
Well, the growth rates of Southeast Asia on a global basis relative to other regions is extremely high, and infrastructure development will probably progress as well. So compared to other parts of the world, we do expect higher growth rates. So we view Asia as a strategic region. We have been doing so in the past. And also, we also expect Africa to grow as well. Therefore, we are focusing on the region. So for Southeast Asia, we believe the overall contribution is likely to increase.
Now I'd like to take up the final question. From Goldman Sachs, I'd like to take a question from Adachi-san.
This is Adachi from Goldman Sachs Securities. Do you hear me speak?
Yes. Please go ahead.
Just a final question. In North American market, mining equipment on estimated basis in North America market, the positive growth on a year-on-year basis, that's very likely to be. And obviously, yes, that's been contributed by FX. But still in North America market versus a major contributor -- a major competitor, it looks good. So maybe there's some variance for the clients and some efforts that you're making have been contributing? Maybe the service and spare parts are contributing a lot? Could you please give us a breakdown of these details?
Yes, especially in comparison versus Caterpillar. I guess we are directly selling -- sales, and they have a distributor for mining. And North American sales, in the first place, half of which is coming from America. So that dropped significantly. The reason being that $130 million -- that $1,300 million of inventory from distributors, that was down. So we don't necessarily have that, the middle ones. So the end users has and will be significantly contributing to our performance in our case, and there is a significant gap between those 2 in that sense. Now looking at the fiscal year '24. As I touched a bit, according to projects, there are some volatility. But in North America, original equipment has great contribution for fiscal '24 Q3, 9 months year-to-date.
Q2 to Q3, it seems like there is an improvement by a nudge. Why is it? Can you justify it? Because of the change of the administration with President Trump or new projects are coming in because of that?
Are you talking about actual performance?
Yes. From Q2 to Q3.
Yes. That [ was the ] deal -- were executed.
Well, because of the President Trump taking office?
Well, that has nothing to do with the new administration with President Trump. Thank you.
Thank you. We'll extend the briefing, and we will also have a Q&A session. We look forward to your attendance. That concludes Komatsu's Fiscal '24 Q3 Results Briefing. Thank you for joining.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]