■ Overview of Kato Manufacturing Co., Ltd. 4. Risk factors, earnings characteristics, issues and countermeasures As general risk factors in the construction machinery industry, fluctuations in demand due to economic, infectious disease, and geopolitical risks, intensifying competition in domestic and overseas markets, confusion in the global supply chain, exchange rate effects, trends in sales prices and raw material/energy prices, compensation liability due to product defects, and delayed response to environmental regulations and technological innovation can be cited. Regarding market competition in the construction machinery industry, there are many competing manufacturers, including major companies such as Komatsu <6301> and Hitachi Construction Machinery <6305>, for hydraulic excavators, which have the largest market size, and the severity of competition is known. However, for other construction machinery (construction cranes, aerial work vehicles, bulldozers, road paving machinery, etc.), manufacturers with their own areas of expertise have achieved high market share, and to some extent, there is differentiation. In terms of the company's position in the market, it is positioned as a major player in construction cranes along with Tadano <6395>, and as a medium-sized player in hydraulic excavators. In addition, in the construction machinery industry, there is a tendency for performance to fluctuate greatly due to changes in demand and exchange rates, as well as intensified competition. In the case of the company, due to the impact of the coronavirus pandemic and confusion in the supply chain, as well as the one-time expenses associated with structural reform, performance significantly declined from the fiscal year 2020 to 2022, so a midterm management plan was formulated with a focus on prioritizing profit recovery and a strategy that focuses on profitability rather than sales expansion. From the fiscal year 2023 onward, despite the remaining impact of confusion in the supply chain, the profitability-focused strategy has been successful and the profit level is on a recovery trend.
As general risk factors in the construction machinery industry, fluctuations in demand due to economic, infectious disease, and geopolitical risks, intensifying competition in domestic and overseas markets, confusion in the global supply chain, exchange rate effects, trends in sales prices and raw material/energy prices, compensation liability due to product defects, and delayed response to environmental regulations and technological innovation can be cited.
As general risk factors in the construction machinery industry, fluctuations in demand due to economic, infectious disease, and geopolitical risks, intensifying competition in domestic and overseas markets, confusion in the global supply chain, exchange rate effects, trends in sales prices and raw material/energy prices, compensation liability due to product defects, and delayed response to environmental regulations and technological innovation can be cited.
Regarding market competition in the construction machinery industry, there are many competing manufacturers, including major companies such as Komatsu <6301> and Hitachi Construction Machinery <6305>, for hydraulic excavators, which have the largest market size, and the severity of competition is known. However, for other construction machinery (construction cranes, aerial work vehicles, bulldozers, road paving machinery, etc.), manufacturers with their own areas of expertise have achieved high market share, and to some extent, there is differentiation. In terms of the company's position in the market, it is positioned as a major player in construction cranes along with Tadano <6395>, and as a medium-sized player in hydraulic excavators.
In the case of the company, due to the impact of the coronavirus pandemic and confusion in the supply chain, as well as the one-time expenses associated with structural reform, performance significantly declined from the fiscal year 2020 to 2022, so a midterm management plan was formulated with a focus on prioritizing profit recovery and a strategy that focuses on profitability rather than sales expansion. From the fiscal year 2023 onward, despite the remaining impact of confusion in the supply chain, the profitability-focused strategy has been successful and the profit level is on a recovery trend.
(Authored by FISCO guest analyst Masanobu Mizuta)