Market Update: Komatsu Faces Sales Decline in Q3 Despite North American Growth

Komatsu has just revealed its revenue growth for the third quarter, showing a significant decline in sales. However, the factors that influenced the sales drop are said to be the tough tariff laws and currency strength. 

The company’s global revenue dropped to roughly $5.8 billion, a 38% decrease from the same time last year. Despite this, Komatsu’s North American sales increased marginally and remained stable at about $1.5 billion, indicating that demand in that area is still fairly stable.

How do the tariff and currency issues make things difficult?

One of the main causes of Komatsu’s recent problems is the strength of the Japanese yen. When the value of the yen rises in relation to other currencies, the company’s revenue from each machine sold overseas decreases. 

The appreciation of the Japanese yen was specifically mentioned by management as a challenge to its outcomes. 

Additionally, Komatsu is battling American tariffs on machinery parts, steel, and aluminum. Many of Komatsu’s products sold in North America are subject to high import duties under current trade policy, costing the company hundreds of millions of dollars every year. 

According to Komatsu, these tariffs will reduce sales by approximately $500 million and negatively impact profits by about $50 million this fiscal year. The business cautions that as tariff exemptions expire and costs rise, these pressures may increase by year’s end. 

How did the North American market back the company?

It’s interesting to note that Komatsu’s North American division has persevered in the face of these difficulties. Sales in North America increased by roughly 0.2% to $1.5 billion in the most recent quarter, according to the company. That fluctuating performance indicates that demand for heavy equipment in the United States and Canada is holding up fairly well in a global context where many regions are experiencing declines. In North America, Komatsu may be benefiting from factors like robust construction spending, renewed infrastructure projects, and dealers stockpiling inventory.

What does Komatsu expect in the future?

Komatsu is expecting a slow year. According to the company’s current projections, full-year sales will drop by about 5.3%, reaching about $25 billion. Because of the combined effects of tariffs and currency, profits are predicted to decline even more dramatically. According to one estimate, operating profit may decrease by roughly 25% from the previous year. The management has issued a warning: they anticipate that the difficulties caused by a strong yen and trade restrictions will continue and possibly get worse as the year progresses.

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