Hitachi Construction Machinery : Financial Results for the Second Quarter Ended September 30, 2023(IFRS)

Consolidated Financial Results for the Second Quarter Ended September 30, 2023

(IFRS)	October 26, 2023
Listed company: Hitachi Construction Machinery Co., Ltd. (HCM)
Stock exchange: Tokyo (Prime Market)	Code number: 6305
URL: https://www.hitachicm.com/global/en/

Representative: Masafumi Senzaki, President and Executive Officer, COO

Scheduled date for submission of the Quarterly Securities Report: November 13, 2023

Scheduled date of commencement of payment of dividends: November 30, 2023

Supplementary materials to the financial statements have been prepared: Yes

Presentation will be held to explain the financial statements: Yes (for institutional investors, analysts and journalists) (Rounded off to the nearest million)

1. Consolidated results for the second quarter ended September 2023 (April 1, 2023 to September 30, 2023)

1. Consolidated results

(The percentages indicated show changes from the same period of the previous fiscal year)

				Adjusted		Income before					Net income
	Revenue				Net income		attributable to
		operating income	income taxes
								owners of the parent
	Millions of		%	Millions of		%	Millions of		%	Millions of		%	Millions of		%
	yen			yen			yen			yen			yen
September 30, 2023	674,100		16.4	82,379		58.2	84,754		53.6	62,712		64.1	57,500		61.2
September 30, 2022	578,902		22.2	52,068		36.7	55,192		29.7	38,223		12.5	35,681		11.9

Note: "Adjusted operating income" is presented as revenues less cost of sales as well as selling, general and administrative expenses.

Net income attributable to owners of the

Net income attributable to owners of the

parent per share (basic)

parent per share (diluted)

Yen

Yen

September 30, 2023

270.38

270.38

September 30, 2022

167.79

167.79

References: Share of profits (losses) of investments accounted for using the equity method

September 30, 2023: ¥1,177 million September 30, 2022: ¥1,474 million

(2)

Consolidated financial position

Total assets

Total equity

Total equity attributable to

Equity attributable to owners of

owners of the parent

the parent ratio

Millions of yen

Millions of yen

Millions of yen

%

September 30, 2023

1,760,841

779,506

735,625

41.8

March 31, 2023

1,627,003

701,040

659,992

40.6

2. Dividends status

Cash dividends per share

First

Second

Third

Year end

Total

Quarter

Quarter

Quarter

Yen

Yen

Yen

Yen

Yen

March 31, 2023

－

50.00

－

60.00

110.00

March 31, 2024

－

85.00

March 31, 2024

－

－

－

(Projection)

Year-end dividends for the fiscal year ending March 2024 are to be determined.

Note: Changes involving the dividend states for the fiscal year ending March 2024: Yes

(English translation of "KESSAN TANSHIN" originally issued in the Japanese language.)

3. Consolidated earnings forecast for the full year ending March 2024 (April 1, 2023 to March 31, 2024)

(The percentages indicated show changes from the same period of the previous fiscal year)

											Net income
			Adjusted		Income before		Net income attributable	attributable
	Revenue				to owners of
		operating income		income taxes		to owners of the parent
					the parent
											per share
	Millions of yen	%	Millions of yen		%	Millions of yen		%	Millions of yen	%	Yen
March 31, 2024	1,360,000	6.3	160,000		17.9	151,000		34.0	98,000	39.7	460.81

Notes: Changes in consolidated earnings forecast: Yes

*Notes

1. Important changes in the scope of the consolidation during period (changes involving specific subsidiaries accompanying changes in the scope of consolidation): None
2. Changes in accounting policies; changes in accounting estimates

[1]	Changes in accounting policies required by IFRS	None
[2]	Changes in accounting policies other than those in [1]	None
[3]	Changes in accounting estimates	None

1. Number of outstanding shares (common shares)
   [1] Number of outstanding shares (including treasury shares)

September	2023	215,115,038
March	2023	215,115,038
[2] Number of treasury shares
September	2023	2,441,399
March	2023	2,465,562

1. Average number of common shares outstanding during the fiscal year (shares)
   September 2023 212,666,966
   September 2022 212,650,394

Indication of audit procedure implementation status

This earnings report is exempt from audit procedure.

Explanation on the appropriate use of results forecasts and other important items

Any forward-looking statements in the report, including results forecasts, are based on certain assumptions that were deemed rational as well as information currently available to the Company at this time. However, various factors could cause actual results to differ materially.

Please refer to ''1. Management Performance and Financial Conditions, (2) Outlook for the Fiscal Year Ending March 2024'' of the attachment for conditions serving as assumptions for results forecasts.

(English translation of "KESSAN TANSHIN" originally issued in the Japanese language.)

Index of the Attachment
1. Management Performance and Financial Conditions
(1) Management Results	2
(2)	Outlook for the Fiscal Year Ending March 2024	5
(3)	Analysis of Financial Condition	6
2. Consolidated Financial Statements
(1)	Consolidated Balance Sheets	8
(2)	Consolidated Statements of Income and Comprehensive Income
	Consolidated Statements of Income	9
	Consolidated Statements of Comprehensive Income	10
(3)	Consolidated Statements of Changes in Equity	11
(4)	Consolidated Statements of Cash Flows	13
(5)	Notes on Consolidated Financial Statements
	(Notes on the Preconditions for a Going Concern)	14
	(Segment Information)	14

(English translation of "KESSAN TANSHIN" originally issued in the Japanese language.)

1

1. Management Performance and Financial Conditions

(1) Management Results

The company newly formulated the three-yearmedium-term management plan entitled

"BUILDING THE FUTURE 2025," which began in the fiscal year ending March 31, 2024 and ends in the fiscal year ending March 31, 2026. We are committed to sustainable growth and improvement of enterprise value under four management strategies:

① Delivering innovative solutions for customer needs; ②Enhancing value chain business;

③Expanding business in the Americas; and ④Strengthening human capital and corporate capabilities.

During the 1H of the fiscal year under review (April 1, 2023 to September 30, 2023), demand for hydraulic excavators remained strong in North America, while continuing to decline sharply year on year in China and beginning to slow down in Asia, Western Europe, and other regions.

Demand for mining machinery remained firm overall, due to continued strong appetite for customers' investment against a backdrop of high resource prices and continued demand for overhaul and regular maintenance associated with high utilization.

Under these circumstances, production activities have been at a high level since the beginning of the period, and revenue significantly increased year on year in the Americas business, which has been undergoing full-scale independent development since March 2022; in addition, the mining business and the value chain business, on which we have been focusing our efforts, also grew significantly. These results, combined with the impact of foreign exchange rates and other factors, resulted in a significant increase as well as the 1Q in overall revenue to ¥674,100 million (an increase of 16.4% year on year), a record high for the 1H.

As for consolidated income items, adjusted operating income increased significantly as a result of ongoing cost reduction activities and promotion of selling price increases, in addition to increased revenue and foreign exchange effects and other factors, despite the impact of increased costs, mainly in material and logistics costs. As a result, adjusted operating income was ¥82,379 million (an increase of 58.2% year on year), a record high for the 1H as well as for revenue. Accordingly, net income attributable to owners of the parent amounted to ¥57,500 million (an increase of 61.2% year on year), also a record high for the 1H.

Business results by segment are described below.

• Construction Machinery Business

During the 1H of the fiscal year under review, revenue was ¥602,043 million (an increase of 15.9% year on year) and adjusted operating income was ¥74,308 million (an increase of 56.6% year on year), a significant year-on-year increase in both revenue and adjusted operating income.

Due to the continued strong performance of our full-scale independent development in the Americas from the previous fiscal year, not only new machinery sales of both construction and mining but also the value chain business centered on parts and services performed well, resulting in a significant year-on-year increase in earnings.

• Specialized Parts & Service Business

This segment consists primarily of Bradken Pty Limited and its subsidiaries, which are engaged in the parts and services business in the after-sales of mining facilities and machinery, and H-E Parts International LLC and its subsidiaries, which provide service

(English translation of "KESSAN TANSHIN" originally issued in the Japanese language.)

2

solutions.

During the 1H of the fiscal year under review, revenue was ¥74,672 million (an increase of 19.3% year on year) due to the strong performance of the mining market environment. Adjusted operating income was ¥8,071 million (an increase of 75.2% year on year) mainly due to an increase in revenue, the impact of foreign exchange rates, and an increase in profitable businesses as a result of business structural reforms that have been undertaken so far. This demonstrates a significant year-on-year increase in both revenue and adjusted operating income.

The above revenues of segments ① and ② are the figures before intersegment adjustments.

Notes: The reportable segment "Solution Business" was renamed "Specialized Parts & Service Business" from the fiscal year ending March 31, 2024. This is only a change in segment name and does not have an effect on the segment information.

(English translation of "KESSAN TANSHIN" originally issued in the Japanese language.)

3

The following table summarizes consolidated net revenue by geographic area:

(Millions of yen)

		FY2023	FY2022
		(April 1, 2023- September 30,	(April 1, 2022- September 30,	Increase (Decrease)
		2023)	2022)
		Revenue	Proportion	Revenue	Proportion	(A)-(B)	(A)/(B)-1
		(A)	(%)	(B)	(%)		(%)
	North America	162,984	24.2	115,061	19.9	47,923	41.7
	Central and	18,780	2.8	16,635	2.9	2,145	12.9
	South America
The Americas	181,764	27.0	131,696	22.7	50,068	38.0
Europe	90,656	13.4	74,743	12.9	15,913	21.3
	Russia-CIS	13,446	2.0	20,516	3.5	(7,070)	(34.5)
	Africa	29,117	4.3	24,624	4.3	4,493	18.2
	Middle East	15,487	2.3	12,729	2.2	2,758	21.7
Russia-CIS, Africa,	58,050	8.6	57,869	10.0	181	0.3
and the Middle East
	Asia	61,863	9.2	52,008	9.0	9,855	18.9
	India	35,539	5.3	30,597	5.3	4,942	16.2
	Oceania	128,777	19.1	113,788	19.7	14,989	13.2
Asia and Oceania	226,179	33.6	196,393	33.9	29,786	15.2
China	15,293	2.3	18,724	3.2	(3,431)	(18.3)
	Sub-total	571,942	84.8	479,425	82.8	92,517	19.3
Japan	102,158	15.2	99,477	17.2	2,681	2.7
	Total	674,100	100.0	578,902	100.0	95,198	16.4

(Rounded off to the nearest million)

(English translation of "KESSAN TANSHIN" originally issued in the Japanese language.)

4

(2) Outlook for the Fiscal Year Ending March 2024

Regarding demand for hydraulic excavators in the fiscal year ending March 31, 2024, market conditions are expected to remain sluggish in China, and there are signs of economic slowdown in Asia, Europe, and other regions as well. On the other hand, demand is expected to remain strong in North America, where the effects of infrastructure investment by the US government are expected. As a result of taking these factors into account, we have revised downward our full-year forecast for global demand for hydraulic excavators to approximately 213 thousand units (down 13% from the same period of the previous year), a downward revision of 6% from our previous July forecast.

Demand for mining machinery is expected to decline for small mining excavators as the price of thermal coal settles down and the willingness to invest in small and medium-sized mines is expected to decline. However, the market for ultra-large mining machinery, which is the core of our business, is expected to be firm and at a high level similar to the previous year, backed by rising infrastructure investment aimed at stimulating the economy after COVID-19 and resource prices that remain at a high level.

As described above, although we anticipate a decrease in demand for some regions and products, overall, we expect the market environment to remain generally high overall, particularly in mining. In addition to these market trends, we are continuing our efforts to reduce costs and raise selling prices, and we expect our business performance to remain strong, especially in our focused-on Americas business, mining business, and value chain business. Taking into careful consideration risks such as continued tightness of marine transportation, material and logistics costs that remain high, and other factors, based on the results of the 1H, we are further revising upward our consolidated earnings forecast for the fiscal year ending March 31, 2024 (April 1, 2023 to March 31, 2024) as of April 2023, which is the highest in our history. The exchange rates assumed for the third quarter and beyond in this forecast are also revised to ¥135 to the US dollar, ¥145 to the euro, ¥18.4 to the Chinese yuan, and ¥86 to the Australian dollar, based on actual conditions.

We will continue to work earnestly to realize our corporate vision of "Ensure a prosperous land and society for the future. We contribute toward realizing a safe and sustainable society." through the realization of our newly formulated mission of "Meet expectations from customers, co-create innovative products, services, solutions and together, we continue to create new values."

Consolidated Earnings Forecast for the Full Year Ending March 31, 2024

					Net income	Net income
		Adjusted			attributable to
		Operating	Income before	attributable to
	Revenue	operating	owners of the
	income	income taxes	owners of the
		income	parent per share
				parent
					(basic)
Previous forecast	Millions of yen	Millions of yen	Millions of yen	Millions of yen	Millions of yen	Yen
(A)	1,300,000	140,000	136,000	131,000	82,000	385.57
Forecast (B)	1,360,000	160,000	156,000	151,000	98,000	460.81
Change (B)-(A)	60,000	20,000	20,000	20,000	16,000	―
Change	4.6%	14.3%	14.7%	15.3%	19.5%	―
(Reference)
FY2022	1,279,468	135,701	133,310	112,661	70,175	330.00

Notes:

Any forward-looking statements in the report, including results forecasts, are based on certain assumptions that were deemed rational as well as information currently available to the Company at this time. However, various factors may cause actual results to differ materially.

(English translation of "KESSAN TANSHIN" originally issued in the Japanese language.)

5

(3) Analysis of Financial Condition

[1] Status of Assets, Liabilities, and Net Assets

(a) Assets

Current assets amounted to ¥ 1,000,148 million, an increase of 10.0%, or ¥ 91,243 million, from the previous fiscal year-end.

This was mainly due to an increase of ¥ 101,170 million in inventory although there was a decrease of ¥ 21,695 million in trade receivables.

Non-current assets amounted to ¥ 760,693 million, an increase of 5.9%, or ¥ 42,595 million, from the previous fiscal year-end. This was due mainly to an increase of ¥ 16,224 million in property, plant and equipment.

As a result, total assets increased by 8.2%, or ¥ 133,838 million, from the previous fiscal year-end to ¥ 1,760,841 million.

(b) Liabilities

Current liabilities amounted to ¥ 674,697 million, an increase of 9.7%, or ¥ 59,827 million, from the previous fiscal year-end.

This was mainly due to an increase of ¥ 34,949 million in bonds and borrowings.

Non-current liabilities amounted to ¥ 306,638 million, a decrease of 1.4%, or ¥ 4,455 million, from the previous fiscal year-end. This was mainly due to a decrease of ¥ 5,369 million in bonds and borrowings although there was an increase of ¥ 2,776 million in lease liabilities.

As a result, total liabilities increased by 6.0%, or ¥ 55,372 million, from the previous fiscal year-end to ¥ 981,335 million.

(c) Equity

Total equity increased by 11.2%, or ¥ 78,466 million, from the previous fiscal year-end to

• 779,506 million. This was mainly due to retained earnings and upturn in foreign currency translation adjustments.

(English translation of "KESSAN TANSHIN" originally issued in the Japanese language.)

6

[2] Analysis of the Status of Consolidated Cash Flows

Cash and cash equivalents at the end of second quarter totaled ¥ 104,680 million, a decrease of

• 7,312 million from the beginning of the fiscal year. Statement and factors relating to each cash flow category are as follows:

(Net cash provided by operating activities)

Net cash provided by operating activities for the second quarter based on ¥ 62,712 million in net income, and included ¥ 28,732 million in depreciation, a ¥ 28,217 million decrease in trade receivables and contract assets, while an ¥ 67,571 million increase in inventories and a ¥ 35,501 million income tax paid as cash outflow.

As a result, net cash provided by operating activities for the second quarter totaled to an inflow of ¥ 28,149 million, an increase inflow of ¥ 20,648 million year on year.

(Net cash provided by (used in) investing activities)

Net cash used in investing activities for the second quarter amounted to ¥ 27,006 million, an increase of ¥ 5,100 million year on year. This was mainly due to an outlay of ¥ 19,665 million for purchase of property, plant and equipment.

As a result, free cash flows, the sum of net cash provided by operating activities and net cash used in investing activities, amounted to an inflow of ¥ 1,143 million.

(Net cash provided by (used in) financing activities)

Net cash used in financing activities for the second quarter amounted to ¥ 12,881 million. While there was ¥ 33,791 million in proceeds from long-term debt and bond, this was due mainly to a decrease of ¥ 26,354 payments on long-term debt and bond and a ¥ 16,275 million dividends paid (including dividends paid to non-controlling interests), net as cash outflow.

As a result, cash for financing activities for the second quarter produced a decreased inflow of ¥ 27,583 million year on year.

(English translation of "KESSAN TANSHIN" originally issued in the Japanese language.)

7

3. Consolidated Financial Statements

(1) Consolidated Balance Sheets			(Millions of yen)
	Second quarter	Previous fiscal year-end
	As of	As of	(A)-(B)
	Sep. 30, 2023 (A)	Mar. 31, 2023 (B)
Assets
Current assets
Cash and cash equivalents	104,680	111,992	(7,312)
Trade receivables	279,401	301,096	(21,695)
Contract assets	5,596	4,221	1,375
Inventories	551,952	450,782	101,170
Income tax receivables	1,138	974	164
Other financial assets	37,404	29,863	7,541
Other current assets	19,977	9,977	10,000
Total current assets	1,000,148	908,905	91,243
Non-current assets
Property, plant and equipment	433,301	417,077	16,224
Right-of-use-asset	66,813	65,305	1,508
Intangible assets	41,359	39,704	1,655
Goodwill	44,288	40,421	3,867
Investments accounted for using the equity method	22,030	16,508	5,522
Trade receivables	44,385	39,253	5,132
Deferred tax assets	24,655	21,349	3,306
Other financial assets	78,496	73,391	5,105
Other non-current assets	5,366	5,090	276
Total non-current assets	760,693	718,098	42,595
Total assets	1,760,841	1,627,003	133,838
Liabilities
Current liabilities
Trade and other payables	259,291	244,034	15,257
Lease liabilities	11,487	11,649	(162)
Contract liabilities	16,928	13,320	3,608
Bonds and borrowings	345,893	310,944	34,949
Income taxes payable	13,827	19,215	(5,388)
Other financial liabilities	23,484	12,883	10,601
Other current liabilities	3,787	2,825	962
Total current liabilities	674,697	614,870	59,827
Non-current liabilities
Trade and other payables	6,080	7,562	(1,482)
Lease liabilities	62,925	60,149	2,776
Contract liabilities	9,571	9,611	(40)
Bonds and borrowings	191,154	196,523	(5,369)
Retirement and severance benefit	21,742	20,715	1,027
Deferred tax liabilities	8,094	6,882	1,212
Other financial liabilities	1,760	5,649	(3,889)
Other non-current liabilities	5,312	4,002	1,310
Total non-current liabilities	306,638	311,093	(4,455)
Total liabilities	981,335	925,963	55,372
Equity
Equity attributable to owners of the parent
Common stock	81,577	81,577	-
Capital surplus	75,741	75,724	17
Retained earnings	507,954	463,174	44,780
Accumulated other comprehensive income	73,419	42,611	30,808
Treasury stock, at cost	(3,066)	(3,094)	28
Total Equity attribute to owners of the parent	735,625	659,992	75,633
Non-controlling interests	43,881	41,048	2,833
Total equity	779,506	701,040	78,466
Total liabilities and equity	1,760,841	1,627,003	133,838

(English translation of "KESSAN TANSHIN" originally issued in the Japanese language.)

8