Kubota : Annual Securities Report for the 134th business term (From January 1, 2023 to December 31, 2023) (3.6MB)

[Translation]

Annual Securities Report

(The 134th Business Term)

From January 1, 2023 to December 31, 2023

2-47, Shikitsuhigashi 1-chome,Naniwa-ku, Osaka, JAPAN

Kubota Corporation

TABLE OF CONTENTS

Cover
1. Overview of the Company ………………………………………………………………………………………………...	1
1. Key Financial Data …………………………………………………………………………………………………..	1

2. History ………………………………………………………………………………………………………………... 2

3.	Description of Business ……………………………………………………………………………………………..	4
4.	Information on Affiliates ……………………………………………………………………………………………..	7

1. Employees ………………………………………………………………………………………………………….... 10

2. Business Overview ………………………………………………………………………………………………………... 12

1. Business Issues to Address ………………………………………………………………………………………... 12
2. Sustainability Approach and Initiatives ……………………………………………………………………………. 14
3. Risk Factors ………………………………………………………………………………………………………….. 31

4. Analysis of Consolidated Financial Position, Results of Operations, and Cash Flows by Management ….

34

5. Material Contracts …………………………………………………………………………………………………... 37

6. Research and Development (R&D) Activities ……………………………………………………………………. 38

3. Property, Plant, and Equipment …………………………………………………………………………………………. 41

1. Summary of Capital Investment ………………………………………………………………………………….... 41

2.	Major Property, Plant, and Equipment …………………………………………………………………………….	42
3.	Plans for Capital Investment and Disposals of Property, Plant, and Equipment ……………………………..	44
4. Information on Kubota Corporation …………………………………………………………………………………….	45
1.	Information on the Shares of Kubota Corporation ………………………………………………………………..	45
2.	Information on Acquisition of Treasury Shares …………………………………………………………………...	51

1. Dividend Policy ………………………………………………………………………………………………………. 52
2. Corporate Governance ……………………………………………………………………………………………... 53

5.	Stock-Related Administration of Kubota Corporation ………………………………………………………………	83
6.	Reference Information on Kubota Corporation ……………………………………………………………………….	84
	1. Information on Parent Company of Kubota Corporation ………………………………………………………...	84

2. Other Reference Information ………………………………………………………………………………………. 84

Consolidated Financial Statements	86
Independent Auditor's Report	151
(Filed under the Financial Instruments and Exchange Act of Japan) (Translation)
Confirmation Letter (Translation)	158
Management's Report on Internal Control over Financial Reporting (Translation)	160

COVER
[Document Filed]	Annual Securities Report ("Yukashoken Hokokusho")
[Applicable Law]	Article 24, Paragraph 1 of the Financial Instruments and Exchange Act of Japan
[Filed to]	Director, Kanto Local Finance Bureau
[Filing Date]	March 22, 2024
[Fiscal Year]	134th Business Term
	(from January 1, 2023 to December 31, 2023)
[Company Name]	Kabushiki Kaisha Kubota
[Company Name in English]	Kubota Corporation
[Title and Name of Representative]	Yuichi Kitao, President and Representative Director
[Address of Head Office]	2-47, Shikitsuhigashi 1-chome,Naniwa-ku, Osaka, JAPAN
[Phone Number]	[phone]
[Contact Person]	Kaori Sato, General Manager of Accounting Dept.
[Contact Address]	Kubota Corporation, Tokyo Head Office
	1-3, Kyobashi 2-chome,Chuo-ku, Tokyo, JAPAN
[Phone Number]	[phone]
[Contact Person]	Jun Sano, General Manager of Tokyo Administration Dept.
[Place Where Available for Public	Kubota Corporation, Tokyo Head Office
Inspection]	(1-3, Kyobashi 2-chome,Chuo-ku, Tokyo, JAPAN)
	Tokyo Stock Exchange, Inc.
	(2-1, Nihombashi Kabuto-cho,Chuo-ku, Tokyo, JAPAN)

This is an English translation of the original Annual Securities Report ("Yukashoken Hokokusho") filed with the Director of the Kanto Local Finance Bureau via Electronic Disclosure for Investors' NETwork (EDINET) pursuant to the Financial Instruments and Exchange Act of Japan.

The translations of the Independent Auditor's Report (filed under the Financial Instruments and Exchange Act of Japan), the Confirmation Letter, and the Management's Report on Internal Control over Financial Reporting for the original Annual Securities Report are included at the end of this document.

For the purposes of this Annual Securities Report, the "Company" refers to Kubota Corporation and its subsidiaries unless context indicates otherwise.

References in this document to the Financial Instruments and Exchange Act of Japan are to the Financial Instruments and Exchange Act of Japan and other laws and regulations amending and/or supplementing the Financial Instruments and Exchange Act of Japan.

Cautionary Statement with Respect to Forward-Looking Statements

This document may contain forward-looking statements that are based on management's expectations, estimates, projections, and assumptions. These statements are not guarantees of future performance and involve certain risks and uncertainties which are difficult to predict. Therefore, actual future results may differ materially from what is forecasted in forward-looking statements due to a variety of factors, including, without limitation: general economic conditions in the Company's markets, particularly government agricultural policies; levels of capital expenditures both in public and private sectors; foreign currency exchange rates; the occurrence of natural disasters; continued competitive pricing pressures in the marketplace; and the Company's ability to continue to gain acceptance regarding its products.

1. Overview of the Company

1. Key Financial Data

		134th	133rd	132nd	131st	130th
Business term		Business term	Business term	Business term	Business term	Business term
		December	December	December	December	December
Fiscal year		2023	2022	2021	2020	2019
Revenue	(millions of yen)	3,020,711	2,676,980	2,196,766	1,853,234	1,920,042
Profit before income taxes	(millions of yen)	342,289	231,150	250,917	185,899	209,022
Profit attributable to owners of the	(millions of yen)	238,455	156,472	174,765	128,524	149,061
parent
Comprehensive income attributable	(millions of yen)	367,470	283,262	269,162	96,656	167,048
to owners of the parent
Equity attributable to owners of the	(millions of yen)	2,175,773	1,874,490	1,678,035	1,476,039	1,442,837
parent
Total equity	(millions of yen)	2,416,067	2,102,488	1,785,109	1,574,185	1,537,214
Total assets	(millions of yen)	5,359,247	4,765,053	3,773,656	3,189,317	3,139,318
Equity attributable to owners of the	(yen)	1,851.75	1,576.30	1,398.47	1,221.95	1,182.72
parent per share
Earnings per share attributable to
owners of the parent:
Basic	(yen)	201.74	131.06	144.80	105.85	121.59
Diluted	(yen)	－	－	－	－	－
Ratio of equity attributable to	(%)	40.6	39.3	44.5	46.3	46.0
owners of the parent to total assets
Ratio of profit attributable to owners	(%)	11.8	8.8	11.1	8.8	10.7
of the parent to equity attributable
to owners of the parent
Price earnings ratio	(times)	10.52	13.89	17.55	21.27	14.20
Net cash (used in) provided by	(millions of yen)	(17,273)	(7,680)	92,511	142,919	82,410
operating activities
Net cash used in investing activities	(millions of yen)	(173,441)	(318,499)	(127,370)	(47,133)	(91,470)
Net cash provided by (used in)	(millions of yen)	178,404	282,557	60,586	(68,354)	(21,515)
financing activities
Cash and cash equivalents, at the	(millions of yen)	222,118	225,799	258,639	222,919	199,665
end of the year
Number of employees	(number of	52,608	50,352	43,293	41,605	41,027
(Average number of part-time	persons)	(12,924)	(12,213)	(3,356)	(2,699)	(2,880)
employees)

(Notes)

1. Consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS).
2. Amounts less than presentation units are rounded.
3. Earnings per share attributable to owners of the parent - Diluted are not stated as Kubota Corporation did not have potentially dilutive common shares that were outstanding.
4. In the year ended December 31, 2022, the Company has changed the measurement method of allowance for doubtful accounts for lease receivables, and the key financial data for the year ended December 31, 2021, has been retrospectively adjusted to reflect this change in the accounting policy.
5. In the year ended December 31, 2023, the Company has adopted IFRS 17 Insurance Contracts. In addition, the provisional accounting for the acquisition of Escorts Limited (currently, Escorts Kubota Limited) in the year ended December 31, 2022, has been finalized. The key financial data for the year ended December 31, 2022, has been retrospectively adjusted for these effects.

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2. History

Month / Year	History
Feb. 1890	Founder Gonshiro Kubota established Kubota Tekko-jo in Okuraato-cho,Minami-ku, Osaka, Japan and
	started manufacturing and sales of various cast metal products.
Jul. 1893	Started production of cast iron pipes for water supply.
Feb. 1922	Started production of compact engines for agro-industrial purposes.
Feb. 1927	Acquired Sumidagawa Seitetsuzyo K.K. and expanded the cast iron pipes business.
Dec. 1930	Established K.K. Kubota Tekko-jo and K.K. Kubota Tekko-jo Machinery Department.
Mar. 1937	Consolidated K.K. Kubota Tekko-jo Machinery Department with K.K. Kubota Tekko-jo.
Nov. 1937	Established Sakai Plant and started mass production of engines for agro-industrial purposes.
Oct. 1940	Established Mukogawa Plant and expanded the industrial machinery business, and started production
	of casting of centrifugal cast iron pipes the following October.
May 1949	Listed on the Tokyo Stock Exchange and Osaka Securities Exchange (integrated with Tokyo Stock
	Exchange in July 2013).
Aug. 1950	Adopted divisionalized organization by product.
Dec. 1952	Started production of pumps in Mukogawa Machinery Plant.
Jun. 1953	Changed corporate name to Kubota Tekko K.K.
Apr. 1954	Established a plant for vinyl pipes and started full production of plastic pipes.
Nov. 1957	Established Kubota Kenzai Kogyo K.K. and advanced into the housing materials business.
Dec. 1960	Established Funabashi Plant (relocated from Sumidagawa Plant) and completed a mass production
	system of cast iron pipes.
May 1961	Established Water Laboratory. Also established the Water Treatment Division for full-scale entry into
	the environmental improvement business the following December.
May 1962	Established Hirakata machinery Plant and Hirakata steel casting Plant and completed building an
	integrated system for industrial machinery and steel casting products.
Jan. 1967	Established Odawara Plant. Absorbed manufacturing sector of Kubota Kenzai Kogyo K.K. for full-scale
	entry into the housing materials business in June of the same year.
May 1969	Established Utsunomiya Plant and completed a mass production system of rice transplanters and
	reaper binders.
Jun. 1972	Absorbed Kanto Daikei Koukan K.K. Changed its name to Ichikawa Plant and continued to manufacture
	spiral welded steel pipes.
Sep. 1972	Established KUBOTA TRACTOR CORPORATION in the United States and strengthened the selling
	system of tractors in North America.
Sep. 1973	Established Kyuhoji Plant as a plant for precision equipment by relocating manufacturing facilities from
	Funademachi Plant.
Mar. 1974	Established Kubota Tractor Europe S.A. (currently, Kubota Europe S.A.S.) in France and strengthened
	the selling system for farm equipment in Europe.
Aug. 1975	Established Tsukuba Plant as a specialized mass production factory for tractors.
Nov. 1976	Listed on the New York Stock Exchange (delisted in July 2013).
Apr. 1980	Established Kashima Plant as a specialized factory for siding materials.
Jan. 1985	Established Sakai-Rinkai Plant in Sakai Plant as a specialized factory for engines.
Apr. 1990	Changed its corporate name to Kubota Corporation.
Oct. 2002	Established Hanshin Office as a hub for environmental engineering in the Kansai area.
Dec. 2003	Separated the housing materials business and Kubota Matsushitadenko Exterior Works, Ltd. (currently,
	KMEW Co., Ltd.), took over its business.
Aug. 2004	Acquired additional shares of The Siam Kubota Industry Co., Ltd. (currently, SIAM KUBOTA
	Corporation Co., Ltd.), which had been an affiliate in Thailand, to make it a consolidated subsidiary and
	strengthened development, manufacturing, and sales of farm equipment in Southeast Asia.
Apr. 2005	Established Kubota-C.I. Co., Ltd. by business integration of plastic pipes with C.I. Kasei Co., Ltd.
	(currently, Kubota ChemiX Co., Ltd.).

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Month / Year	History
Sep. 2007	Established Siam Kubota Tractor Co., Ltd. (currently, SIAM KUBOTA Corporation Co., Ltd.) as a
	manufacturing base for tractors in Thailand.
Mar. 2012	Acquired ownership interest in Kverneland ASA (currently, Kverneland AS), a manufacturer of upland
	farming implements in Norway, and made it a consolidated subsidiary.
Dec. 2013	Established Kubota Farm Machinery Europe S.A.S. in France as a manufacturing base for upland
	farming tractors.
Jul. 2016	Acquired ownership interest in Great Plains Manufacturing, Inc., a manufacturer of implements in the
	United States, and made it a consolidated subsidiary.
Apr. 2022	Acquired ownership interest in Escorts Ltd. (currently, Escorts Kubota Ltd.), a manufacturer of tractors in
	India, and made it a consolidated subsidiary.
Sep. 2022	Established Kubota Global Institute of Technology aimed at promoting cooperation between research
	and development (R&D) bases worldwide and strengthening its R&D network.

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3. Description of Business

The Company consists of Kubota Corporation and 218 affiliates (199 subsidiaries and 19 equity method affiliates) as of December 31, 2023, and provides a wide variety of products and services in the three reportable segments of Farm & Industrial Machinery, Water & Environment, and Other.

The Company prepares its consolidated financial statements in accordance with IFRS, and subsidiaries and equity method affiliates included in the scope of consolidation are determined in accordance with IFRS. The same applies to the

scope of affiliates in sections 2. Business Overview, and 3. Property, Plant, and Equipment.

The businesses and roles of the Company by reportable segment are as follows:

(1) Farm & Industrial Machinery

Farm & Industrial Machinery mainly manufactures and sells products such as farm equipment, agricultural-related products, engines, and construction machinery.

1) Main Products

Farm equipment and	Tractors, Power tillers, Combine harvesters, Rice transplanters, Turf equipment, Utility
agricultural-related products	vehicles, Other agricultural machineries, Implements, Attachments, Post-harvest
	machineries, Vegetable production equipment, Intermediate management machines,
	Other equipment for agricultural use, Cooperative drying facilities, Rice seedling
	facilities, Rice mill plants, Gardening facilities, Scales, Weighing and measuring control
	systems, and Air purifier with humidification function
Engines	Engines for farm equipment, construction machinery, industrial machinery, and
	generators
Construction machinery	Mini excavators, Wheel loaders, Compact track loaders, Skid steer loaders, and Other
	construction machinery-related products

1. Main Affiliates Manufacturing and Sales

(Overseas) Kubota Manufacturing of America Corporation (Note) Kubota Industrial Equipment Corporation (Note) Great Plains Manufacturing, Inc. and 18 subsidiaries Kubota Farm Machinery Europe S.A.S.

Kubota Baumaschinen GmbH Kverneland AS and 37 affiliates

Kubota Agricultural Machinery (SUZHOU) Co., Ltd. SIAM KUBOTA Corporation Co., Ltd.

KUBOTA Engine (Thailand) Co., Ltd. Escorts Kubota Ltd. and 7 affiliates

Sales and Services, etc.

(Domestic)	13 farm equipment sales companies, including Hokkaido Kubota Corporation
	KUBOTA Construction Machinery Japan Corporation
(Overseas)	Kubota North America Corporation
	KUBOTA TRACTOR CORPORATION
	Kubota Engine America Corporation
	Kubota Canada Ltd.
	Kubota Holdings Europe B.V.
	Kubota Europe S.A.S.
	Kubota (Deutschland) GmbH
	Kubota (U.K.) Ltd.
	Kubota Australia Pty Ltd.

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Financial Leasing

(Domestic)	Kubota Credit Co., Ltd.
(Overseas)	Kubota Credit Corporation, U.S.A.
	Siam Kubota Leasing Co., Ltd.
	Kubota China Financial Leasing Ltd.

(Note)

Kubota Manufacturing of America Corporation merged with Kubota Industrial Equipment Corporation on January 1, 2024, with Kubota Manufacturing of America Corporation as the surviving company.

(2) Water & Environment

Water & Environment mainly manufactures and sells products related to pipe systems (ductile iron pipes, plastic pipes and other products), industrial products (reformer and cracking tubes, spiral welded steel pipes, air-conditioning equipment, and other products), and environment (environmental control plants, pumps, and other products).

1) Main Products

Pipe system	Ductile iron pipes, Plastic pipes, Valves for public sector, Single stack drain fittings, and
	Design and construction of construction works
Industrial products	Reformer and cracking tubes, Hearth rolls, TXAX (friction materials), Spiral welded steel
	pipes (steel pipe piles, steel pipe sheet piles), and Air-conditioning equipment
Environment	Wastewater treatment equipment and plants, Pumps and plants, Membrane solutions,
	Water purification plants, Night-soil treatment plants, Waste incinerating and melting
	plants, Waste shredding and sorting plants, Flue gas desulfurization apparatus,
	Membrane methane fermentation plants, Wastewater treatment plant (Johkasou), and
	Valves for private sector

1. Main Affiliates Manufacturing and Sales

(Domestic)	Kubota ChemiX Co., Ltd.
	NIPPON PLASTIC INDUSTRY CO., LTD.
	Kubota Air Conditioner, Ltd.
(Overseas)	Kubota Materials Canada Corporation
	Kubota Saudi Arabia Company, LLC
Operation, Maintenance, and Repair
(Domestic)	KUBOTA Environmental Engineering Corporation
Design and Construction
(Domestic)	Kubota Construction Co., Ltd.

(3) Other

Other mainly offers a variety of services.

1) Main Products

Other	Various services including logistics, and roofing and siding materials

1. Main Affiliates Manufacturing and Sales

(Domestic)	KMEW Co., Ltd.
Services
(Domestic)	KUBOTA LOGISTICS Corporation
(Overseas)	Kubota China Holdings Co., Ltd.

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(Business distribution diagram)

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4. Information on Affiliates

					(As of December 31, 2023)
				Ownership	Relationship
		Common stock		percentage of
			voting rights	Business transaction, etc.
Company name	Location	(millions of yen)	Principal business activities	(%)

Subsidiaries

6 domestic farm	Nishi-ku,	100	Sales of farm equipment, etc.	80.8	Lease of facilities from
equipment sales	Sapporo,				Kubota Corporation, and
companies, including	JAPAN, etc.				sales of Kubota
Hokkaido Kubota					Corporation's products
Corporation
KUBOTA	Naniwa-ku,	300	Sales of construction machinery, etc.	100.0	Lease of facilities from
Construction	Osaka,				Kubota Corporation, sales
Machinery Japan	JAPAN				of Kubota Corporation's
Corporation					products, and interlocking
					directors
Kubota Credit Co.,	Naniwa-ku,	500	Retail financing to purchasers of farm	(22.9)	Loans from Kubota
Ltd.	Osaka,		equipment and related products	77.8	Corporation, lease of
	JAPAN				facilities from Kubota
					Corporation, credit
					guarantees, and
					interlocking directors
Kubota Machinery	Naniwa-ku,	30	Export and import of components for	100.0	Loans from Kubota
Trading Co., Ltd.	Osaka,		farm equipment, engines, and		Corporation, lease of
	JAPAN		construction machinery		facilities from Kubota
					Corporation, and material
					supplies to Kubota
					Corporation
Kubota Engine Japan	Naniwa-ku,	310	Sales, service, and engineering of	100.0	Lease of facilities from
Corporation	Osaka,		industrial engines		Kubota Corporation and
	JAPAN				sales of Kubota
					Corporation's products
Kubota North	Delaware,	(thousands	Administration of North American Farm	100.0	Interlocking directors
America Corporation	USA	of USD)	& Industrial Machinery business
(Note 2)		597,100
KUBOTA TRACTOR	Texas,	(thousands	Sales of tractors, outdoor power	(100.0)	Sales of Kubota
CORPORATION	USA	of USD)	equipment, construction machinery,	100.0	Corporation's products
(Note 2) (Note 3)		37,000	and implements		and interlocking directors
Kubota Credit	Texas,	(thousands	Retail financing to purchasers of	(90.0)	Interlocking directors
Corporation, U.S.A.	USA	of USD)	tractors, outdoor power equipment,	100.0
		8,000	construction machinery, and
			implements
Kubota	Georgia,	(thousands	Manufacturing of tractors and outdoor	(100.0)	Interlocking directors
Manufacturing of	USA	of USD)	power equipment	100.0
America Corporation		10,900
(Note 4)
Kubota Industrial	Georgia,	(thousands	Manufacturing of implements, tractors,	(100.0)	Interlocking directors
Equipment	USA	of USD)	and construction machinery	100.0
Corporation		70,000
(Note 4)
Kubota Engine	Illinois,	(thousands	Sales, engineering, and after-sales	(100.0)	Sales of Kubota
America Corporation	USA	of USD)	service of engines, engine parts, and	100.0	Corporation's products
		10,000	engine accessories		and interlocking directors
Kubota Insurance	Hawaii,	(thousands	Underwriting non-life insurance in the	(100.0)	Interlocking directors
Corporation	USA	of USD)	United States	100.0
		2,000
Great Plains	Kansas,	(thousands	Manufacturing and sales of implements	(100.0)	Interlocking directors
Manufacturing, Inc.	USA	of USD)	and construction machinery	100.0
and 18 subsidiaries		90
Kubota Research &	Georgia,	(thousands	Development of outdoor power	(100.0)	Commissioned research
Development North	USA	of USD)	equipment and implements	100.0	services from Kubota
America Corporation		90,000			Corporation and
(Note 2)					interlocking directors
Kubota Canada Ltd.	Ontario,	(thousands	Sales of tractors, outdoor power	100.0	Sales of Kubota
	CANADA	of CAD)	equipment, construction machinery,		Corporation's products
		6,000	and implements		and interlocking directors
Kubota Holdings	Noord-Holland,	(thousands	Administration of European Farm &	100.0	Loans from Kubota
Europe B.V.	NETHERLANDS	of EUR)	Industrial Machinery business		Corporation and
(Note 2)		532,788			interlocking directors
Kubota Europe	Val-d'Oise,	(thousands	Sales of construction machinery,	(100.0)	Sales of Kubota
S.A.S.	FRANCE	of EUR)	tractors, outdoor power equipment, and	100.0	Corporation's products
		11,167	engines		and interlocking directors

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