Kubota : Results of operations for the nine months ended September 30, 2018 (0.3MB)

FOR IMMEDIATE RELEASE

November 6, 2018

Contact: IR Group

Global Management Promotion Dept. 2‐47, Shikitsuhigashi 1‐chome, Naniwa‐ku, Osaka 556‐8601, Japan Phone: +81‐6‐6648‐2645

RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 [IFRS]

Kubota Corporation hereby reports its consolidated results for the nine months ended September 30, 2018.

Consolidated Financial Highlights

1. Consolidated results of operations for the nine months ended September 30, 2018

(1) Results of operations

(¥ in millions, except earnings per share)

Nine months ended Sept. 30, 2018	Change [%]	Nine months ended Sept. 30, 2017	Change [%]
Revenue	¥ 1,364,392	7.4	¥ 1,270,369	‐
Operating profit	¥ 148,442	(0.5)	¥ 149,224	‐
Profit before income taxes	¥ 153,633	(4.6)	¥ 161,095	‐
Profit for the period	¥ 114,312	(0.7)	¥ 115,152	‐
Profit attributable to owners of the parent	¥ 105,924	(1.9)	¥ 107,995	‐
Comprehensive income for the period	¥ 104,714	(11.4)	¥ 118,125	‐
Earnings per share attributable to owners of the parent: Basic Diluted	¥ 85.92 ¥ 85.92	¥ 87.24 ‐

(2) Financial condition

(¥ in millions)

Sept. 30, 2018	Dec. 31, 2017
Total assets	¥ 2,900,437	¥ 2,832,364
Total equity	¥ 1,435,869	¥ 1,375,568
Equity attributable to owners of the parent	¥ 1,348,856	¥ 1,291,094
Ratio of equity attributable to owners of the parent to total assets	46.5%	45.6%

Note:

Change [%] represents the percentage change from the same period in the prior year.

2. Cash dividends

Cash dividends per common share
Interim	Year‐end	Total
Year ending Dec. 31, 2018	¥ 16.00	¥ 18.00 (forecast)	¥ 34.00 (forecast)
Year ended Dec. 31, 2017	¥ 15.00	¥ 17.00	¥ 32.00

3. Forecasts of operations for the year ending December 31, 2018

(¥ in millions, except earnings per share)

Year ending Dec. 31, 2018	Change [%]
Revenue	¥ 1,830,000	4.5
Operating profit	¥ 204,000	2.0
Profit before income taxes	¥ 210,000	( 1.9)
Profit attributable to owners of the parent	¥ 145,000	8.1
Earnings per share attributable to owners of the parent‐Basic	¥ 117.62

Notes:

• 1. Change [%] represents the percentage change from the same period in the prior year.

• 2. Please refer to the accompanying materials, "1. Review of operations and financial condition (3) Forecasts for the year ending December 31, 2018" on page 6 for further information related to the forecasts of operations.

4. Other information

• (1) Changes in significant subsidiaries during the nine months (changes in specified subsidiaries resulting in the changes in scope of consolidation): None

• (2) Changes in accounting policies and changes in accounting estimates

  • a) Changes in accounting policies required by IFRS: Yes

  • b) Changes in accounting policies due to reasons other than a) above: None

  • c) Changes in accounting estimates: None

  Note:

  See the accompanying materials, "2. Other information (2) Changes in accounting policies" on page 7

• (3) Number of common shares issued

  a) Number of common shares issued including treasury shares as of September 30, 2018	:	1,234,056,846
  Number of common shares issued including treasury shares as of December 31, 2017	:	1,234,024,216
  b) Number of treasury shares as of September 30, 2018	:	1,938,779
  Number of treasury shares as of December 31, 2017	:	362,159
  c) Weighted‐average number of common shares outstanding during the nine months ended September 30, 2018	:	1,232,791,485
  Weighted‐average number of common shares outstanding during the nine months ended September 30, 2017	:	1,237,911,760
  (Adoption of International Financial Reporting Standards (hereinafter "IFRS"))

  Kubota Corporation and its subsidiaries (hereinafter, the "Company") have adopted IFRS from the beginning of the fiscal year ending December 31, 2018. Accordingly, financial figures for the nine months ended September 30, 2017 and the year ended December 31, 2017 are also reclassified in accordance with IFRS.

  Please refer to the accompanying materials, "3. Condensed consolidated financial statements (8) First‐time adoption of IFRS" on page 15 for further information related to the effects of the transition from accounting principles generally accepted in the United States of America to IFRS.

(Information on the status of the quarterly review by the independent auditor)

This release is not subject to the quarterly review by the independent auditor.

(Method of obtaining supplementary materials on the financial results)

Kubota Corporation plans to hold a results presentation (conference call) for institutional investors and securities analysts on November 6, 2018. The supplementary material will be published on the Company's website on November 6, 2018.

< Cautionary statements 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 forecast 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, as well as the Company's ability to continue to gain acceptance of its products.

Index to accompanying materials

• 1. Review of operations and financial condition ………………………………………………………………………………………… 4

  (1) Summary of the results of operations for the nine‐month period ………………………………………………… 4

  (2) Financial condition ……………………………………………………………………………………………………………………..... 5

  (3) Forecasts for the year ending December 31, 2018 ………………………………………………………………………… 6

• 2. 7

  Other information …………………………………………………………………………………………………………………….............

  (1) Changes in significant subsidiaries ………………………………………………………………………………………………… 7

  (2) Changes in accounting policies ……………………………………………………………………………………………………… 7

• 3. 8

Condensed consolidated financial statements ………………………………………………………………………………………

(1) Condensed consolidated statement of financial position ……………………………………………………………… 8

(2) Condensed consolidated statement of profit or loss ……………………………………………………………………… 10

(3) Condensed consolidated statement of comprehensive income ……………………………………………………… 11

(4) Condensed consolidated statement of changes in equity ……………………………………………………………… 12

(5) Condensed consolidated statement of cash flows ………………………………………………………………………… 13

(6) Notes to the going concern assumption ………………………………………………………………………………………… 13

(7) Consolidated segment information ………………………………………………………………………………………………… 14

(8) First‐time adoption of IFRS …………………………………………………………………………………………………………… 15

(9) Consolidated revenue by product group ………………………………………………………………………………………… 25

(10) Anticipated consolidated revenue by reportable segment ……………………………………………………………… 26

4. Results of operations for the three months ended September 30, 2018 ………………………………………………… 27

(1) Condensed consolidated statement of profit or loss ……………………………………………………………………… 27

(2) Consolidated segment information ………………………………………………………………………………………………… 28

(3) Consolidated revenue by product group ………………………………………………………………………………………… 29

1. Review of operations and financial condition

(1) Summary of the results of operations for the nine-month period

Kubota Corporation and its subsidiaries (hereinafter, the "Company") have adopted International Financial Reporting Standards (hereinafter, "IFRS") instead of accounting principles generally accepted in the United States of America (hereinafter, "U.S. GAAP") from the beginning of the fiscal year ending December 31, 2018. The figures for the nine months ended September 30, 2017 and the fiscal year ended December 31, 2017 used in the following analysis were reclassified into figures in accordance with IFRS.

For the nine months ended September 30, 2018, revenue of the Company increased by ¥94.0 billion [7.4%] from the same period in the prior year to ¥1,364.4 billion.

Domestic revenue increased by ¥7.4 billion [1.8%] from the same period in the prior year to ¥422.8 billion because of increased revenue in Farm & Industrial Machinery, which compensated for lower revenue in Water & Environment.

Overseas revenue increased by ¥86.6 billion [10.1%] from the same period in the prior year to ¥941.6 billion. Revenue in Farm & Industrial Machinery increased due to strong sales of construction machinery and tractors. Revenue in Water & Environment increased as well due to increased sales of ductile iron pipes and wastewater treatment plants (Johkasou).

Operating profit decreased by ¥0.8 billion [0.5%] from the same period in the prior year to ¥148.4 billion.

This decrease was mainly due to the negative effects from an increase in fixed costs and a rise in material prices, while there were some positive effects, such as increased sales in the domestic and overseas markets and the yen depreciation against the Euro. Profit before income taxes decreased by ¥7.5 billion [4.6%] from the same period in the prior year to ¥153.6 billion because finance income, which had previously included gain on sales of securities, decreased from the same period in the prior year. Income tax expenses decreased by ¥6.9 billion from the same period in the prior year to ¥40.8 billion mainly due to the federal corporate tax rate cut in the United States. Profit for the period decreased by ¥0.8 billion [0.7%] from the same period in the prior year to ¥114.3 billion. Profit attributable to owners of the parent decreased by ¥2.1 billion [1.9%] from the same period in the prior year to ¥105.9 billion.

In addition, the Company has detected improper conduct in rolling mill roll business, such as submitting the inspection reports, stating values different from those in the actual inspection, to its customers. Rolling mill rolls are metal consumable parts used in some of the production equipment for steel plates. The Company sincerely apologizes for causing concern and inconvenience to all its customers and concerned parties again.

The matter did not have a significant impact on the results of operations for the nine months ended September 30, 2018.

Revenue from external customers and operating profit by each reportable segment was as follows:

1) Farm & Industrial Machinery

Farm & Industrial Machinery is comprised of farm equipment, agricultural‐related products, engines, and construction machinery.

Revenue in this segment increased by 8.7% from the same period in the prior year to ¥1,139.6 billion and accounted for 83.5% of consolidated revenue.

Domestic revenue increased by 4.6% from the same period in the prior year to ¥234.7 billion due to increased sales of farm equipment, agricultural‐related products, engines, and construction machinery.

Overseas revenue increased by 9.8% from the same period in the prior year to ¥904.8 billion. In North America, sales of construction machinery and engines increased due to solid demand for construction. Sales ofutility vehicles increased due to the newly introduced model as well. In addition, sales of tractors increased due to continuous expansion of demand. In Europe, revenue increased due to significant growth in sales of construction machinery, as well as a favorable foreign exchange rate of the yen against the Euro and the British pound sterling. In Asia outside Japan, revenue decreased because sales of farm equipment in China decreased significantly resulting from the drastic shrink in demand. On the other hand, sales of farm equipment in Thailand increased due to recovered demand in response to a rise in the prices of rice and cassava. In addition, sales of tractors in India also increased.

Operating profit in this segment increased by 5.1% from the same period in the prior year to ¥158.1 billion due to some positive effects from increased sales in the domestic and overseas markets and the yen depreciation against the Euro, which compensated for some negative effects from increased fixed costs and sales promotion expenses.

2) Water & Environment

Water & Environment is comprised of pipe‐related products (ductile iron pipes, plastic pipes, pumps, valves, and other products), environment‐related products (environmental control plants and other products), and social infrastructure‐related products (industrial castings, ceramics, spiral‐welded steel pipes, and other products).

Revenue in this segment increased by 1.4% from the same period in the prior year to ¥203.0 billion and accounted for 14.9% of consolidated revenue.

Domestic revenue decreased by 1.8% from the same period in the prior year to ¥166.5 billion. Revenue from pipe‐related products decreased due to a significant decrease in sales of ductile iron pipes, while revenue from environment‐related products and social infrastructure‐related products increased.

Overseas revenue increased by 19.2% from the same period in the prior year to ¥36.5 billion because export sales of ductile iron pipes to the Middle East increased significantly. In addition, export sales of wastewater treatment plants (Johkasou) to China increased as well.

Operating profit in this segment decreased by 32.9% from the same period in the prior year to ¥11.1 billion mainly due to a rise in material prices and the decrease in domestic sales of ductile iron pipes.

3) Other

Other is comprised of a variety of services.

Revenue in this segment increased by 1.4% from the same period in the prior year to ¥21.9 billion and accounted for 1.6% of consolidated revenue.

Operating profit in this segment decreased by 19.0% from the same period in the prior year to ¥1.8 billion.

(2) Financial condition

1) Assets, liabilities, and equity

Total assets at September 30, 2018 were ¥2,900.4 billion, an increase of ¥68.1 billion from the prior fiscal year‐end. With respect to assets, finance receivables significantly increased due to the expansion in sales financing operations in North America and Thailand, where retail sales were strong.

With respect to liabilities, bonds and borrowings increased along with the expansion in sales financing operations, while income taxes payable decreased. Equity increased as the accumulation of retained earnings compensated for a decrease in other components of equity, which was due to fluctuations in prices of securities and foreign exchange rates, and an increase in treasury stock. The ratio of equity attributable to