Japan’s Komatsu expects 27% profit fall this year on stronger yen, tariffs

By Kantaro Komiya

TOKYO (Reuters) -Top Japanese construction machinery maker Komatsu (OTC:KMTUY) on Monday forecast a 27% decline in operating profit this financial year due to a stronger yen and new U.S. tariffs which will have an impact of more than $650 million.

The company expects operating profit of 478 billion yen ($3.33 billion) for the business year to March 2026, after posting a record-high profit of 657.1 billion yen in the previous period, which marked 8.2% growth.

With robust mining equipment sales, a weak yen and successful price hikes, the positive 2024/25 result beat analysts’ mean estimate of 605.7 billion yen in the data compiled by LSEG.

Revenues came to 4.1 trillion yen and net income 439.6 billion yen, both historical highs for a third straight year.

"On tariffs, we’ve already taken immediate measures such as bypassing the U.S. when we export from Japan to Canada," Komatsu chief executive Takuya Imayoshi told an earnings briefing.

"We will consider changing sources globally or other mid-term efforts," Imayoshi, who took office earlier this month, said, adding that hiking prices in the U.S. is another possible tariff response.

Komatsu, the world’s second-largest heavy equipment maker after U.S. rival Caterpillar (NYSE:CAT), earns more than a quarter of its sales from North America, making it vulnerable to repercussions of President Donald Trump’s trade policy.

About 50% of Komatsu products sold in the U.S. are manufactured outside the country and imported, it said.

In the current business year, the company factored in a 78.5 billion yen direct tariff cost as well as a 15.8 billion yen indirect impact from tariff-induced slower economic growth on equipment demand.

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Yen appreciation would also shave off 133 billion yen from its profit this year, Komatsu said. The company assumes an exchange rate of 135 yen per dollar, against 153 yen per dollar in the previous year.

Komatsu also said it would buy back up to 4.3% of its outstanding shares for 100 billion yen and cancel them.

Shares in Komatsu closed on Monday 2.3% higher than the previous trading day, beating benchmark Nikkei 225’s 0.4% growth.

($1 = 143.4200 yen)

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