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  • 1

    Construction and Mining Equipment Business in Latin America

    September 16, 2014Hishashi Shinozuka

    Director and Senior Executive OfficerPresident of the Construction and Mining

    Equipment Marketing Division

    Investors Meeting (September 16, 2014)

  • 2

    1. Outline of Komatsus Latin American Business1) Positioning2) Footprints3) Operations4) Operation by country

    2. Other operations in Latin America1) Panama Stock Operation (PSO)2) Next-generation mining equipment: Autonomous Haulage System (AHS)3) CSR activities

    ContentsPages

    3-8

    9-11

  • 3

    0FY11 FY12 FY13

    554.0

    While Latin American demand accounted for only about 8% of global demand in 2013, our sales in Latin America represented about 15% of total sales, translating into the third important market after Japan and North America.In terms of breakdown of sales of mining equipment by region, Latin America represented the largest share of all regions.

    (About 34% for FY2013)

    1-1) Positioning

    Sales of mining equipment by region: Latin America(to outside customers)

    614.5

    506.3

    34%

    Demand for major 7 products

    60.00%

    40.00%

    20.00%

    0.00%

    20.00%

    40.00%

    60.00%

    0

    100000

    200000

    300000

    400000Units

    8%

    Breakdown of sales by product for FY2013

    Estimated by Komatsu

    0

    25,000

    FY10 FY11 FY12 FY13

    15%

    1,677.01,739.3 1,749.7

    1,615.6

    EuropeLatin America Japan

    YoY change: global

    North AmericaOthers

    YoY change: Latin AmericaChina

    JPY82.5/USD JPY79.0/USD JPY82.5/USD JPY99.6/USD JPY82.5/USDJPY79.0/USD JPY99.6/USD

    JPY in bn

    2,000

    1,500

    1,000

    500

    600

    400

    200

    JPY in bnAfrica

    Middle East

    Oceania

    Asia

    China

    CIS

    Europe

    North America

    Japan

    Latin America

    Global

    Latin America

    Construction equipment Mining eqpt Parts

    Service

    Others

    OthersServicePartsMining eqptConstruction eqpt

    Sales of construction & mining equipment by region (to outside customers)

  • 41-2) Footprints

    0

    2000

    4000

    6000

    8000

    10000

    0

    5000

    10000

    15000

    20000

    USD/Ton*Estimated by Komatsu

    Units Brazilian

    crisis

    Brazilian currency

    crisis

    Production

    Sales

    Local production Reinforcement of distributors Expansion of mining equipment businessExpansion of aftermarket

    business

    Distribution

    Mercosurfounded

    Lehman Shock

    1980s1970s

    NAFTAin effect

    Argentinean currency crisis

    1990s 2000s 2010 and forward2010 and forward

    Latin American demand for 7 major products*

    73 Brazil: Began production ofconstruction equipment(together with sales function)

    74 Mexico: Began production of construction equipment(together with sales function)

    55 Exported graders to Argentina

    09 Discontinued

    99: Established distributor through equity participation.

    05 Chile: EstablishedReman plant for parts

    09: Made equity participation in distributor in Peru.

    10 Miami: Closed down and transferred southern Latin America marketingfunction to Chile.

    11 Chile: Acquired truck vessel maker

    12: Made equity participation in distributor of mining equipment in Colombia.

    12: Established service subsidiary in Panama.

    Mexican debt crisis

    85 Miami: Transferred sales base.

    72 Panama:Established sales subsidiary (Coordinating Latin American sales

    except for Mexico & Brazil)

    80s: Built distribution network to cover entire Latin America.

    13 Brazil: Established Reman plant for parts

    98 Established sales subsidiary in Brazil

    10 Miami: Closed down and transferred northern Latin America marketingfunction to Komatsu America Corp.

    13 Mining equipmentAcquired distributor.

    95 Miami: EstablishedLatin America regional HQ company.

    (Coordinating Latin American sales except for Brazil)

    71 Opened Panama office (-- 72)73 Opened Mexico office (-- 74) 78 Opened Bogota office (-- 84)

    75 Opened Lima office (-- 83)

    76 Opened Caracas office (-- 83)

    10 Opened Mexican office. ( -- 13)

    90s: Established the current distribution network. 13: Made distributor of mining

    equipment a subsidiary in Brazil.

    Establishment of distributors

    Demand Copper price

  • 5

    Komatsu Brasil International Ltda.Brazilian marketing HQ for construction equipment

    Komatsu CumminsChile Ltda.(KCC)

    Komatsu Chile S.A.(KCH)Distributor of construction & mining equipment

    1-3) OperationsOperating production bases in Brazil, logistic base in Panama and powerful distribution network, especially in Chile.

    Only Komatsu and CAT maintain powerful distribution networks, covering entire Latin America.

    No. of distributors: 26 companiesIncl. 3 companies (Komatsu equity)

    (Chile, Brazil and Colombia)

    Komatsu do Brasil Ltda.Plant to produce construction equipmentPlant to remanufactureparts

    Komatsu Holding S.A. (KHSA)Latin American HQ for mining equipmentSouthern Latin American HQ for construction equipmentTecpalsa in ColombiaDistributor of construction & mining equipment

    Tecmap in PanamaMining equipment service

    Komatsu Mitsui Maquinarias Peru S.A. (KMMP) in PeruDistributor of construction & mining equipment

    Road Machinery in MexicoDistributor of mining equipment

    Igaretta in ArgentinaDistributor of construction & mining equipmentTiesa in PanamaDistributor of construction & mining equipment

    Distributor: MB Comrcio de Peas e Servios Ltda. (MB)

    10 dealers of construction equipment

    Komatsu Reman Center Chile (KRCC)Plant to remanufacture parts

    Majority equity held bythe Komatsu Group

    Major market of mining equipment

    IndependentDistributor

    Komatsu America Corp. NLAD

    Northern Latin America marketing HQ

    Makomex in MexicoDistributor of construction equipment

    Equinova in MexicoDistributor of construction equipment

    Diteca in Ecuador Distributor of construction & mining equipment

    Mega/Makint in VenezuelaDistributor of construction & mining equipment

    Others

    (As of August 2014)

    Panama:Logistic base for construction & mining equipment

  • 6

    Komatsus stronghold base in Latin America. Sales of mining equipment drive sales, accounting for about 60% of total sales in the region for FY2013. Expanding business based on aftermarket revenues against the backdrop of stable growth of Komatsu machine population.

    1-4) Operation by Country: Chile

    Sales by industrial sector (USD)

    Population of mining equipment and maintenance service contracts

    Merits for customers Stable machine operation and improved

    productivity Fixed running costs and easy budgeting Streamlined operation

    Merits for distributors Stable earnings Increased sales of genuine parts

    No. employees of employees by country (consolidated) (excl. Japan)

    Provision of sophisticated service(incl. service contracts)

    Remanufacturing of parts

    Sales and rental of construction equipmentSales of used equipment

    Retail finance

    Functions in Chile

    Conceptual

    Construction equipmentOther equipmentServiceService contracts

    Mining equipmentOthersParts

    Index: FY04=100

    Komatsu

    Customers

    Periodic inspection, maintenance and repairs Planned overhaul of keycomponents

    (Service differs depending on the contract.)

    Payment of fixed fees

    No maintenance contract(Repair and overhaul fees, when provided)

    Cumulative repair expenses

    Maintenance contract(fixed amount)

    Operating hours

    1st overhaul 2nd overhaul

    Start

    Population of mining equipment% of service contracts

    Population index: FY04=1

    No. of employees (consolidated) as of March 31, 201435 countries: 51,279 (incl. 22,117 in Japan)

    Chile China USA Indonesia Australia Brazil Germany Thailand S. Africa Others

  • 71-4) Operation by Country: BrazilThe largest market for construction equipment in Latin America (about 50% of the total) In response to the governments preferential policy for products made in Brazil, Komatsu has production plants and engages in integrated operation of production and sales.

    Demand for construction equipment* Organization

    WarehouseSales/service baseMajor mining region

    Southern branch of KBI(incl. parts warehouse) in 2013

    KBI head office

    Parts warehouse of KDB in Sao Paulo in 2013

    Northern branch of KBI(incl. parts warehouse) in 2013

    KDBs Reman plant for parts in Sao Paulo in 2013

    Market conditions of mining equipment

    Demand for mining equipment*

    Worlds second largest production of iron ore

    Characteristics of production: KDB

    2013:Established sales and service company of mining equipment (100% equity of the Komatsu Group): MB Comrcio de Peas e Servios Ltda. (MB)

    2013:Established sales and service company of mining equipment (100% equity of the Komatsu Group): MB Comrcio de Peas e Servios Ltda. (MB)

    High growth potentials

    *Estimated by Komatsu

    *Estimated by Komatsu

    % of Brazil

    Latin America Brazil Sales function

    Construction eqptwholesale

    Mfg function Construction eqptfor domestic and export sales

    MB: sales/service distributor of mining equipment

    Construction equipment:10 sales/service distributors

    Reman & salesof parts

    No. of models made by KDB 12 models

    Domestic salesDomestic sales% of KDB-made