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  • Mining Equipment and Aggregate & Cement Sector Businesses

    September 16, 2016

    Hisashi ShinozukaDirector and Senior Executive Officer

    President of Construction and Mining Equipment Marketing DivisionKomatsu Ltd.

  • Mining Equipment Business

    1

  • Mining equipment Construction equipment Utility equipmentCustomers businesses

    Limited to regions with resourcesGlobal operation

    Global operation is rare. Country or region specific.

    Mainly in smaller areas

    Hours of machine operation

    24/7Over 5,000 hrs/year

    8-16 hrs/day and 5-6 days/week1,000--3,000 hrs/year

    8 hrs/day (max) and 5 days/weekUp to 1,500 hrs/year

    Locations of machine use

    Remote areas (in main)Almost no relocation of machines

    Urban, suburbia and remote areasRelocation of machines for each project

    Urban and suburbiaFrequent relocation of machines

    Customers expectations

    SafetyProductivity/machine utilization,$/ton, and lifecycle costs

    Machine performance/reliability,Model range and ample attachments Initial costs

    Versatility,Ample attachmentsInitial costs

    Customer service Maker/distributor Distributor/maker Distributors

    Machine ownership Customers (relatively high %) Customers and rental companies

    Competitors A few Many Extensively many(esp. mini excavators)

    Market Characteristics (1/2) 2

  • Estimated by Komatsu350

    300

    250

    200

    150

    100

    50

    0Ann

    ual p

    rodu

    ctio

    n vol

    ume (

    inde

    x)

    The ratio of underground mining equipment to increase

    Underground

    Breakers

    Crushing & conveyingequipment

    Underground truck

    Surface

    Komatsus offering

    Fleet control system

    Roof support

    Bulldozer

    Motor graderDump truck

    Wheel loader

    Hydraulic excavator

    Market size in FY2014 Source:Estimated by Komatsu from materials published by relevant companiesMining machines and our product offering

    Komatsu

    Joy GlobalSurface

    Joy GlobalUnderground

    Market size: JPY3 tnSurface: JPY1.9 tn (64%)

    Underground: JPY1.1 tn (36%)

    About JPY1.4 tnapplicable to Komatsus offering

    Production volume of minerals: surface and underground mining

    Shearer

    LHD

    Continuous miner

    Hydraulic jumbo drill

    Drag line

    Drill

    Rope shovel

    Market Characteristics (2/2)

    Underground: small and medium-sized mines

    Underground: major mines (supercaves)

    Underground: major mines (excl. supercaves)

    Surface mines

    Year

    3

  • 0

    500

    1,000

    1,500

    2,000

    1991

    1992

    1993

    1994

    1995

    1996

    1997

    1998

    1999

    2000

    2001

    2002

    2003

    2004

    2005

    2006

    2007

    2008

    2009

    2010

    2011

    2012

    2013

    2014

    2015

    2016

    2017

    2018

    2019

    2020

    Market Trends (1/2) All commodity prices peaked out in 2011. They appear to have bottomed out in 1Q, FY2016. We anticipate that commodity prices will head for slow recovery, although they wont recover to the peak level.

    2011/Feb.$187.18

    $57.50

    0

    50

    100

    150

    200

    250Ja

    nAp

    rJu

    lO

    ctJa

    nAp

    rJu

    lO

    ctJa

    nAp

    rJu

    lO

    ctJa

    nAp

    rJu

    lO

    ctJa

    nAp

    rJu

    lO

    ctJa

    nAp

    rJu

    lO

    ctJa

    nAp

    rJu

    lO

    ctJa

    nAp

    rJu

    l

    2009 2010 2011 2012 2013 2014 2015 2016

    US$/MT Iron ore

    2011/Sep$1,771.88 $1,327.80

    0

    500

    1,000

    1,500

    2,000

    Jan

    Apr

    Jul

    Oct

    Jan

    Apr

    Jul

    Oct

    Jan

    Apr

    Jul

    Oct

    Jan

    Apr

    Jul

    Oct

    Jan

    Apr

    Jul

    Oct

    Jan

    Apr

    Jul

    Oct

    Jan

    Apr

    Jul

    Oct

    Jan

    Apr

    Jul

    2009 2010 2011 2012 2013 2014 2015 2016

    GoldUS$/Ounce

    As of Sep. 9

    Source: Kitco

    Source: International Monetary Fund

    $69.60

    0

    50

    100

    150

    Jan

    Apr Ju

    lO

    ctJa

    nA

    pr Jul

    Oct

    Jan

    Apr Ju

    lO

    ctJa

    nA

    pr Jul

    Oct

    Jan

    Apr Ju

    lO

    ctJa

    nA

    pr Jul

    Oct

    Jan

    Apr Ju

    lO

    ctJa

    nA

    pr Jul

    2009 2010 2011 2012 2013 2014 2015 2016

    Thermal coalUS$/MT

    Source: World Bank (Monthly ave.)Description: Australian Thermal Coal FOB New Castle., 12000 btu/pound

    As of Sep. 9

    2011Feb$137.53c

    0.000.501.001.502.002.503.003.504.004.505.005.50

    0

    2,000

    4,000

    6,000

    8,000

    10,000

    12,000

    Jan

    May Sep

    Jan

    May Sep

    Jan

    May Sep

    Jan

    May Sep

    Jan

    May Sep

    Jan

    May Sep

    Jan

    May Sep

    Jan

    May Sep

    2009 2010 2011 2012 2013 2014 2015 2016

    CopperUS$/MT 2011/Feb$9,880.94

    Source: World Bank (Monthly ave.)Description: grade A LME spot price CIF European

    US$/lb

    $4,615.00 US$/ton$2.09US$/lbAsofSep.9

    As of Sep. 9

    x: 2000 = 100

    Thermal coalIron oreCopper

    Gold

    *data after 2016 is estimated by Komatsu

    Long-range price trend of main commodities

    4

  • 0

    50

    100

    150

    200

    250

    0

    1,000

    2,000

    3,000

    4,000

    5,000

    6,000

    7,000

    8,000

    9,000

    10,000

    1990199119921993199419951996199719981999200020012002200320042005200620072008200920102011201220132014201520162017201820192020

    2.2%

    .%

    6.9%0.0%

    3.0%

    Market Trends (2/2) While the business environment of the mining equipment industry remains challenging in the short range, we project that

    demand for mining equipment will gradually recover to a 4,000-unit level in the mid to long term, supported by an increase of consumption of major minerals and corresponding increase in their production volume.

    Mining Equipment Demand and Index of Major Commodity Consumption

    (Units)Consumption

    (Indexed)

    Mining Equipment Demand *1

    Indexed Major Commodity Consumption (Production in 2000 indexed to 100) *2

    Annual Growth Rate of Indexed Major Commodity Consumption *3

    *1: For Komatsus mining product lines only *2: Major CommodityThermal coal, met coal, iron ore, copper *3: Average of annual growth rate over the period

    Source: Komatsu Estimate

    5

  • 196.1 214.9

    194.3

    96.3 91.7 84.2

    206.8 140.6

    115.6

    +22%+18%

    -14%

    +15%+33%

    +11%

    -18%-1% -10% -12%

    -50%

    0%

    50%

    0

    200

    400

    600

    800

    FY07FY08FY09FY10FY11FY12FY13FY14FY15FY16 FY14FY15FY16

    356.5

    422.0

    361.5

    554.0

    614.5

    417.0

    506.3499.3

    447.3

    54.9 52.7

    56.9

    50.4 45.7

    23.5 22.9 23.2 22.1

    19.4

    37.5 34.4

    33.6

    35.0 33.2

    +24%+20%

    +4%-1%

    -17%-27% -23%

    -4% -7%-3%

    +20%

    -19%

    -4%

    -4%-12%

    -12%

    -15%

    -50%

    0%

    50%

    0

    50

    100

    150

    200

    250

    FY12/1Q2Q 3Q 4Q FY13/1Q2Q 3Q 4Q FY14/1Q2Q 3Q 4Q FY15/1Q2Q 3Q 4Q FY16/1Q

    FY15/1Q2Q 3Q 4Q FY16/1Q

    Middle East & Africa OceaniaAsia ChinaEurope & CIS Latin AmericaN. America Y-o-Y change

    139.1157.0163.4

    129.6119.2

    155.2

    107.2115.9

    150.5120.9

    118.7128.8

    130.8

    110.1113.7

    394.1

    107.598.3

    Sales of Mining Equipment and Outlook

    Annual sales of mining equipment (incl. parts and service) Quarterly sales of mining equipment (incl. parts and service)

    Y-o-Y change

    Billions of yenBillions of yen

    Y-o-Y change

    PartsEquipm

    entService, etc

    Equipment

    PartsService, etc.

    Initial projection Initial projection

    For the first 3-Month period of FY2016, sales declined by 15% from the corresponding period a year ago, to JPY98.3 billion, as affected by the Japanese yens appreciation and reduced sales of parts.

    We project that full-year sales for FY2016 will decrease from FY2015, as affected by a decline in demand for new equipment and the Japanese yens appreciation.

    6

  • 1. Growth Strategies Based on Innovation

    In response to our surrounding environment and tasks, we will work to achieve sustainable growth by focusing efforts and through open innovation, when applicable, in 1) Growth strategies based on innovation, 2) Growth strategies of existing businesses, and 3) Structural reforms designed to reinforce the business foundation, centering on DANTOTSU products, service and solutions.

    . Growth Strategies of Existing Businesses

    3. Structural Reforms Designed to Reinforce the Business Foundation

    Development of next-generation construction and mining equipment as well as next-generation components

    Deployment of AHS*1 and reinforcement of platform for mining solutions

    Contributions to expanding sales by developing new products, incl. DANTOTSU products Expansion of earnings in the value chain Expansion of the mining equipment business M&A

    Continuous reduction of costs (production and fixed costs) Reforms of spare parts operation Lean and powerful development Development of human resources with global perspective and framework to promote diversity for

    sustainable growth

    Basic Strategies of Mid-range Management P