COMPANY PROFILE

Kubota Corp, Japan

Profile
Japan’s Kubota Corp is a diversified manufacturer whose products are focused on food, water and the environment. The company
has three reporting segments: Farm & Industrial Machinery, Water & Environment, and, Other. The first of these is its largest and
encompasses the production of farm equipment, engines and construction machinery. The Water and Environment segment targets
water infrastructure applications ranging from water intake and purification to water supply and wastewater treatment. Its products
range from ductile iron pipes, plastic pipes, pumps, valves through to membranes and environmental plants. The Other segment
includes the design, construction and servicing of various works, as well as the manufacture and sale of housing equipment.

Analysis
Kubota Corp posted consolidated revenues for fiscal 2016 of ¥1596.1
billion, down 5.5% from the prior year. In its domestic market, revenues
fell 5.0% to ¥551.4 billion attributed to lower sales of farm equipment
and construction machinery, as well as weak public sector spending. In
overseas markets, Kubota’s revenues were back 5.7% to ¥1044.7 billion,
with the decline reflecting the negative currency impact flowing from
the appreciation of the yen. In the company’s Water & Environment
segment, home to its water treatment and membrane operations, sales
decreased by 7.5% on the prior year to ¥296.3 billion to account for
18.6% of consolidated revenues. Domestic revenues decreased by 3.2%
to ¥240.9 billion. Revenues from pipe‐related products fell on the back
of reduced public works spending, while sales of environment‐related
and social infrastructure‐related products also decreased. The segment’s
overseas revenues fell 22.8% to ¥53.7 billion mainly due to a big drop
in shipments of ductile iron pipes to the Middle East for large‐scale
projects, while in contrast revenues from environment‐related products
expanded. Sales in the Farm & Industrial Machinery segment decreased
5.1% on the year earlier to ¥1272.6 billion, equivalent to 79.7%
of consolidated revenues, with the fall higher in domestic markets.
Kubota’s overall operating income for the year fell 15.3% on the fiscal
2015 equivalent to settle at ¥188.8 billion due to the weak sales in the
domestic market and the effects of yen appreciation. Operating income
in the Water & Environment segment finished 13.3% lower at ¥22.2
billion reflecting the impact of lower revenues in both its domestic
and overseas markets. Operating income in the Farm & Industrial
Machinery segment fell 16.5% to ¥185.0 billion. Kubota’s net income
also fell, dropping 11.3% on the year earlier figure to ¥132.5 billion.
COMMENT
Kubota’s strategic focus remains the targeting of key
product sectors, expanding its presence in international
markets and increasing its efficiency. With regards to
the former, the company is looking to embrace technol-
ogy to enhance its competiveness. It is aiming to create
value by incorporating capabilities such as Internet of
Things (IoT) and robot technologies into its products.
Targeted applications include the monitoring of water
and environment infrastructure with IoT to reduce staff-
ing costs and using artificial intelligence to extend the life
of machinery through failure prediction. The company’s
development priorities also encompass its ‘Global Major
Brand Kubota’ objective whose aims include consolidat-
ing its position in North America and Europe, as well
as growth in Asian markets, particularly India. In the
medium term, Kubota says the focus for its Water &
Environment segment is increasing profitability rather
than revenues. Kubota is on track for improved financial
performance in fiscal 2017. After the first nine months
of the year revenue had reached ¥1266.7 billion, an
increase of 7.2% on the 2016 figure, while net income
was up 13.2% at ¥105.3 billion. The company’s full year
revenues are now forecast to reach ¥1700.0 billion, which
would represent a 6.5% increase year-on-year. n

Key Figures (¥ billion)

Kubota Corp Year ended 31.12/31.3*
2016 2015 2015* 2014* 2013*
Revenues 1596.1 1688.6 1586.9 1508.6 1210.6
Of Which:
Water & Environment 296.3 320.3 343.3 331.0 289.4
Cost of Revenues 1122.5 1153.2 1104.8 1057.0 880.9
Gross Margin 473.6 535.4 482.1 451.6 329.7
Selling, General & Admin Expenses 283.8 307.0 278.8 247.9 208.6
Other Operating Expenses (net) 0.9 13.2 (0.8) 1.3 (0.3)
Operating Income 188.8 222.9 204.1 202.4 121.4
Of Which:
Water & Environment 22.2 25.6 29.5 25.3 23.4
Income before Income Taxes 197.0 224.0 211.3 211.3 127.2
Net Income Attributable to Kubota 132.5 149.4 140.0 131.7 78.1
*Financial year ended 31.3
Source: Kubota annual reports.

Contact Details
President: Masatoshi Kimata
Address: 1-2-47 Shikitsu-higashi Tel: +81 6 6648 2937
Naniwa-ku, Osaka 556-8601, Japan Web: www.kubota-global.net

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Filtration Industry Analyst November 2017