Kobelco Construction Machinery Group launches Fiscal 2016-2020 Medium-Term Management Plan

May 31, 2016
Kobelco Construction Machinery Co., Ltd.

The Kobelco Construction Machinery Group has formulated its Medium-Term Management Plan covering fiscal years 2016 to 2020.

<<Summary of the Previous Medium-Term Plan (Fiscal 2013 – 2015)>>

Excavator Business

During the previous medium-term plan from fiscal years 2013 to 2015, the Group re-entered the European and American markets and strove to maximize Kobelco’s brand value throughout the world. At the same time, the Group aimed at maximizing profits by implementing profit-oriented strategies for regions where it already had a certain share and addressed business challenges under a basic policy to undergo a transformation into a strong enterprise capable of accommodating any changes in the business environment.

Specifically in terms of development and production, the Group promoted the reduction of development lead time and succeeded in cutting the development time for both heavy and mini excavators by about half. It also significantly reduced the total production lead time. At the Numata Factory in Hiroshima, the Group put effort into improving its competitiveness as a parts plant as well as into shifting to in-house production of a high value-added product menu.

In terms of sales and marketing, the Group has been building a foundation in both Europe and the U.S. by steadily establishing distributor networks. Additionally, the start-up of its U.S. manufacturing facility has been pushed forward by one year, and operations are to begin soon.

Crane Business

The crane business experienced a consolidated term-end deficit three times in a row until fiscal year 2012. To achieve a surplus for fiscal year 2013, the Group addressed business challenges under two basic policies to 1) establish a business foundation to ensure stable earnings and 2) build a foundation for business expansion and development.

As a result of these efforts and generally stable market conditions, the Group achieved higher earnings and posted a surplus on an ordinary income basis in fiscal 2013, with increasing earnings thereafter. From the standpoint of business selection and focus, the Group identified unprofitable products while making a decision to re-enter the large-sized LBCC market.

<<About the New Medium Term Management Plan (Fiscal 2016 – 2020)>>

The new medium-term management plan is the first medium-term plan for Kobelco Construction Machinery that combines both the excavator and crane businesses. The Group will benefit from the advantages of the consolidation as well as leverage the synergy from both companies’ strengths.

With radical changes in each market, the Group will carry out region-specific manufacturing and sales strategies tailored for each market including reconstruction of the business in China, ICT promotion, and re-entry into the large-sized crawler crane business. At the same time, the Group will strive for continuous growth in the global market by building, improving and extending the Group’s internal systems and frameworks that have been continuing from the previous medium-term plan and by establishing a more solid business foundation.

The medium-term management policy is as follows.

<<Medium-term Business Policy>>

The Kobelco Construction Machinery Group will:

  • As a challenger in the industry, continue to grow in the global market by promoting differentiation in products, manufacturing, and distribution and services.
  • Create new value and contribute to the development of an affluent society through the construction machinery business.

Concretely, the Group will operate its business based on the following basic strategies.

<<Basic Strategies under the Medium-term Management Plan>>

Excavator Business Strategies

1. Increase presence in Europe, the U.S. and upcoming growth areas and establish a solid presence as a global excavator manufacturer.

  • Implementation of clear strategies by categorizing each market as a market subject to “defensive marketing,” “proactive marketing” or “market development”
  • Assignment of marketing managers to better provide products suitable for each region
  • Assignment of customization engineers who collect region-specific information and take appropriate measures
Defensive marketing Japan, Southeast Asia, and China
Proactive marketing North America, Europe, and India
Market development The Middle East and Africa

2. Provide differentiated products and services that competitors cannot match, provide solutions utilizing IT, and become a company that will be chosen by customers and distributors.

  • Creation of product value utilizing i-Construction (in Japan) and construction of open systems with users
  • Centralized management and sharing of strategic information through establishment of the ICT Products Promotion Center (provisional name)
  • A further shift of plants into “Smart_Factory”
  • Acquisition of core technologies through in-house manufacturing and acquisition of next-generation technologies

3. Make a transformation into a strong enterprise capable of accommodating any changes in the business environment and ensuring stable earnings.

  • Improvement of preparation accuracy using information from the field, and its utilization for sales and marketing
  • Establishment of parts and machine sourcing systems, taking into consideration the load balance among all production sites
  • Improvement of competitiveness through further reduction of development and production lead time

Crane Business Strategies

4. Improve operational quality in order to ensure stable earnings

  • Improvement of customer relations based on the characteristics of each key area
  • Further reduction of lead time and minimization of opportunity loss through promotion of production reform

5. Establish a foundation for business growth.

  • Timely introduction of new products and models (model changeover) to the markets
  • Improvement of brand power as well as the technical capabilities to become a leading company
  • Establishment of a business foundation for large-sized crawler cranes

Common Strategies

6. Strengthen the cultivation of global human resources and improve global development capabilities through familiarization with the Group’s spirit.

  • Familiarization of the Kobelco Construction Machinery Group’s spirit (uniqueness)
  • Fostering of GK persons by providing on-the-job and off-the-job training for employees from early years after joining

<<Business Objective>>

Medium-term Management Plan: Image of Business Objectives (Consolidated)

(in billions of yen)

  FY2015
(Two companies together)
FY2016
Outlook
FY2020
Image
Net Sales 344.6 3,35.0 400.0 or higher
Ordinary Income -12.1 8.0 30.0 or higher

<<Important Numerical Targets (Fiscal 2020)>>

  • Global share (heavy + mini excavators): 10%
  • Global share (cranes) *Excluding China: 40%
  • Global sales ranking in the industry: 10th or better
  • ROA (ordinary income ÷ total asset): 5% or higher

*The information contained herein is as of the date this announcement was made and it may be changed without a prior notice.