Kiyoshi Hishinuma: This is Hishinuma. As for the residential, at the beginning of the year, housing starts were weak, but now residential investment is coming back and we think it has already bottomed out. Non-residential is also robust. Rental has a seasonality, Q3 is not the strong period in rental. But our business is wholesale business for dealers. And now the dealers are not rushing to refuel the stock, so the sales are not picking up. Therefore, as mentioned before, towards the rental demand season in April onward, depending on whether they are restocked by March or later, there might be time lag.
Yoshinao Ibara: Retailers more than expected strength is coming mainly from the residential, right?
Kiyoshi Hishinuma: As for the recent trend, yes, that’s right.
Yoshinao Ibara: Thank you. When – say, the rental is dead for rental companies.
Kiyoshi Hishinuma: Yes, for the third-party.
Yoshinao Ibara: Right. Thank you. Second question is about the selling price in the fourth quarter. Mr. Horikoshi, you mentioned that fourth quarter will be double the third quarter. What do you mean by that?
Takeshi Horikoshi: In the third quarter, pricing was JPY32.7 billion, which was higher than expectation by JPY2.5 billion. So originally, it was expected to be JPY30 billion in the fourth quarter against the expected JPY28 billion. And we said doubled upside pricing will be plus JPY33 billion year-over-year in the fourth quarter.
Yoshinao Ibara: When you say double in the fourth quarter, what do you mean by that?
Takeshi Horikoshi: I meant that the gap from the projection in October will be double.
Yoshinao Ibara: I see.
Takeshi Horikoshi: Compared to October projection, Q3 selling prices was higher by JPY2.5 billion in 4Q, it to be higher by almost JPY6 billion than the October projection. And compared to the previous year, in Q3 selling prices were up by JPY32.7 billion and in Q4, it will be up by about JPY33 billion year-over-year.
Yoshinao Ibara: I see. Then in total for the full year compared to the October projection prices will be up by JPY6 billion, right?
Takeshi Horikoshi: In total, it will be about JPY8 billion.
Yoshinao Ibara: JPY6 billion in the fourth quarter, is that for three months?
Takeshi Horikoshi: Yes.
Yoshinao Ibara: Then for the full year, is the upside JPY8.5 billion?
Takeshi Horikoshi: I said JPY8.1 billion, compared to the October projection we received that upside.
Yoshinao Ibara: You commented on the steel costs and the freight costs vis-à-vis the forecast. You may not be able to specify the impact, but can you give us some colors like low [indiscernible] level or any?
Takeshi Horikoshi: Steel cost impact in the first quarter will be less than JPY1 billion and it will be higher in the next fiscal year.
Yoshinao Ibara: How about the ocean freight?
Takeshi Horikoshi: It’s smaller.
Yoshinao Ibara: Then when they are combined, it’s not much less than JPY1 billion, right?
Takeshi Horikoshi: Are you talking about the next fiscal year?
Yoshinao Ibara: No, for the fourth quarter.
Takeshi Horikoshi: For the four quarter, it is less than that.
Yoshinao Ibara: I see. Thank you.
Operator: Thank you. We are running out of time, so I would like to take the last question. Mr. Tai of Daiwa Securities, please.
Hirosuke Tai: This is Tai. I have one question. On Page 24 of sales of parts, in Q3, sales of parts were better than those of equipment, where to be speaking? But we don’t see the parts alone parts sales failed slightly in Q3, yen will still depreciate it. So, was there any change in the momentum of trend?
Takeshi Horikoshi: Pricing impact was about JPY100 million for nine months up to Q3.
Hirosuke Tai: Can you give us that rough breakdown, how much was from parts? Would you give us any hints?
Takeshi Horikoshi: Breakdown between parts and equipment, it is about 30-70, sorry, no, almost 50-50 or 40-60, 40 for parts and 60 for equipment, including both of mining and construction equipment.
Hirosuke Tai: I see. Then roughly speaking, parts JPY40 billion and equipment JPY60 billion, right?
Takeshi Horikoshi: Yes. Sound close.
Hirosuke Tai: Incidentally, talking about the next year from April, Mr. Ogawa said that the parts price increase will be important in this year. How is it going to change next year?
Takeshi Horikoshi: At this point, I don’t know.
Hirosuke Tai: You don’t know, I see. Should I assume that the parts will be bigger than the equipment, is it likely to happen?
Takeshi Horikoshi: No idea. It depends on demand as well.
Hirosuke Tai: Right.
Takeshi Horikoshi: I am not sure.
Hirosuke Tai: I see. Can you comment on Q3?
Kiyoshi Hishinuma: This is Hishinuma. There were differences in sales by region. In Q3, Indonesia and Asia were more or less sluggish.
Hirosuke Tai: I see. Then excluding them, can we expect the incremental turned from Q1 to Q2?
Kiyoshi Hishinuma: Are you asking about Q4 and the next year?
Hirosuke Tai: Well, I am not asking about numbers, but equipment sales might be up and down by region. But the utilization of the equipment in the field is high, so parts will continue to grow, and price should be and can be raised. I conceived such story. Does my story sound right? It’s my last question.
Kiyoshi Hishinuma: Yes, your thought is right. But due to economic conditions and utilization, part sales may fall in some areas.
Hirosuke Tai: I see. That’s all. Thank you.
Operator: Thank you very much. With this, we would like to close the business results meeting for the third quarter FY 2023 of Komatsu Limited. Thank you very much for your participation today.
