Japanese Manufacturers Recovering from the impact of COVID 19
The shocks of the pandemic did not only impact the treasuries of most governments, but also denied profits to major manufacturers around the world and the giant multinational Kubota Group was not exempted from the adverse effects of the pandemic. Demand for heavy machines such as excavators, skid steers, tunneling equipment, bulldozers, cranes among others fell drastically as governments were compelled to bring industries to a halt in order to manage the rapid spread of the disease.
However, based on market trends, the demand for such heavy equipment sprang to life in late 2021 and early 2022 as government-imposed lockdowns were lifted and industries started to move forward. According to the financial statements of the Kubota Group, revenues for 2022 reached a record high for the fiscal year for the first time as revenues exceeded 2 trillion yen. The significant increase in revenue was generally cites as revenue from the Farm & Industrial Machinery component where demand increased significantly as customers avoided the consumption tax hike that was expected.
Revenue from the same component for North America also increased significantly due to the recovery of the construction industry in the region and also due to the recovery from the adverse impact of COVID-19. The increased revenue had a significant positive impact on profit as the Kubota Group achieved a record high profit despite the increase in the prices of raw material and costs directly linked to logistics. Currently the manufacturer has forecasted that profits will again achieve the same performance of 2022 due to the boom in North America. According to senior management of Kubota, the increased revenue is expected to enhance R & D initiatives with increased budgets.
The Representative Director and President of the Kubota Corporation Yuichi Kitao stressed on the fact that Kubota has laid the path for the company’s future which have become more clear and present since the pandemic. According to Mr. Kitao the planet has a range of pressing challenges that go beyond COVID-19 and the Kubota Group is ready to do what is necessary to ease the pressures that stem from these challenges. From sky rocketing commodity prices related to agriculture that are at record highs to millions of people across the continents who are facing acute under-nourishment and the absence of basic necessities such as running tap water right up to the doorstep of global warming and climate change, the statistics are real and are harrowing to say the least.
The action plans that the Multinational has taken are mainly based on what was revealed by the pandemic and what was realized by the company which is what triggered the drastic shift in mind-set by the top management of the Group towards “Building back better”. The rough years during the pandemic that saw the company rolling in losses and the recent turnaround has pushed the Kubota Group to reimagine the company’s business objectives which revolves around prioritising the state of the world’s natural environment towards ensuring sustainable growth for the company.
This paradigm is shared by both institutions and the average person which was among the main reason that triggered Kubota to look into the “Essentials Innovator for Supporting Life” concept during the time when Cholera was a menace. The company according to the president still hold on to this motto which mainly gives priority to both people and the environment, COVID-19 played an integral role towards renewing this concept. The multinational is currently pursuing its ambition as an “essentials innovator” towards sustaining life with hopes of arriving at carbon neutrality by the year 2050.
From a business perspective the company which presented lower revenue by 3 % was able to increase its revenue by 18.5 % in 2021 with operating profits lower by 31.1 % in 2020 and subsequently recovering towards the last quarter of 2021 by 40 %. The financial situation improved further for the fiscal year 2022 with revenues increasing by more than 10 % from the previous year and operating profit increasing by 1.5 %.
The lower margin is directly been attributed to the rising cost of steel and expenses related to logistics. According to the last financial statement overseas revenue made up more than 72 % of the total consolidated revenue which was an increase of nearly 5 % from 2021. Domestic revenue however remained sluggish based on the increase of only 1.3 %.
Much of the increase in revenue has been associated with construction and agricultural equipment such as excavators, tractors and skid steers. Within the scope of equipment, the Kubota’s K Series is among the top sellers based on the fact that the excavator series ranges from 1metric ton to 8 metric tons and is available in 3 varieties (zero tail swing, tight tail swing and the general conventional tail swing configuration).
Among the models the KX-040-4 has been cited as the bestselling excavator within Kubota’s spectrum of compact excavators. According to Kubota’s product manager Jeff Jacobsmeyer, the reason for the popularity of excavators such as the KX040-4 is due to the practicality of the machine as it is not only easy to transport about around project sites, but also because of the fact that the machine performance generally exceeds the expectations of the customer.
According to him, the current scenario as the world comes into a new phase of ‘living with COVID 19’ has resulted in a boom for small construction projects which has given general contractors more work than they are able to handle and these general contractors collectively make up for Kubota’s biggest customer segment which is why most of the concepts and designs that are injected to our latest models are based on input by these general contractors.
Lately, the company has emphasised on agriculture which became evident when the company decided to acquire French based B.C. TECHNIQUE AGRO-ORGANIQUE SAS. Among the reasons cited for the acquisition included legislations that are coming into place in Europe which intends to reduce the agricultural component’s impact on the environment which includes policies that involve a 50% reduction in chemical pesticide use within the next decade.
Kubota has also made headway in R & D initiatives revolving around implements that are able to work topsoil mechanically without utilising chemical herbicides to farm which fit into the narrative of the acquisition perfectly.
