What growth strategies does Kubota President Kitao have in mind? [MosaTe] (June 4, 2022)

🎥 Jun 03, 2022 📺 テレ東BIZ ダイジェスト ⏱ 11m 👁 83399 views

Watch unreleased footage here: https://txbiz.tv-tokyo.co.jp/nmspremi... *First-time subscribers receive a 7-day free trial. Founded in Osaka 133 years ago, Kubota holds the top share of agricultural machinery in Japan. What's the solution to the ongoing decline of domestic agriculture due to a declining producer population and an aging workforce? And what's its global strategy? We interviewed Kubota's President and CEO, Yuichi Kitao. Cast: Yuichi Kitao (Kubota President and CEO) Shinsaku Toyoshima (News Morning Satellite Main Commentator) *The information and data provided are not intended...

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Transcript (26 segments)

Host0:04

Founded 133 years ago in Osaka, Kubota holds the top domestic share in agricultural machinery. Ranked third globally in sales, it is also the world's leading seller of small construction machinery. President Yuichi Kitao, who comes from tractor development, leads the company. In the 2021 fiscal year, sales reached approximately 200 billion yen, with record highs in both sales and operating profit. Although the 2022 fiscal year is expected to achieve consecutive record highs, the stock price fell after earnings did not meet market expectations.

Yuichi Kitao1:11

With the global recovery from the pandemic, demand has recovered, and our sales have increased. We achieved record sales and profit, but the stock price dropped the next day. Despite material cost hikes and the Ukraine situation, personally, I aim for a stock price of 3000 yen.

Host1:36

Kubota developed Japan's first riding tractor for field work in 1960, reducing the burden of farming. This is Kubota's largest tractor production base in Sakai City. It takes four people to assemble an engine because...

Factory Worker2:07

They may appear similar, but they are all different. Everything on this line is custom-produced. We operate on a completely made-to-order basis.

Host2:20

How many types are there?

Factory Worker2:23

We have about 450 types currently in production, with over 150 variations.

Host2:29

Due to order specifications, each tractor requires manual assembly. This facility produces about 3000 tractors per month, with over 80% exported. Kubota is a global company with overseas sales accounting for over 70%.

Reporter3:00

Reporter Toshima test-drives a tractor for field work. Starting the engine, this is a tractor intended for Hokkaido, priced from approximately 11 million yen. Even this size is considered medium-sized globally. Driving it feels completely different.

Host3:36

While overseas orders are surging and full production continues, domestically, tractor shipments are declining annually due to a decreasing farming population. To address Japan's declining agriculture, Kubota focuses on smart agriculture using information and communication technology. For example, sensors can measure sugar and moisture content during harvest. Kubota aims for full automation from planting to harvesting from home.

Yuichi Kitao4:19

Smart agriculture will change Japanese agriculture. Yes, I believe it will change. New entrants and part-time workers can easily operate machinery. Digitizing agriculture to visualize everything will improve yields and quality.

Host4:38

Kubota, aiming for the future of agriculture, has an unexpected side. This is the Kubota Sakai Manufacturing Plant, the largest tractor production base in Japan. Here, they manufacture various engines for companies worldwide.

Factory Worker5:04

We have engines for various uses: for generators, mini excavators, and shovel cars. Each has a different shape, so we custom-make the manufacturing lines. Some engines are unique to just one machine in the world.

Host5:33

Kubota manufactures engines for its own machinery and for global companies in construction and industrial machinery, exporting over 80%. This factory produces about 1300 engines daily, with approximately 3000 patterns. Production is at record highs and busy.

Factory Worker5:57

It's been busy, but that's how it has been.

Host6:05

Additionally, at Kubota's largest water pipe factory in Funabashi, Chiba Prefecture, Kubota was the first in Japan to mass-produce iron water pipes in 1904. Currently, it produces about 60% of domestic water pipes. Machinery and water pipes account for most sales, making it a machinery and water company.

Factory Worker6:38

The raw material for water pipes is scrap iron.

Host6:47

Kubota uses 100% recycled scrap iron to produce water pipes.

Factory Worker6:57

This is molten iron, the raw material for pipes. Scrap iron is melted at 1500 degrees Celsius.

Host7:07

Kubota developed a unique technology to double production capacity by manufacturing Japanese water pipes simultaneously. After processing and painting, water pipes are complete. This factory produces about 3000 pipes daily at full capacity. They also developed earthquake-resistant pipes that do not come off during seismic events. During the Great East Japan Earthquake, Kubota's water pipes did not break.

All factories are active and busy. Kubota will open a new R&D center in Sakai City around autumn. Given the excellent performance, what is the outlook going forward?

Yuichi Kitao8:14

Material cost hikes and logistics issues are significant. Supply chains, including geopolitical risks, are problematic. We are considering how to respond to these challenges.

Host8:34

In May, first-quarter operating profit for 2022 was about 15% lower year-on-year. Amid global instability, President Kitao bet the company's future. The battleground is India, the world's largest tractor market. The global tractor market is about 2.3 million units annually, with India accounting for 900,000. In India, tractors are used not only for farming but also for transporting goods and people. Kubota decided on an M&A with Escorts, the eighth-largest farm machinery maker in India, for 150 billion yen in April.

Yuichi Kitao9:31

We want to use India as an export hub for Europe and Africa. We see Africa's agricultural machinery market growing, with demand for both high-end and basic machines. We invested to capture this market.

Host9:56

Facing Kubota is Mahindra & Mahindra, which dominates with low prices. The M&A gives Kubota and Escorts about 13% share in India, while Mahindra has about 40%. You plan to fight Mahindra in India.

Yuichi Kitao10:22

We have full confidence in winning. By combining low prices, high performance, and Kubota's sports rules, we aim to produce machines for the world.

Host10:36

President Kitao is aggressively expanding overseas, especially in Africa. Regarding Kubota's stock price, it touched 1000 yen in the 2000s, 2000 yen in the 2010s, and is now around 3000 yen. With President Kitao aiming for 3000 yen, it's interesting to see if this long-term trend can be realized.