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IR-DAY2017 Forest Machine Business

September 15, 2017 Kiyoshi Mizuhara Senior Executive Officer and President, Construction Equipment Marketing Division IR‐DAY2017 Market Demand of Forest Machines 2

1. Global production of industrial roundwood = 1,850 mil. tons in 2015. Will grow 1.7% annually. Estimation = 2,190 mil. tons in 2025.※１ • Growth rate by product: • Sawlogs & Veneer logs; +2.3% （Global increase in housing starts） • Pulpwood; +1.4% (Increase in paper production in developing countries. Developed countries =>decreasing) • Growth rate by region: • Europe; +1.7%, North America; +1.9%, Asia; +1.5%, Latin America; +1.7%, Oceania; +2.2% 2. mechanization ratio by each region: Europe/NA/Oceania ; stable Asia; increasing 3. Forest machine demand = JY 520 B in 2016. will grow 3.3% annually. Estimation = JY 690 B in 2025.※2

※1 Source: Food and Agriculture Organization of the United Nations (FAO), Komatsu estimate, ※２ Source: Freedonia, Komatsu estimate IR‐DAY2017 Economic indicators for Forest Machine Market 3

• International pulp price is stable in the past decade except for Lehman aftermath. • Consumption increases in emerging countries, decreases in developed countries. • US housing starts has recovered to pre-Lehman level.

International Pulp Price

Source: INSEE - National Institute of Statistics and Economic Studies (French national statistics bureau) International prices of imported raw materials - Wood pulp (Chicago) - Index NBSK - Price in US dollars per tonne US Monthly Housing Starts IR‐DAY2017 Image of forestry and harvesting method 4

Houses Sawmill

Furniture

For sawlog Planting / , Delimbing Transport from forest Transport on pubic road Clear-cutting Load to trailer

For pulp Pulp, paper mill Power station, Hot water Wood chip （1）CTL method（Cut To Length) For Biomass supply Pellet Heater, （Full Tree Length) For fuel （2）FTL method Fuel wood cooking Method Detail Characteristics Felling, Delimbing, Extracting from forest, Transporting Machine Bucking Loading to trailer attachment ( head) （1） fells, delimbs, CTL HE Harvester spec bucks (cut to length), and debarks trees. Crawler harvester Forwarder Extract logs to Felled trees are delimbed and cut to length in public roadside by Wheeled harvester the forest and transported to near public road. forwarder.

Felling Extracting Delimbing, Bucking Collecting, Transporting Machine attachment loading (felling head) fells trees Crawler and extracts processor trees with branches （2） Wheel log loader and barks. Skidding Crawler skidder usually damages FTL ground and young Wheeled feller Delimber trees. This method has buncher Wheel skidder been developed in North America and is able to fell trees in Log loader HE processer large volume in a short Felled trees are extracted with full tree length. time. Crawler Trees bucked and processed in a different area. IR‐DAY2017 History of Komatsu Forest Machine Business 5

〜2000 2005 2010 2015

2011 2012 Brand name Acquired Valmet Harvester 1961 → KOMATSU head OEM Log Max Sweden Umea CTL KFAB Mechaniska (KFAB) 2004 ･Harvester 1997 Komatsu ･Forwarder Acquisition acquired 2014 2015 by Partek Forwarder Harvester Partek M/C M/C Forest (Valmet)

N. America FTL 2009 2011 1979 2000 (USTC 1) Production & Brand KAC Timbco Acquisition • Crawler Development name by Partek moved to changed feller buncher Chattanooga • Log loader from Shawano

2012 PC200F-8 Komatsu Synergy with harvester Development (KDB) Komatsu machine Harvester spec. H/E （CETC1） （2010〜） 2015 C/T （ADC） PC130F-7 (KI) harvester Harvester head KFAB 350 head license production (2007-) IR‐DAY2017 Komatsu Forest AB: Net Sales 6

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0 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 IR‐DAY2017 Forest Machine - CTL 7

Forest machines widely used in Northern Europe

Wheeled harvester Felling tree and buck tree to make logs on the site. Max 800mm diameter.

Forwarder Extracting logs after bucking tree from site to public roadside. Max load：20 tons Average traveling distance：200 to 300 ｍ

For reducing damage of ground, the machine equip several tire ( Max 8 wheels ) reducing ground pressure. IR‐DAY2017 Forest machine - FTL 8

Forest machines widely used in North America

Feller buncher Felling trees on the bottom and bunching several trees with felling head.

Skidder Extracting full length trees skidding on the ground.

• High production extracting several trees at the same time. • On the other hand, skidding trees might damage ground. IR‐DAY2017 Forest spec machine based on Excavator 9 PC200F-8M0 PC138US-10 PC138US-10 Harvester (Brazil) Harvester (Japan) Grapple (Japan)

PC130F-7 PC130F-7 PC300-8 Harvester (Indonesia) Feller Buncher Swing (Indonesia) (Indonesia) IR‐DAY2017 ICT by Komatsu Forest (MaxiXplorer, MaxiFleet, PROACT) 10

Machine, Machine & Head, Visualize, Optimize, Service Provider Head Assist & Report (Komatsu)

Control System Information Cloud Service Product Machine Data Reports & Production Data Reports, Inspection, Maintenance, KPI, GIS Maps, Remote Control & Access, Training & Follow-Up

(Maintenance contract for every 500-750 hours) MaxiXplorer MaxiXplorer PROACT 2.0

Link Link

Setting Production Machine data

Service Provider/Technician, Operator, Machine Owner, Operator, Machine owner Operator Forest company(and Komatsu) (and Komatsu) IR‐DAY2017 Forest Machine Business Strategy 11

Focusing on forest machine business as core business following after construction and mining equipment and expand the business further 1. Direction of Komatsu Forest Machine Business (Basic Concept)  CTL product (1) Sales increase of existing products Development of harvesters and forwarders, KFAB as a core  FTL product Development of Dantotsu product in North America as a CTL FTL main development center (2) Innovation and new field  Expanding solution business 1. MaxiXplorer 2. MaxiFleet 3. ProACT 2.0 D85 bulldozer, Aftermarket business (Machine data) (Fleet management) (Maintenance service Silviculture spec Promoting “Smart forestry” (Utilizing Kom- Connect) Getting into silviculture machine business

(3) Promoting mechanization in  Mechanization in large-scale plantations strategic markets Brazil; Retain customers by service contract Indonesia; Collaborate with distributor and establish benchmark PC200F-8 PC130F-7 for other Southeast Asia countries Harvester Harvester spec spec  Promoting mechanization in Japan (Brazil) (Indonesia) Increase product line 2. Forest machine sales Unit: Billion yen 100 Base on mid-term business plan, Sales target in FY18 = 50 100 billion yen （1€=¥130 basis) 0 FY14 Act FY15 Act FY16 Act FY16 FY17BP FY18 target €1=130 €1=130 €1=130