Valuation Fluctuations in Construction Equipment and Inventories

「If market prices for steel materials rise, the purchase prices of construction equipment and inventories also rise in tandem, increasing the cost of goods issued upon sale and depreciation of construction equipment and pushing up cost of sales. Conversely, if prices fall, the carrying value may be written down due to lower profitability,」

「The residual value used to calculate depreciation of construction equipment is determined with reference to domestic market prices for iron scrap. As these market prices have been trending upward in recent years, particularly since 2020, we have reviewed the method and changed it going forward. As a result, compared with the previous method, operating profit, ordinary profit and profit before income taxes for the first quarter of the consolidated fiscal year under review each increased by ¥56 million.」

「Construction equipment is valued at cost calculated using the gross average method by year of purchase, less depreciation calculated using the straight-line method, while merchandise and materials and supplies are valued at cost using the gross average method. If market prices for steel materials rise, the purchase prices of construction equipment and inventories also rise in tandem, increasing the cost of goods issued upon sale and depreciation of construction equipment and pushing up cost of sales. Conversely, if prices fall, the carrying value may be written down due to lower profitability.」