Announcement on Termination of Joint Venture Relationship with Deere

Hitachi Construction Machinery Co., Ltd. published the following press release on 19 August 2021

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Hitachi Construction Machinery Co., Ltd. ( “Hitachi Construction Machinery”) announces that its Board of Directors has resolved on August 19, 2021 to terminate and dissolve the joint venture relationship with Deere & Company (“Deere”) in North, Central and South America.

1. Reason for the Dissolution

Since 1988, Hitachi Construction Machinery and Deere have collaborated through a joint venture alliance in construction machinery business throughout North, Central and South America. In 1988, the two companies established Deere-Hitachi Construction Machinery Corporation (“DHK”) for the manufacture, import and distribution of hydraulic excavators. The distribution business of hydraulic excavators was later consolidated with distribution of mining machinery in 2001, in an unincorporated partnership under John Deere Construction and Forestry Company (“JDCFC”), a subsidiary of Deere. In 2011, the two companies reorganized Deere-Hitachi Máquinas de Construção do Brasil S.A. (“DHB”) (established in 2000) as a manufacturing joint venture in Brazil, and have expanded the joint venture business throughout North, Central and South America.

However, in response to recent changes in the business environment surrounding the joint venture, Hitachi Construction Machinery and Deere have discussed future prospects of the joint venture partnership, which has led to a decision to terminate the relationship in a future-oriented perspective to allow each to pursue its growth strategy independently.

2. Substance of the Dissolution

(1) Business to be Dissolved

The comprehensive joint venture agreements pertaining to the manufacture and distribution of hydraulic excavators and distribution of rigid dump trucks in North, Central and South America will be terminated.

Concurrently with the termination, Hitachi Construction Machinery will transfer the shares it holds in DHK and DHB, both of which are Hitachi Construction Machinery’s affiliates subject to equity-method accounting, to Deere and its wholly owned subsidiary, John Deere Brasil Ltda. (“JDB”), respectively. The distribution business consolidated under JDCFC will be transferred back to each of Hitachi Construction Machinery and Deere, and each company will manage its own brand independently.

(2) Overview of the Joint Venture Companies

3. Overview of the Joint Venture Partner (Unit: US$)

4. Date of Dissolution (Currently Contemplated) February 28, 2022

5. Exclusion from Equity-Method Affiliates

Upon the dissolution of the joint venture, DHK and DHB will no longer be Hitachi Construction Machinery’s affiliates subject to equity-method accounting.

6. Future Outlook

Upon the dissolution of the joint venture and starting from March 2022, Hitachi Construction Machinery will be able to provide the newest products, technologies, and services directly to our customers through our independent dealer network, as part of the integrated Hitachi Construction Machinery Group activities throughout the North, Central and South American markets. Hitachi Construction Machinery Group will offer sales and services of compact to construction-sized hydraulic excavators, ultra-large mining machines, and, in addition, wheel loaders, all of which are recognized globally for their excellence in performance and quality, in these markets.

Going forward, Hitachi Construction Machinery will have Hitachi Construction Machinery Loaders America, Inc., which currently serves as the production and distribution base for Hitachi branded wheel loaders, to function as the hub of its activities in the Americas. Hitachi Construction Machinery will coordinate with their group companies in the region to build a new business structure.

While utilizing and strengthening the existing network of Hitachi branded hydraulic excavators, trucks and wheel loader dealers, Hitachi Construction Machinery will build an optimal network for marketing and servicing throughout the entire North, Central and South American markets.

Hitachi Construction Machinery and Deere have entered into a new supply agreement under which Hitachi Construction Machinery will provide Deere with OEM supply of Deere branded mini excavators and completed hydraulic excavators of the current lineup, as well as components and service parts to Deere’s manufacturing and distribution bases in the United States and in Brazil for the foreseeable future.

Furthermore, we are placing our utmost priority on providing uninterrupted services after the dissolution of the joint venture to our customers who own products manufactured or sold through the joint venture business.

Our shares of DHK and DHB will be transferred to Deere, and the impact of this transfer upon dissolution on the consolidated financials for the year ending March 2022 is expected to be insignificant.

(Reference)

Consolidated financial forecast for the fiscal year ending in March 2022 (as announced on April 27, 2 021）and actual consolidated results from the previous fiscal year: