Briefing on Results for the Fiscal Yearending March 31, 2020

May 14, 2020
Photo: Denyo Europe B.V.

All Rights Reserved. Copyright Denyo Co.,Ltd. 0

Contents

Ⅰ. Overview of Results for FY2020/3
II. Response to the COVID-19 Coronavirus and
its Impact on Forecasts for the Consolidated
Financial Results for FY2021/3.
Ⅲ. Outlook for FY2021/3

All Rights Reserved. Copyright Denyo Co.,Ltd. 1

Overview of Results for
FY2020/3

All Rights Reserved. Copyright Denyo Co.,Ltd. 2

Highlights of Results for FY2020/3 (Consolidated)
Key Point

Net sales and profits are greatly increased.
(million yen)

FY2019/3

FY2020/3

Change(YoY)

Rate of change(YoY)

Net sales

55,554

100% 62,887

100%

7,332

13.2%

Operating income

4,201

7.6%

6,057

9.6%

1,856

44.2%

Ordinary income

4,592

8.3%

6,202

9.9%

1,610

35.1%

Profit attributable toowners of parent

3,166

5.7%

4,071

6.5%

905

28.6%

Capital investment

1,499

1,201

Depreciation

1,132

1,162

30

2.7%

149.8yen

194.3yen

44.5yen

29.7%

5.9%

7.4%

42.0yen46.0yen

Net income per share

ROE
Cash dividends per share△ 298 △ 19.9%

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Sales Trends by Product (Consolidated)
Overview

1. Sales of generators increased by 6,776 million yen (15.5%).
2. Sales of welders decreased by 42 million yen (0.8%).
3. Sales of compressors decreased by 47 million yen (4.5%).
(million yen)

By product

FY2019/3

Change(YoY)

FY2020/3

Rate ofchange(YoY)

Net sales

55,554100%

62,887 100%

7,332

13.2%

Generators

43,660 78.6%

50,436 80.2%

6,776

15.5%

Welders

5,115

9.2%

5,072

8.1%

%
△ 42 △ 0.8

Compressors

1,059

1.9%

1,012

1.6%

%
△ 47 △ 4.5

Others5,719 10.3%

6,365 10.1%

646

11.3%

All Rights Reserved. Copyright Denyo Co.,Ltd. 4

Engine Generators (Consolidated)

Generators

Rate of change(YoY)

FY2019/3

FY2020/3

43,660million yen

50,436million yen• In Japan, shipment to the rental industry slightly decreased,
but shipment of the back-up power source are good shape.

15.5%

65%

• Overseas, shipment to America greatly increased.
Domestic market share of*According to aengine generators (mobile-type) Company survey(5-year average)

Manufacturing engine-driven generators with capacityfrom 1kVA to 1100kVA

Vertical type minimum spaceStand-by generating sets

Simul Generator

Mobile-type generators
Power source on a construction site and for civil engineering workand disaster recovery/restoration, etc.
Stand-by generating sets (stationary type)Back-up power source for disaster prevention equipment
and offices, etc.
Power-supply vehicles, etc.
All Rights Reserved. Copyright Denyo Co.,Ltd. 5

Engine Welders (Consolidated)

Welders

Rate of change(YoY)

FY2019/3

FY2020/3

5,115million yen

5,072million yen• In Japan, shipment of the CO2 welders and TIG welders
increased.

△ 0.8%

55%• Overseas, shipment to America decreased.
Domestic market share ofengine welders*According to a
Company survey(5-year average)

The Company developed the first engine-driven welder for outdoor work inJapan.
Ranging from 135A for welding light-gauge steel to a 500A engine-driven
welder for heavy-gauge steel, a TIG welder and a CO2 welder, etc.
Welding of steel construction for buildings, condominiums and bridges.
Welding of important structures such as petroleum storage tanks and pipelines.
CO2 welder

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Engine Compressors (Consolidated)
Rate of change(YoY)

FY2019/3

FY2020/3

1,059million yen

1,012million yen

Compressors• The shipment to America increased, but the shipment
to the domestic market decreased.

20%

Domestic market share ofengine compressors

Engine compressor

Motor compressor△ 4.5%*According to a
Company survey(5-year average)

Manufacturing compressors with air discharge
amounts from 1.7㎥/min to 45.3㎥/min.
 Breaking-up of roads and ground improvement workof roads
 Mortar spraying work for preventing landslides ofmountain roads.
 For artificial snow machines on ski slopes, etc.

All Rights Reserved. Copyright Denyo Co.,Ltd. 7

Others (Consolidated)

Others

FY2019/3

FY2020/3

5,719million yen

6,365million yen

Rate of change
(YoY)

11.3%

• Sales of self-propelled lifters and parts ,etc. increased.

Sales of other products
Self-propelled lifters
Load testing equipment
PartsSecondhand equipment and purchased
merchandiseRepair sales, etc.
Self-propelled lifters

Load testing equipment

All Rights Reserved. Copyright Denyo Co.,Ltd. 8

Sales Trends by Region (Consolidated)(million yen)

FY2019/3

FY2020/3

Change(YoY)

Rate ofchange(YoY)

55,554100%

62,887

100%

7,332

13.2%

Domestic sales

33,69360.6%

37,043

58.9%

3,349

9.9%

Overseas sales

21,86039.3%

25,844

41.1%

3,984

18.2%

North/Central
America

14,08025.3%

18,430

29.3%

4,349

30.9%

Asia

5,527

9.9%

5,197

8.3%

△ 330

△ 6.0%

Others

2,252

4.1%

2,216

3.5%

△ 36

△ 1.6%

By region

Net sales

FY2019/3

North/Central
AmericaJapan

FY2020/3

North/Central
AmericaJapan010,00020,000Asia Others

30,00040,000Asia Others

50,00060,00070,000All Rights Reserved. Copyright Denyo Co.,Ltd. 9

Factor Analysis of Changes in Operating Income
Increase in Operating Income

The operating income increased because of an increase of the net sales
and improvement of the operating income margin.
(million yen)

FY2019/3

FY2020/3

Change (YoY)

Operating income

4,201

6,057

1,856

Operating income margin (%)

7.6%

9.6%

2.0percentage points

FY2019/3
Gross profit margin
Ratio of SG&A to sales
Ratio of operating income to sales

•
•

22.3%
14.8%
7.6%

FY2020/3

Change (YoY)

23.2%
13.6%
9.6%

0.9percentage points△ 1.2percentage points
2.0percentage points

The gross profit margin is improved by an increase in the sales of high profitable products.
The ratio of SG&A to sales is improved by an decrease of the rate of the fixed cost such as personnel expenses which is
caused by an increase of the net sales.

All Rights Reserved. Copyright Denyo Co.,Ltd. 10

Consolidated Balance Sheets
Overview

1. Current assets increased by 3,083 million yen mainly due to an increase in cash anddeposits, etc.
2. Current liabilities decreased by 372 million yen mainly due to an decrease in trade
payables, etc.
(million yen)

Current assets
Non-current assets
Total assets
Current liabilities
Long-term liabilities
Total liabilities
Total net assets
Total liabilities and net assets

At the end of
FY2019/3

At the end of
FY2020/3

49,84924,23674,085
14,624
3,170
17,79456,29074,08552,932
22,69475,626
14,252
3,019
17,27258,35475,626

Change from theend of FY2019/3

3,083△ 1,542
1,541
△ 372
△ 151
△ 522
2,064
1,541

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Changes in Consolidated Cash Flows
Overview

1. Cash flow from operating activities was 7,257 million yen, mainly due to the recording of
the income before income taxes, etc.
2. Balance of cash and cash equivalents increased by 4,883 million yen from the end of theprevious fiscal year.
(million yen)

FY2019/3

FY2020/3

I Cash flow from operating activities

4,085

7,257

II Cash flow from investing activities

△ 164

△ 874

I + II Free cash flow

3,921

6,398

△ 1,315△ 1,528

IV Foreign currency translation adjustments on
cash and cash equivalents

△ 146

13

V Net increase or decrease in cash and cash
equivalents

2,458

4,883

VI Cash and cash equivalents, end of period

16,17021,054

III Cash flow from financing activities

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II. Response to the COVID-19 Coronavirus and
its Impact on Forecasts for the Consolidated
Financial Results for FY2021/3.

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Response to the COVID-19 Coronavirus
Current measures

The Company is implementing measures, with the health andsafety of every stakeholder as the top priority.

For customers• Customer visits are prohibited, basically.
• Maintenance of production and delivery systems under restriction

For employees• Facilitation of telework, shift work and staggered working hours.
• Measures to ensure mask wearing, handwashing, gargling and sanitization
are practiced.
• Provision of masks to every employee.
• Domestic and overseas business trips are prohibited, basically.
• Measures to ensure that meetings are held online wherever possible.
• Offering special paid leave to employees during temporary school
shutdowns if their children are junior high school students or younger, etc.

From financial
perspectives• Holding approximately 21.0 billion yen cash on hand in the form of cash andequivalents on a consolidated basis (equivalent to consolidated net sales
for approximately four months).
• Concluding agreements with four partner financial institutions forcommitment lines totaling 3.0 billion yen.

The Company, working together as one with its group companies, will maintain its
product supply systems, and thereby provide power sources to support social
infrastructure.
All Rights Reserved. Copyright Denyo Co.,Ltd. 14

Response to the COVID-19 Coronavirus
Status of production sites

So far, there has been no major impact on product supply operations.
Japan(Fukui Plant, Shiga SubPlant, and Nishihatsu Co.,
Ltd. (in Karatsu))

United States(Denyo Manufacturing
Corporation)••

All facilities are operating as usual.
Delays occurred in the delivery of certain parts. However, impact
was limited because it was possible to replace these parts withparts in stock or alternative parts.

••

Operations were temporary shut down from March 24 until April 3.
Currently, the facility is operating in a limited fashion by restricting
the number of staff working in the facility.

•(P.T. Dein Prima Generator) •Indonesia
Vietnam•Operations were temporarily shut down on March 30 and March 31.
The facility is operating as usual now.
The facility is operating as usual.

(Denyo Vietnam Co., Ltd.)All Rights Reserved. Copyright Denyo Co.,Ltd. 15

Response to the COVID-19 Coronavirus
Status of sales companies

Sales activities are restricted and delivery operations are affected at sales
companies in Singapore and the Netherlands.
Japan

•
•

Singapore(Denyo United
Machinery Pte. Ltd.)

Vietnam••••(Denyo Trading Vietnam•
Co., Ltd.)Netherlands(Denyo Europe B.V.)•••

All facilities, while undertaking measures such as telework and shift
work, are operating as usual.
Sales activities are affected due to a range of factors such as the
postponement or cancelation of exhibitions in many places.
The facility has been implementing a teleworking system since April
7.
Its office will reopen for business from June 2.
Delivery operations are affected in Singapore due to teleworking.
The facility implemented a teleworking system from March 24 until
April 25.
The facility is a sales company established in February this year
and began operations on April 1. Therefore, its operations have notbeen affected in any significant way.
The facility has been implementing a teleworking system since
March 12.
Its office will reopen for business from May 19.
Sales activities and delivery operations are affected due to the
lockdowns enforced across Europe.
All Rights Reserved. Copyright Denyo Co.,Ltd. 16

Impact on Forecasts for the Consolidated Financial Results for FY2021/3
In light of the current situation, where there is uncertainty over when the COVID-19 coronavirus will
be under control and the government’s declared state of emergency is in place, the Company has
difficulty making reasonable calculations on the impact of COVID-19 on financial results. The
Company therefore announced forecasts for the consolidated financial results for the fiscal year
ending March 31, 2021 on May 14, without factoring in the impact of the coronavirus (which applies
to “III. Outlook for FY2021/3”).
It may make downward revision to earnings forecasts depending on how the situation develops,
going forward.
Here are the main risk factors that the Company assumes may contribute to downward revisions toearnings results forecasts at this time.

Main risk factors that the Company assumes may contribute to downward revisions toearnings results forecasts at this time・ Decrease in demand for generators due to the cancelation of events and other activities expected to take place ina range of areas.
・ Postponement of deliveries due to the cancellation or rescheduling of the installation of emergency generators.
・ Decline in product demand as a result of the cancellation or postponement of overseas projects.
・ Measures taken by construction equipment rental companies to reduce investments due to economic uncertainty
・ Delay in the delivery of parts from suppliers and subcontractors (particularly, delays in the delivery of engines,
which are key parts the Company procures externally, may have a significant impact)
・ Slowdown or delay in sales operations, production and/or development as a result of the Group’s employees
and/or their family members becoming infected with the coronavirus.

All Rights Reserved. Copyright Denyo Co.,Ltd. 17

Outlook for FY2021/3

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Outlook for FY2021/3: Consolidated Income and Loss
Key points

1. The impact of the spread of infection from COVID-19 was not included in that forecast,depending on the situation, it may affect the forecast of business results.
2. Assumed exchange rate is 105 yen/dollar.
(million yen)

FY2020/3

FY2021/3(forecast)

Change (YoY)

Rate of change(YoY)

58,000 100% △ 4,887△ 7.8%Net sales

62,887 100%

Operating income

6,057

9.6%

4,900

8.4% △ 1,157 △ 19.1%

Ordinary income

6,202

9.9%

5,200

9.0% △ 1,002 △ 16.2%

Profit attributable toowners of parent

4,071

6.5%

3,500

6.0%

Capital investment

1,201

Depreciation
Net income per share

ROE
Cash dividends per share△ 571△ 14.0%

2,000

799

66.5%

1,162

1,250

88

7.6%

194.3yen

167.9yen△ 26.4yen

7.4%
46.0yen＊

6.2%

46.0yen* Equity is calculated by using the amount of money at the end of FY2020/3.
All Rights Reserved. Copyright Denyo Co.,Ltd. 19

Outlook for Sales by Product (Consolidated)
Overview

The net sales are expected to be worsen because of reactionary fall in sales of Engine
Generators for the American market which the sales greatly increased in a prior period
and decrease of sales of Engine Generators for construction sites in Japan.
(million yen)

FY2020/3△ 7.8%

Generators

50,436 80.2% 45,800 79.0% △4,636△ 9.2%

Welders

5,072

8.1%

5,200

9.0%

128

2.5%

Compressors

1,012

1.6%

1,100

1.9%

88

8.7%

5,900 10.2%△ 465△ 7.3%

Others

62,887

100% 58,000

Rate ofchange (YoY)

100% △4,887

Consolidated sales
By product

Change(YoY)

FY2021/3 (forecast)

6,365 10.1%

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Outlook for Sales by Region (Consolidated)(million yen)

FY2021/3(forecast)

FY2020/3

Rate ofchange (YoY)

100% 58,000

100% △ 4,887△ 7.8%

Domestic sales

37,043 58.9% 35,600

61.4% △ 1,443△ 3.9%

Overseas sales

25,844 41.1% 22,400

38.6% △ 3,444 △ 13.3%

18,430 29.3% 14,900

25.7% △ 3,530 △ 19.2%

62,887

Consolidated sales

By region

Change(YoY)

North/ Central
America
Asia

5,197

8.3%

5,200

9.0%

3

0.1%

Others

2,216

3.5%

2,300

4.0%

84

3.8%

FY2020/3

Japan

FY2021/3(forecast)

Japan
0

10,00020,000

North/Central
America

North/CentralAmerica
30,00040,00050,000Asia Others

Asia Others
60,00070,000All Rights Reserved. Copyright Denyo Co.,Ltd. 21

Details of the Operating Income Forecast
Decrease in operating income

With the decrease of the net sales, operating income is expected to decrease by
1,157 million yen.
(million yen)

FY2020/3

FY2021/3 (forecast)

Change (YoY)

Operating income

6,057

4,900

△ 1,157

Operating income margin

9.6%

8.4%

△ 1.2percentage point

FY2020/3

FY2021/3 (forecast)

Change (YoY)

Gross profit margin
Ratio of SG&A to sales
Ratio of operating income to sales

•
•

23.2%
13.6%
9.6%

23.1% △ 0.1percentage point
14.7%
1.1percentage point
8.4% △ 1.2percentage point

The gross profit margin is expected to be slightly decreased by the demand for the relatively profitable products
are expected to be remain robust, although the net sales decrease.
The ratio of SG&A to sales are expected to be worsen by an increase of the rate of fixed cost which is caused byan decrease of the net sales.

All Rights Reserved. Copyright Denyo Co.,Ltd. 22

Changes in the Amount of Capital Investment(million yen)

End of March2018

End of March2019

End of March
2020

End of March 2021
(plan)

Cost ofequipment

870

1,499

1,201

2,000

Main uses

・Machinery of Fukui plant,etc.
310
・Nishihatsu
50
・U.S. Plant
450
・Vietnam Plant
20
・Others
40

・Machinery of Fukui plant,
etc.
730
・Nishihatsu
50
・U.S. Plant
670
・Others
40

・Machinery of Fukui plant,
etc.
810
・Nishihatsu
20
・U.S. Plant
290
・Vietnam Plant
10
・Others
70

・Machinery of Fukui plant,
etc.
1600
・Nishihatsu
50
・U.S. Plant
150
・Vietnam Plant
80
・Others120

Production Sites:
Amount of capital investment

million yen
2,500
2,000

・Fukui Plant
・Shiga Sub-Plant
・Nishihatsu

1,500
1,000

・America Plant

・Vietnam Plant
・Indonesia Plant

500
0
End ofMarch
2018

End ofMarch
2019

End ofMarch
2020

End ofMarch
2021(plan)All Rights Reserved. Copyright Denyo Co.,Ltd. 23

Profit Distribution Policy
Profit distribution: Denyo recognizes the importance of making further efforts to return profits
to shareholders, while aiming to strengthen the company’s financial structure and profitability,
and we will implement an interim and term-end dividend payouts of distribution of results
comprehensively calculated by achievement and payout ratio.
Changes in cash dividends:
42 yen in FY2019/3 ⇒ 46 yen in FY2020/3 ⇒ 46 yen (forecast) in FY2021/3

50
40
30

25

22

24

24
Year-end dividends
Interim dividends

20
10

15

20

22

22

FY2018/3

FY2019/3

FY2020/3

FY2021/3(forecast)0

All Rights Reserved. Copyright Denyo Co.,Ltd. 24Overview of the Medium-term Management Plan
FY2021/3
Business Objectives
Consolidated
Net sales

58.0

billion yen

Ordinary
income margin

11.0%

ROE

7.0%

Corporate
Philosophy
Management Vision

Contribute to enriching society by providing safe,
secure power sources based on “Benefits for Three
Parties” (which expresses our aim to see the user
(customer), the seller (dealership), and the
manufacturer (Denyo) prosper together).
Aim to be the global No1 brand of high-quality powersources with creativity and constant technologicalinnovations.

2020 Medium-termManagement Plan

Basic Policy
Establish a profit structure that is resistant to changes in the environment, by increasing the ratios of non construction-related products as well as products
for overseas markets, while firmly maintaining our position as the leading provider of high-quality power sources in the construction-related sector.

Strategies in the Domestic Market

Strategies in Overseas Markets
Overseas sector

Construction-related sector◇ Maintain market share by reliably promoting areview of the sales structure and developmentof new products based on customer needs.

Non construction-related sector◇ Aim to increase market share by reviewing theGroup’s sales system through closer
cooperation with Nishihatsu Co., Ltd. andenhancing sales activities based oncomprehensive proposals.

◇ Be proactive in Asia, including the rental market
which is expected to expand in the future. Step up
activities for strengthening sales and service
capabilities in regions including Asia and elsewhere(such as Europe and the Middle and Near East,etc.). Strengthen cooperation with local distributor
in the America.
◇ Confirm the specifications demanded in each target
market and establish a system for producing andselling stationary generators in Asia and the Middle
and Near East.
◇ For welding machines, enhance the lineup of
products that each target market demands and focus
efforts on developing highly maintainable products.

Reinforcing the Operating Foundations
Development◇ Identify market needs accurately and develop
competitive products promptly. Step up
measures for stationary generators in Japan andother countries.

Production◇ Further promote production in optimal locations
to supply high-quality products, reduce cost,and ensure quicker delivery.

Human Resource Development◇ Further enhance the training system with a
special emphasis on developing globallycompetitive human resources.
All Rights Reserved. Copyright Denyo Co.,Ltd. 25

Notes on Our Outlook

This material contains assumptions and outlooks for the future andforecasts based on plans as May 14, 2020.
Actual results may differ materially from projected values due to future
economic changes and competition.
This material is prepared for the purpose of providing information and is
not meant to solicit investment in securities issued by the Company.
Investors are responsible for making their own final investment decision.

All Rights Reserved. Copyright Denyo Co.,Ltd. 26

Reference Materials

All Rights Reserved. Copyright Denyo Co.,Ltd. 27

Overview of the Company
The leading manufacturer of outdoor power sources such as engine generators and engine welders
History:

July 2,1948

Established as Japan Power Welding Machine Co., Ltd.

1959

Developed and launched Japan’s first high-speed engine-driven welders.

1961

Began to manufacture and sell engine-driven generators.

1966

Developed soundproof engine-driven generators.
Changed its corporate name to Denyo Co., Ltd.

1983

Listed on the Second Section of the Tokyo Stock Exchange.

2000

Listed on the First Section of the Tokyo Stock Exchange.

● Company size, etc. (FY2020/3 on a consolidated basis)(million yen)

Net sales

62,887

Overseas sales

25,844

Ordinary income

6,202

Profit attributable to owners of parent

4,071

Total assets

75,626

Net assets

58,354Market capitalization (as of March 31)

44,005

Number of employees

1,370persons
Head Office (Nihonbashi-Horidomecho,Tokyo)

All Rights Reserved. Copyright Denyo Co.,Ltd. 28

The Group Companies
100%( Nishihatsu Co., Ltd. )
100%

80%

100%

100%

( Established in February 2020 )

100%

76%

51%

100%

*1. Other than the above, the New Japan Machinery Corporation is an equity-method affiliate (investment ratio 15.7%).
2. Underlined companies are manufacturers.

All Rights Reserved. Copyright Denyo Co.,Ltd. 29

Trends and Forecasts by Product Sales
Sales by product
Generators

Welders

Compressors

Others

70,00060,000

6,365
5,719

50,000

5,504
1,126
5,556

40,000

5,919
1,104
5,100

5,720
1,440
4,832

5,525

1,012
5,072

1,059
5,115

5,900
1,100
5,200

1,083
4,919

30,00050,43620,00045,80043,66040,07938,29436,85738,653

FY2015/3

FY2016/3

FY2017/3

FY2018/3

10,0000FY2019/3

FY2020/4

FY2021/3(Forecast)

All Rights Reserved. Copyright Denyo Co.,Ltd. 30

Changes in Sales by Region and Forecasts
Sales by region
Japan

North/Central America

Asia

Europe and others

70,0002,216
5,197

60,0002,252

50,000

2,945

3,606

6,619
6,921

2,808
6,479

2,648

9,776

10,3105,527
18,4305,938

14,90014,08040,000
11,234

2,300
5,200

10,38230,00020,00031,46830,155FY2015/3

FY2016/3

29,252

31,211

33,693

FY2017/3

FY2018/3

FY2019/3

37,04335,600

FY2020/3

FY2021/3(forecast)

10,0000

All Rights Reserved. Copyright Denyo Co.,Ltd. 31

Changes in Results for the Last 30 YearsJapan

Net sales,100 milion yen

Overseas

Ordinary income

Ordinary income, 100 million yen

700

70
Great East Japan
Earthquake

600

60
Bubble period

500

Lehman shock

50

Y2K boom

400

40

300

30

200

20

100

10

0

0
Fiscal Year

All Rights Reserved. Copyright Denyo Co.,Ltd. 32