Briefing on Results for the First Half of theFiscal Year ending March 31, 2021

November 12, 2020

Photo: Fukui Plant (Japan)

Overview of Results for
the First Half of FY2021/3

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

Highlights of Results for the First Half of FY2021/3 (Consolidated)
Key Point

Both Net sales and incomes decreased year on year.
(million yen)First half of
FY2020/3

First half of
FY2021/3

Change(YoY)

Rate ofchange (YoY)

Net sales

30,176100%

25,346100%△ 4,829 △ 16.0%

Operating income

2,649

8.8%

2,0147.9%△ 635 △ 24.0%

Ordinary income

2,646

8.8%

2,1678.5%△ 479 △ 18.1%

Profit attributable toowners of parent

1,828

6.1%

1,442

5.7%

△ 386 △ 21.1%

Capital investment

741

906

165

22.3%

Depreciation

579

528

△ 51

△ 8.8%

87.22 yen

69.17 yen

Net income per share

ROE
Interim dividends pershare

6.8%
22.0 yen

Annualized

5.0%△ 18.05yen △ 20.7%
Annualized

22.0 yen
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Sales Trends by Product (Consolidated)
Overview

1. Sales of generators decreased by 4,094 million yen (16.9%).
2. Sales of welders decreased by 227 million yen (9.4%).
3. Sales of compressors decreased by 88 million yen (17.2%).
(million yen)

By productFirst half ofFY2020/3

First half of
FY2021/3

Change(YoY)

Rate ofchange (YoY)

Net sales

30,176100%

25,346 100%

△ 4,829 △ 16.0%

Generators

24,167 80.1%

20,072 79.2%△ 4,094 △ 16.9%

Welders

2,434

8.1%

2,206

8.7%

△ 227Compressors

5121.7%424

1.7%△ 88 △ 17.2%

2,642 10.4%△ 418 △ 13.7%

Others3,061 10.1%△ 9.4%All Rights Reserved. Copyright Denyo Co.,Ltd. 3

Engine Generators (Consolidated)

Generators

First half of
FY2020/3

First half of
FY2021/3

24,167million yen

20,072million yen △ 16.9%• In Japan, shipment to the rental industry were sluggish
but shipment of the generators for handling theblackout remain robust.
• Overseas, due to the impact of the novel coronavirus
infection, shipment mainly to America fell sharply.

Rate of change(YoY)

65%
Domestic market share of*According to aengine generators (mobile-type) Company survey(5-year average)

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

Soundless generator“Mālie”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.
Vertical type minimum spacePower-supply vehicles, etc.
Stand-by generating sets
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Engine Welders (Consolidated)

Welders

First half of
FY2020/3

First half ofFY2021/3

2,434million yen

2,206million yen• The shipment of the specialized welding machines
increased but the small-type machines decreased.

Rate of change(YoY)△ 9.4%

55%

Domestic market share ofengine welders*According to aCompany 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)
First half of
FY2020/3

512million yenCompressors• The shipment mainly to the domestic market
decreased.

First half of
FY2021/3

Rate of change(YoY)

424million yen△ 17.2%20%

Domestic market share ofengine compressors

Engine compressor

Motor compressor*According to aCompany 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.

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Others (Consolidated)

OthersFirst half ofFY2020/3

First half ofFY2021/3

Rate of change(YoY)

3,061million yen

2,642million yen△ 13.7%• Sales of self-propelled lifters and the purchased merchandise
etc. decreased.

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

Load testing
equipment

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

Sales Trends by Region (Consolidated)(million yen)First half of
FY2020/3

First half of
FY2021/3

Change(YoY)

Rate ofchange(YoY)

30,176100%

25,346100%△ 4,829△ 16.0%

Domestic sales

17,38657.6%

16,32964.4%△ 1,057△ 6.1%

Overseas sales

12,789

42.4%

9,017

35.6%

△ 3,772△ 29.5%

North/Central
America

9,509

31.5%

6,156

24.3%

△ 3,353△ 35.3%

Asia

2,423

8.0%

1,938

7.6%

△ 484

△ 20.0%

Others

856

2.8%

921

3.6%

65

7.6%

By region

Net salesFirst half of FY2020/3

Japan

First half of FY2021/3

Japan
05,000

North/Central
America

North/Central
America
10,00015,00020,000Asia

OthersAsia Others
25,00030,00035,000All Rights Reserved. Copyright Denyo Co.,Ltd. 8

Factor Analysis of Changes in Operating Income
Decrease in Operating Income

The operating income decreased mainly due to a decrease of the netsales.
(million yen)

Operating income
Operating income margin (%)

First half ofFY2020/3

First half of
FY2021/3

Change (YoY)

2,649
8.8%

2,014
7.9%

△ 635
△ 0.9 percentage points

First half of
FY2020/3

First half of
FY2021/3

Change (YoY)

Ratio of SG&A to sales

23.2%
14.4%

23.0%
15.0%

△ 0.2 percentage points
0.6 percentage points

Ratio of operating income to sales

8.8%

7.9%

△ 0.9 percentage points

Gross profit margin••

The gross profit margin was expected to be only dropped by 0.2 percentage point by the increase in the component ratioof relatively profitable products were expected to be remain robust, although the net sales decreased.
The ratio of SG&A to sales were expected to be worsen by significant decrease of the net sales, although the SG&A
expenses decreased.

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Consolidated Balance Sheets
Overview

1. A 1,577 million yen decrease in current assets was mainly due to an decrease in tradereceivables, etc.
2. A 706 million yen decrease in current liabilities was mainly due to a decease in accounts
payables, etc.
(million yen)

At the end ofFY2020/3

First half ofFY2021/3

Change from theend of FY2019/3

52,932
22,69475,626
14,252

51,354
23,39274,747
13,546△ 1,577698

Total net assets

3,019
17,27258,354

1,877
15,42359,323△ 1,141△ 1,848969

Total liabilities and net assets

75,62674,747△ 879

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

△ 879
△ 706

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Changes in Consolidated Cash FlowsOverview

1. 1,961 million yen cash flow from operating activities was mainly due to a decrease in tradereceivables, etc.
2. Balance of cash and cash equivalents increased 217 million yen from the end of the previous
fiscal year.
(million yen)First half ofFY2020/3

First half ofFY2021/3

I Cash flow from operating activities

3,842

1,961

II Cash flow from investing activities△ 446△ 1,0033,396958

III Cash flow from financing activities

△ 758

△ 602

IV Foreign currency translation adjustments on
cash and cash equivalents

△ 55

△ 137

V Net increase or decrease in cash and cashequivalents

2,581

217

VI Cash and cash equivalents, end of quarterly
period

18,752

21,272

I + II Free cash flows

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Outlook for FY2021/3

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Outlook for FY2021/3: Consolidated Income and Loss
Key points• Considering the impact of the spread of infection from COVID-19, we revised down theconsolidated forecast financial results.
• Assumed exchange rate is 105 yen/dollar.
(million yen)

FY2020/3

FY2021/3 (forecast)

Change (YoY)

Rate of change(YoY)

Net sales

62,887100%

52,000Operating income

6,057

9.6%

4,100

100% △ 10,887 △ 17.3%
7.9% △ 1,957 △ 32.3%

Ordinary income

6,202

9.9%

4,400

8.5%

△ 1,802 △ 29.1%

Profit attributable toowners of parent

4,071

6.5%

2,800

5.4%

△ 1,271 △ 31.2%

Capital investment

1,201

2,000

799

66.5%

Depreciation

1,162

1,250

887.6%

194.3yen

134.3yen△ 60.0 yen

7.4%

*5.0%

46.0yen46.0yen

Net income per share

ROE
Cash dividends per share* Equity is calculated by using the amount of money at the end of FY2020/3.
All Rights Reserved. Copyright Denyo Co.,Ltd. 13

Outlook for Sales by Product (Consolidated)
Overview• The sales of generators for America are expected to be worsen because of reactionary fall insales which the sales greatly increased in a prior period and the impact of the novel corona
virus infection.
• In Japan, the sales of generators for rental industry are expected to be decreased.
(million yen)

Change (YoY)

FY2020/3

By productConsolidated sales

62,887

FY2021/3 (forecast)

100% 52,000

Rate ofchange(YoY)

100% △ 10,887 △ 17.3%

Generators

50,436 80.2% 41,700 80.2%

Welders

5,072

8.1%

4,300

8.3%

△ 772 △ 15.2%

Compressors

1,012

1.6%

9001.7%△ 112 △ 11.1%

6,365 10.1%

5,1009.8%△ 1,265 △ 19.9%

Others△ 8,736 △ 17.3%

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

FY2020/3

FY2021/3 (forecast)

Change (YoY)

Rate of change(YoY)

62,887100%

52,000100%△ 10,887△ 17.3%

Domestic sales

37,04358.9%

34,90067.1%△ 2,143△ 5.8%

Overseas sales

25,84441.1%

17,10032.9%△ 8,744△ 33.8%

North/ Central
America

18,43029.3%

10,80020.8%△ 7,630△ 41.4%

Asia

5,197

8.3%

4,2008.1%△ 997△ 19.2%Others

2,216

3.5%

2,100

4.0%

△ 116

△ 5.2%

By region

Consolidated sales

FY2020/3

North/Central
AmericaJapan

FY2021/3(forecast)

Japan
0

10,00020,00030,000

North/Central
America

Asia Others

40,00050,000Asia Others

60,00070,000All Rights Reserved. Copyright Denyo Co.,Ltd. 15

Details of the Operating Income Forecast
Decrease in operating incomeMainly with the decrease of the net sales, operating income is expected todecrease by 1,957 million yen.
(million yen)

FY2020/3

FY2021/3 (forecast)

Change (YoY)

Operating income

6,057

4,100

△ 1,957

Operating income margin

9.6%

7.9%

△ 1.7percentage 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%

23.0% △ 0.2percentage point
15.1%
1.5percentage point
7.9% △ 1.7percentage point

The gross profit margin is expected to be only dropped by 0.2 percentage point by the demand for therelatively 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 significant decrease of the net sales, although theSG&A expenses decrease.

All Rights Reserved. Copyright Denyo Co.,Ltd. 16

Changes in the Amount of Capital Investment(million yen)

Cost ofequipment
Main uses

End of March 2018

End of March 2019

End of March 2020

870

1,499

1,201

・Machinery of Fukui plant, etc.
・Nishihatsu
・U.S. Plant
・Vietnam Plant
・Others

310
50450
2040

・Machinery of Fukui plant, etc.
・Nishihatsu
・U.S. Plant
・Others

730
50670
40

・Machinery of Fukui plant, etc.
・Nishihatsu
・U.S. Plant
・Vietnam Plant
・Others

810
20290
1070

End of March 2021
(plan)

2,000
・Machinery of Fukui plant, etc.
・Nishihatsu
・U.S. Plant
・Vietnam Plant
・Others

1,600
50
150
80120

Amount of capital investment

million yen
2,500
2,000

1,500
1,000

5000End ofMarch2018

End ofMarch2019

End ofMarch2020

End ofMarch2021…

Denyo Manufacturing Corporation (U.S.A.)All Rights Reserved. Copyright Denyo Co.,Ltd. 17

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 FY2021/350403025222424Year-end dividends
Interim dividends

2010152022

FY2018/3

FY2019/3

FY2020/3

220
FY2021/3※Breakdown of the year-end dividends
in FY2018/3: Ordinary dividends(forecast)

15.00 yen
Commemorative dividends 10.00 yen

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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 ThreeParties” (which expresses our aim to see the user(customer), the seller (dealership), and themanufacturer (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 Middleand Near East.
◇ For welding machines, enhance the lineup ofproducts 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. 19

Notes on Our Outlook

This material contains assumptions and outlooks for the future andforecasts based on plans as November 12, 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. 20

Reference Materials

All Rights Reserved. Copyright Denyo Co.,Ltd. 21

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. (FY2019/3 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)

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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. 23

Trends and Forecasts by Product Sales
Sales by product
Generators

Welders

CompressorsOthers

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
5,100
900
4,300

1,059
5,115

1,083
4,919

30,00050,43620,00043,66040,07938,29436,85738,653

FY2015/3

FY2016/3

FY2017/3

FY2018/3

41,70010,0000FY2019/3

FY2020/4

FY2021/3(Forecast)

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Changes in Sales by Region and Forecasts
Sales by region
JapanNorth/Central America

Asia

Europe and others

70,0002,216
5,197

60,00050,0002,945

3,6062,808

6,921

6,479

6,619

2,648

9,776

10,31018,4305,938
14,08040,000
11,234

2,252
5,527

2,100
4,200

10,80010,38230,00020,00031,46830,155FY2015/3

FY2016/3

29,252

31,211

33,693

FY2017/3

FY2018/3

FY2019/3

37,04334,900

FY2020/3

FY2021/3(forecast)

10,0000

All Rights Reserved. Copyright Denyo Co.,Ltd. 25

Changes in Results for the Last 30 Years

Net sales,100 milion yen

JapanOverseas

Ordinary income

Ordinary income, 100 million yen

700

70
Great East Japan
Earthquake

600

60

Bubble period500

50
Y2K boom400Lehman shock

40300

30200

20100

1000Fiscal Year

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