Briefing on Results for the First Half of theFiscal Year ending March 31, 2020

November 27, 2019

Photo: Fukui Plant (Japan)

ContentsI. Overview of Results for the First Half of FY2020/3
Toshiya Tozawa,

Director and Managing Executive Officer,
Chief Executive, Administration Division

II. Outlook for FY2020/3
Shoichi Shiratori, President

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Overview of Results for
the First Half of FY2020/3

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

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

Both Net sales and Net income increased year on year.
(million yen)First half of
FY2019/3

First half ofFY2020/3

Rate ofchange (YoY)

Change(YoY)

Net sales

25,258100%

30,176

100%

4,917

19.5%

Operating income

1,435

5.7%

2,649

8.8%

1,214

84.6%

Ordinary income

1,657

6.6%

2,646

8.8%

989

59.6%

Profit attributable toowners of parent

1,107

4.4%

1,828

6.1%

721

65.1%

Capital investment

594

741

147

24.7%

Depreciation

558

579

213.8%

52.11 yen

87.22 yen

35.11yen

67.4%

Net income per share

ROE
Interim dividends pershare

4.1%
20.0 yen

Annualized

6.8%

Annualized

22.0 yen
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Sales Trends by Product (Consolidated)
Overview

1. Sales of generators increased by 4,505 million yen (22.9%).
2. Sales of welders rose by 16 million yen (0.7%).
3. Sales of compressors decreased by 46 million yen (8.3%).
(million yen)

By productFirst half of
FY2019/3

First half ofFY2020/3

Rate ofchange (YoY)

Change(YoY)

Net sales

25,258100%

30,176 100%

4,917

19.5%

Generators

19,661 77.8%

24,167 80.1%

4,505

22.9%

Welders

2,417

9.6%

2,434

8.1%

160.7%

Compressors

558

2.2%

512

1.7%

Others2,620 10.4%

3,061 10.1%△ 46 △ 8.3%
441

16.8%

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Engine Generators (Consolidated)

Generators

First half of
FY2019/3

First half of
FY2020/3

19,661million yen

24,167million yen• In Japan, shipment to the rental industry remain robust
and shipment of the generators for handling theblackout increased.

Rate of change(YoY)

22.9%

65%

• Overseas, shipment to America 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

Simul generator

Stand-by generating sets

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.
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Engine Welders (Consolidated)Welders

First half of
FY2019/3

First half of
FY2020/3

2,417million yen

2,434million yen• In Japan, the shipment of the small-type welder remainrobust.

Rate of change(YoY)

0.7%

55%

• Overseas, the shipment to the Middle and near Eastdecreased.
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.
Engine welder

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Engine Compressors (Consolidated)
First half of
FY2019/3

558million yen

Compressors

First half of
FY2020/3

Rate of change(YoY)

512million yen△ 8.3%• The shipment to the domestic market decreased.
• Overseas, the shipment to America increased.

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 ofFY2019/3

First half of
FY2020/3

2,620million yen

3,061million yen

Rate of change(YoY)

16.8%• Sales of self-propelled lifters and the purchased merchandiseetc. increased.

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

Load testingequipment

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Sales Trends by Region (Consolidated)(million yen)First half of
FY2019/3

First half ofFY2020/3

25,258100%

30,176100%

Domestic sales

14,68958.2%

17,386

Overseas sales

10,56941.8%

North/Central
America

6,758

AsiaOthers

By region

Net sales

19.5%

57.6%

4,917
2,696

12,78942.4%2,220

21.0%

26.8%

9,509

31.5%

2,751

40.7%

2,649

10.5%

2,423

8.0%

△ 226

△ 8.5%

1,161

4.6%

856

2.8%

△ 305 △ 26.3%

North/Central
America

AsiaFirst half of FY2019/3

Japan

First half of FY2020/3
5,000

10,00015,00020,000

18.4%

OthersNorth/Central
AmericaJapan0Rate ofchange(YoY)

Change(YoY)

Asia
25,000

Others
30,00035,000All 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 the improvement of the operating income margin.
(million yen)First half of
FY2019/3

First half of
FY2020/3

Change (YoY)

Operating income

1,435

2,649

1,214

Operating income margin (%)

5.7%

8.8%

3.1 percentage points

First half of
FY2019/3

First half of
FY2020/3

Gross profit margin
Ratio of SG&A to sales

22.8%
17.1%

Ratio of operating income to sales

5.7%

Change (YoY)*23.2%*0.4 percentage points*14.4% *△ 2.7 percentage points
8.8%
3.1 percentage points* As a result of reviewing the scope of the cost accounting in some overseas subsidiaries, the classification of some expenses has been reorganized from
SG & A expenses to the cost of sales.

••

Gross profit margin is affected by the impact of reviewing the scope of cost accounting in some overseas subsidiaries(△0.6%) ,and improved by an increase of the sales of the profitable machines.
Ratio of SG&A to sales is improved by the impact of reviewing the scope of cost accounting in some overseas subsidiaries(△0.6%) ,and also deceased because of the rate of the fixed cost decline which is caused by an increase of the net sales.
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Consolidated Balance Sheets
Overview

1. A 853 million yen increase in current assets was mainly due to an increase in cash anddeposits, etc.
2. A 528 million yen decrease in current liabilities was mainly due to a decease in accounts
payables, etc.
(million yen)

At the end ofFY2019/3

Current assets
Non-current assets
Total assets
Current liabilities
Long-term liabilities
Total liabilities
Total net assets
Total liabilities and net assets49,849
24,23674,085
14,624
3,170
17,79456,29074,085First half ofFY2020/3

Change from theend of FY2019/3

50,702
23,72874,43014,096
3,238
17,33457,09674,430

853
△ 508
344
△ 52867△ 460805344

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Changes in Consolidated Cash Flows
Overview

1. A 3,842 million yen cash flow from operating activities was mainly due to a decrease intrade receivables, etc.
2. Balance of cash and cash equivalents increased 2,581 million yen from the end of theprevious fiscal year.
(million yen)First half of
FY2019/3

First half ofFY2020/3

I Cash flow from operating activities

3,346

3,842

II Cash flow from investing activities

480

△ 446

3,8263,396

III Cash flow from financing activities

△ 376

△ 758

IV Foreign currency translation adjustments oncash and cash equivalents

△ 149

△ 55

V Net increase or decrease in cash and cashequivalents

3,301

2,581

VI Cash and cash equivalents, end of quarterly
period17,01318,752

I + II Free cash flows

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Outlook for FY2020/3All Rights Reserved. Copyright Denyo Co.,Ltd. 13

Outlook for FY2020/3: Consolidated Income and Loss
Key points

1. Net sales are expected to be 59.5 billion yen.
2. Assumed exchange rate is 110 yen/dollar.
(million yen)

FY2019/3

FY2020/3(forecast)

Net sales

55,554 100%

Operating income

4,201

7.6%

Ordinary income

4,592

Profit attributable toowners of parent

3,166

Capital investment

1,499

Depreciation
Net income per share

ROE
Cash dividends per share

Change (YoY)

Rate of change(YoY)

59,500 100%

3,946

7.1%

5,200

8.7%

99923.8%8.3%

5,400

9.1%

808

17.6%

5.7%

3,600

6.1%

434

13.7%

1,900

401

26.8%

1,132

1,300

168

14.8%

149.8yen

171.7yen

21.9 yen

5.9%

*6.6%

42.0yen44.0yen* Equity is calculated by using the amount of money at the end of FY2019/3.
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Outlook for Sales by Product (Consolidated)
Overview

1. Sales of generators are expected to increase by 4,040 million yen (9.3%).
2. Sales of welders are anticipated to decrease by 115million yen (2.2%).
3. Sales of compressors are anticipated to decline by 59 million yen (5.6%).
(million yen)

FY2019/3

Rate ofchange (YoY)

3,946

7.1%

Generators

43,660 78.6% 47,700 80.2%

4,040

9.3%

Welders

5,115

9.2%

5,000

8.4%

△ 115 △ 2.2%

Compressors

1,059

1.9%

1,000

1.7%

△ 59 △ 5.6%

5,719 10.3%

5,800

9.7%

Others55,554

100% 59,500

Change(YoY)

100%

Consolidated sales
By product

FY2020/3 (forecast)

81

1.4%

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

FY2020/3(forecast)

FY2019/3Change(YoY)

Rate of change(YoY)

100% 59,500

100%

3,946

7.1%

Domestic sales

33,693 60.6% 35,500

59.7%

1,807

5.4%

Overseas sales

21,860 39.3% 24,000

40.3%

2,140

9.8%

14,080 25.3% 17,100

28.7%

3,020

21.4%
△ 7.7%

55,554

By region

Consolidated sales

North/ Central
America
Asia

5,527

9.9%

5,100

8.6%

△ 427

Others

2,252

4.1%

1,800

3.0%

△ 452 △ 20.0%

FY2019/3Japan

FY2020/3(forecast)

Japan010,000

20,000

North/Central
America

Asia Others

North/Central
America
30,00040,000

Asia Others
50,00060,00070,000All Rights Reserved. Copyright Denyo Co.,Ltd. 16

Details of the Operating Income Forecast
Increase in operating income

With the implement of the medium-term management plan, operating income is
aimed to increase.
(million yen)

FY2019/3

FY2020/3 (forecast)

Change (YoY)

Operating income

4,201

5,200999

Operating income margin

7.6%

8.7%

1.1percentage point

FY2019/3

FY2020/3 (forecast)Gross profit margin
Ratio of SG&A to sales
Ratio of operating income to sales

••

22.3%
14.8%
7.6%

Change (YoY)

22.9%
0.6ercentage point
14.1% △0.7percentage point
8.7%
1.1percentage point

The gross profit margin is aimed to be improved by enhancement of the sales in the profitable product andthe cost reduction activities.
The ratio of SG&A to sales are expected to be improved because of the rate of the fixed cost such as
personnel expenses decline which is caused by an increase of the net sales.

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Changes in the Amount of Capital Investment(million yen)

Cost ofequipment
Main uses

End of March 2017

End of March 2018End of March 2019

511

870

1,499

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

10050250
20・Machinery of Fukui plant, etc.
・Nishihatsu
・U.S. Plant
・Vietnam Plant
・Others

310504502040

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

730
50670
40

End of March 2020
(plan)

1,900
・Machinery of Fukui plant, etc.
・Nishihatsu
・U.S. Plant
・Vietnam Plant
・Others

1,500
40260
4060

Amount of capital investment

million yen
2,000
1,800
1,600
1,400
1,200
1,000
8006004002000
End ofMarch2017

Denyo Manufacturing Corporation (U.S.A.)

End ofMarch2018

End ofMarch2019

End ofMarch2020(plan)All Rights Reserved. Copyright Denyo Co.,Ltd. 18

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:
40 yen in FY2018/3 ⇒ 42 yen in FY2019/3 ⇒ 44 yen (forecast) in FY2020/3504030252222Year-end dividends
Interim dividends

201510151520

FY2017/3

FY2018/3

FY2019/3220
FY2020/3※Breakdown of the year-end dividends in FY2018/3: Ordinary dividends
15.00 yen(forecast) Commemorative dividends 10.00
yen
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Overview of the Medium-term Management Plan
FY2021/3
Business Objectives
Consolidated
Net sales

58.0billion yenOrdinary
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.
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Notes on Our Outlook

This material contains assumptions and outlooks for the future andforecasts based on plans as November 14, 2019.
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. 21

Reference Materials

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

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

55,554

Overseas sales

21,860Ordinary income

4,592Profit attributable to owners of parent

3,166

Total assets

74,085

Net assets

56,290Market capitalization (as of March 31)

31,295

Number of employees

1,350persons
Head Office (Nihonbashi-Horidomecho,Tokyo)

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

80%

100%

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. 24Trends and Forecasts by Product Sales
Sales by product
Generators

Welders

Compressors

Others

70,00060,0005,800
5,719

50,000

5,504
5,334

40,000

993
5,263

1,126
5,556

5,919
1,104
5,100

5,720
1,440
4,832

5,525

1,059
5,115

1,000
5,000

1,083
4,919

30,00047,70020,00043,66038,241

40,07938,29436,85738,653

FY2014/3

FY2015/3

FY2016/3

FY2017/3

FY2018/3

10,0000FY2019/3

FY2020/3(Forecast)

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

Asia

Europe and others

70,00060,000
50,000

2,137
6,959

2,945

3,606

2,808

6,921

6,479

6,619

2,648
5,938

11,23431,727FY2014/3

17,10014,08040,000
9,007

2,252
5,527

1,800
5,100

10,382

9,776

10,31031,46829,252

31,211

33,69335,50030,155FY2015/3

FY2016/3

FY2017/3

FY2018/3

FY2019/3

FY2020/3(forecast)

30,00020,00010,0000

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Changes in Results for the Last 30 Years
JapanNet sales,100 milion yen

Overseas

Ordinary income

Ordinary income, 100 million yen

70060070Great East Japan
EarthquakeBubble period

500

Lehman shock

6050

Y2K boom

400

40300

30200

20100

1000
Fiscal Year

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