DAIHATSU DIESEL MFG. CO., LTD.

First Half of the Fiscal Year Ending March 31, 2017

Financial Results Briefing
November 2016

DAIHATSU DIESEL MFG. CO., LTD.

Sales Breakdown

Business

Internal combustion engines

96％

OtherSection

Marine-use

80％

Land-use

Application

Auxiliary power generators

approx.

approx.

80％

2Main

propulsion systems

4％

approx.

20％

approx.

20％

DAIHATSU DIESEL MFG. CO., LTD.

Market Share (Auxiliary Engines for Large Ocean-going Vessels)
Share in Japan

Overseas market share

DAIHATSUDIESELDAIHATSUDIESEL

44%

23%

Major competitors Japan: company Y Overseas: company M (Denmark), company Y(Japan), company H(South Korea), company W(Finland)

3

DAIHATSU DIESEL MFG. CO., LTD.

Market Trends for Newbuild Vessels
Volume of orders received, by country

Volume of work in hand, by country

180,000

400,000

Other countries total
160,000
140,000
120,000

Other countries total

European countries total

350,000

China

European countries total

China
300,000

South Korea
JapanSouth Korea
Japan

250,000
100,000
200,000
80,000150,000
60,000100,000

40,00050,00020,0000019961997199819992000200120022003200420052006200720082009201020112012201320142015

19961997199819992000200120022003200420052006200720082009201020112012201320142015

Source: The Shipbuilders’ Association of Japan

Global ocean cargo volumes, by product12,000Other
10,000 Orders received show an uneven increase overtime, with a spike in 2006 to 2007, just before the2008 financial crisis

Petroleum products
Crude oilContainers

8,000

Grain
Coal

6,000

Iron ore Volume of work in hand continues to show
recovery, following a major slump after the 2008financial crisis

4,000

2,000

 Ocean cargo volumes show steady rise over time0
19961997199819992000200120022003200420052006200720082009201020112012201320142015
Est.

4DAIHATSU DIESEL MFG. CO., LTD.

Acting Promptly on Environmental Initiatives
Impact of toughened environmental rules: Exhaust gas regulation
20NOx regulation values (g/kWh)18

Primary regulation

16(2000)

14
12
10

Secondary
regulation

8(2011)

6

Tertiary
regulation

42(2016)

Approx. 20% cut
comparedwith primary
regulation

Approx. 80% cut
compared withprimaryregulation

00200

400600

800

1000

1200

1400

1600

Engine rotation speed (rpm)

1800

2000

2200

Source: Ministry of Land, Infrastructure, Transport and Tourism

Launch of tertiary regulation in 2016
NOx volumes will have to fall 80% versus primary regulation
Our engine combined with the selective catalytic reduction (SCR*) system has alreadywonformal approval from 8 major ship classification societies around the world, ahead of rival
World first:companies*SCR: Emissions control technology system that neutralizes NOx in exhaust gas through a special catalyst

5DAIHATSU DIESEL MFG. CO., LTD.

Remarks on Earnings

POINT

1

Ability to develop products rapidly enables tailoredresponse to market needs.
▶ Stabilize business by mitigating impact of marine cargo restrictions and market state

POINT

2 Stable capture of earnings over life-cycle (30 years)▶ Post-voyage maintenance services are key.
▶ Cumulative total of engine units (number of ships carrying our engines) is decisive.

6

DAIHATSU DIESEL MFG. CO., LTD.

Sales by Horsepower(10,000 hp)

180

Level of sales
increased
remarkably

160
140

153

154
146

142

120

128

100

123

125

121
109

10880
8260787977816540200March March March March March March March March March March March March March March March March

2001

2002

2003

20042005

20062007200820092010

2011

2012

20132014

2015

2016

*Does not include technological partners in China

7DAIHATSU DIESEL MFG. CO., LTD.

Strengthening Business in the After-sales-service Market

10 years ago

Holding the line

Sales

 Business focus was selling engines to builders of newvessels.
 Sales for the after-sales-service did not really exist.

approx.

¥15.0 billion

Major increase

Now

Shifting to the offensiveSales

 Creation of sales teams specializing in parts
 Launch of strategic sales targeting ship-owners
and ship-managers in the after-sales-service marketapprox.

¥26.0 billion

Issues for the future
Genuine parts usage ratio is approx. 50%. Scope exists for increasing this rate.
▶ Gradually expand sales to mid-sized ship-owners as well.

8DAIHATSU DIESEL MFG. CO., LTD.

Overseas Strategy (Licensing)

Anqing CSSC Diesel Engine Co., Ltd.

SHAANXI DIESEL ENGINE HEAVY INDUSTRY
CO., LTD.

Anqing Diesel

Shaanxi Diesel

Anhui Province, China(Yangtze River Basin, 600 km from Shanghai)

Shaanxi Province, China(50 km from Xi’an) Contract partner since 1982
 Granting of rights for Manufacture and marketing of certainclasses of internal combustion engine
 Expand market share of DAIHATSU brand

9DAIHATSU DIESEL MFG. CO., LTD.

First Half of the Fiscal Year Ending March 31, 2017

Summary of Earnings

DAIHATSU DIESEL MFG. CO., LTD.

DAIHATSU DIESEL MFG. CO., LTD.

Summary(Unit: Million yen)

YoY difference

March 2017

September
2014
Results

September
2015
Results

September
2016
Results

Net sales

29,323

26,44728,139

1,692

6.4%

60,00046.9%

Operatingincome

1,816

1,884

1,097(786)(41.7)%

2,800

39.2％

Ordinary
income

1,894

1,833

997(836)(45.6)%

2,700

37.0％

Net income

1,241

1,227706(520)(42.4)%

1,900

37.2％

Basicearnings
per share

39.00

38.55

22.20

(16.35)(42.4)％

59.65

37.2％

Total assets

74,83571,93475,652

3,718

5.2％

－－

Equity ratio

39.5%

45.1%

45.3%

0.2％

－－

POINT

Increase/decrease(%)－Forecast

Progress(%)

 Sales expanded due to increased ship size Yen appreciation and sluggish performance by maintenance operations
had a major negative impact on sales and earnings

11

DAIHATSU DIESEL MFG. CO., LTD.

Trend of Sales and Earnings
Operating income(Unit: Million yen)

7,000

Ordinary income

Net income

Net sales(Unit: Million yen)

65,00062,30460,00057,5666,000

57,01960,00054,52855,0005,000
50,0004,000

45,000
4,929
4,973

3,000

5,438
5,493

1,900
3,596

2,744

1,000

35,000

4,689
4,736

2,000

40,000

2,800
2,700

30,000

3,004

2,271

1,097

25,000

997

0

2,826
2,780

13/3

706

20,00014/315/3

1216/3

17/3 (Est.)

DAIHATSU DIESEL MFG. CO., LTD.

Analysis of Increase/Decrease in Earnings
SalesExpenses(Unit: Million yen)

Operating income
for the previous term: ¥1,884 million

Maintenancerelated(512)

Enginerelated(64)

SG&A andCustomer
Serviceadjustments＋341

Other+154
Valuation reservefor inventory*2(469)

Operating income
exchange
for the current term: ¥1,097 millionForeign
difference*1(535)

YoY change

Other＋98

Cost
reduction,etc.
＋200-787*1 Exchange rate: ¥121.26 for the previous term; ¥104.35 for the current term
*2 Valuation reserves, etc. for the inventory, associated with foreign exchange fluctuations

13DAIHATSU DIESEL MFG. CO., LTD.

Net Sales and Earnings for the Internal Combustion Engine Section
Net sales(Unit: Million yen)

35,000Marine-use (Japan)
Land-use (Japan)

28,47730,000290
2,018

25,000Internal combustion engine section earnings
Marine-use (Overseas)
Land-use (Overseas)

25,312280
2,580

20,00018,282

15,000(Unit: Million yen)

3,500

26,427

3,000

3,003

3,114

154

2,500

2,267

2,113

2,000

11,687
13,4841,500

10,000

1,000

5,000

7,886

8,968

12,31850000
1H FY2015

POINT

1H FY2016

1H FY2015

1H FY2017

1H FY2016

1H FY2017

 Profitability picture remains bleak for sales of diesel engine units Net sales increase due to rise in sales proportion of larger diesel engines formarine-use
 Maintenance-related sales are stagnant
 Reduced earnings due to the effects of yen appreciation and valuation reserve forinventory

14

DAIHATSU DIESEL MFG. CO., LTD.

Unit Sales and Maintenance-related Net Sales
Units sold(Unit: Units)

500
450
400

Maintenance-related net sales

Marine-use (Japan)

Marine-use (Overseas)

Land-use (Japan)

Land-use (Overseas)

417

413

(Unit: Million yen)

14,000446

12,00013535011,51010,65810,00013615330012,442

8,000

250
6,000

200
150

256

246

100

295

4,000
2,000

5000
1H FY2015

POINT

1H FY2016

1H FY2017

1H FY2015

1H FY2016

1H FY2017

 Total units sold increased Decreased earnings on back of stronger yen and sluggish maintenance-related
sales

15

DAIHATSU DIESEL MFG. CO., LTD.

Earnings Forecasts(Unit: Million yen)March 2017
March 2016
ResultsForecast (revisedon October 17)

Increase/decrease(%)

Net sales

57,01960,000＋5.2

Operating income

5,493

2,800(49.0)

Ordinary income

5,438

2,700(50.4)

Net income

3,596

1,900(47.2)

Basic earnings pershare

112.9859.65(47.2)*Exchange rates: March 2016 (Results) ¥119.41, March 2017 (Estimate) ¥100.00

Forecast

 Sales increase from higher sales composition of marine-use large-scalediesel engines
 Profitability deteriorating for main engine units
 Earnings decrease due to sluggish maintenance-related sales and yen
appreciation

16DAIHATSU DIESEL MFG. CO., LTD.

Progress of the Mid-term Management Plan(from April 1, 2015 to March 31, 2019)

DAIHATSU DIESEL MFG. CO., LTD.

DAIHATSU DIESEL MFG. CO., LTD.

18

DAIHATSU DIESEL MFG. CO., LTD.

19

DAIHATSU DIESEL MFG. CO., LTD.

Location: Fuji-cho, Hirohata-ku, Himeji City, Hyogo
Prefecture
Site area: Approx. 60,000㎡
Start of operations: Scheduled within FY2018
Number of employees: Approx. 100 (after 3 years)
Remarks: Finished products will be shipped fromthe adjacent public berth20

DAIHATSU DIESEL MFG. CO., LTD.

These materials contain statements relating to future earnings and businessstrategy, etc. Inherent in these statements are risk and uncertainty; they
form no guarantee of future performance.
Please be aware that actual results may differ significantly from forecasts,
due to changes in the business environment, etc.
Furthermore, information relating to companies other than the Company or
the Company group, etc., contained here has been taken from publicly
available information, etc. No verification of any kind has been undertakenby the Company, and no guarantee is offered regarding the accuracy orappropriateness of such information.
The information contained in these materials is intended only for purposes ofprovision of information, and not for solicitation to purchase securities.

DAIHATSU DIESEL MFG. CO., LTD.