TOP INTERVIEWREVIEW OF SEGMENT OPERATIONSTop Interview

We will restructure ourproduction systems, and link it
to sustainable growth beyond
the 100 years.
As we look to celebrate the Company’s 100th anniversary in June
2018, we will promote our medium-term management plan, withrestructuring production systems at its core, and focus on building thefoundations for the sustainable growth of the Group. I will hereby
report on the business conditions during the first half of the current
fiscal year and our future initiatives.

tell us about the business conditions
Q Pleasefor the first half of the current fiscal year.

A

Profitability declined in the Industrial
Systems segment, and we reported an
operating loss. We achieved anincrease in net income owing to thereporting of extraordinary income.

Overall orders received fell below those of the corresponding
period of the previous fiscal year owing to a decline in theTransportation Systems segment, but net sales increased
thanks to increases in the Industrial Systems and Information
Equipment Systems segments. From a profit perspective,
profitability declined in the Industrial Systems segment, leading
profits to fall below the initial targets. We achieved an increasein net income attributable to owners of the parent owing to thereporting of a gain on sales of investment securities.
Looking at it segment by segment, the Transportation
Systems segment saw a decline in orders in Japan, a decline
in net sales owing to the effect of some shipments being
delayed into the second half, and a decline in operating
income, although we exceeded our initial targets.
In the Industrial Systems segment, despite the fact thatorders for testing equipment declined, net sales increased
owing to an increase in sales for overseas customers. From a1

President Kenzo Terashima

profit perspective, machinery costs increased in line withdiversification targeting the expansion of the testing equipment
market, leading to a decline in profit.
In the Information Equipment Systems segment, orders
received increased as we secured orders for railway station
operating equipment, and net sales also increased. From a
profit perspective, development costs for new equipment
increased, resulting in a decline in profit.

tell us about the progress of theQ Pleasemedium-term management plan.

AWe are accelerating businessdevelopment overseas.
Operations will finally commence at theShiga Ryuo Plant, constructed as themain focus of restructuring production
systems.

The Company is promoting the medium-term management
plan, “NEXT 100: Beyond 100 years, Ver. 2,” which builds themanagement foundations for sustainable growth beyond 100years. In the current fiscal year, the final year of the plan, weare completing the initiatives.
With regard to “strengthening our international
competitiveness,” one of the main measures of the plan, weimplemented initiatives aimed at local production ofpantographs in China in the Transportation Systems segment.
We decided to establish a new assembly site as a joint venture
in Chengdu, Sichuan Province in August 2017, and increased
our investment ratio in an affiliate in Changzhou, Jiangsu
Province, which will be a local production site for components,
in November 2017. In addition, we will also gradually expand
the maintenance business for subway vehicles, which webegan in 2014. We also expanded our businesses outside
China, including securing orders for vehicles in Jakarta,
Indonesia and Doha, Qatar.
On the other hand, in regard to overseas development in theIndustrial Systems segment, we have steadily increased ourorders for generators and processing machinery in the ASEAN
region, and are developing new products to further respond to
the needs of the region.
With regard to “restructuring production systems,” which isanother main measure of the plan, we have completed theconstruction of the Shiga Ryuo Plant, a new production site of
the Industrial Systems segment, and plan to commence fulloperations in June. In addition to consolidating production
sites in the Industrial Systems segment and improving
efficiency, we also aim to expand our business field andincrease net sales by strengthening our research anddevelopment function. In the Transportation Systems segment
also, we will increase production capabilities at the Yokohama
Works, in order to accurately respond to increasing demand infuture. We will further increase business efficiency with a newcore system that began operating in June 2017 and pursue
enhanced productivity across the Group as a whole.

is the outlook for development in
Q Whatthe second half of the current fiscal year
and full-year forecasts?

AWe have made downward revisions to
our earnings forecasts.
Our top priority is enhancing production
efficiency and cost competitiveness inorder to improve profitability.

In regard to full-year forecasts, we have made downward
revisions to forecasts for net sales, operating income, andordinary income, based on circumstances through the first half.
However, our forecast for net income attributable to ownersof the parent remains unchanged, since we are systematicallycompressing investment securities. (Please refer to P1 forspecific figures.)
For the second half, we will enhance production efficiency inthe Transportation Systems segment by strengthening plant
management systems and improve profitability in the Industrial
Systems segment by adjusting our organizational systems andstrengthening machinery cost management.

tell us your thoughts in regard to theQ Please
Company celebrating its 100th anniversary.

AWe will achieve sustainable growth in
the global market. We will focus on
strengthening diversity and corporate
governance.

Looking back over the Company’s progress since its
foundation in 1918, I am reminded of the importance ofhistory. For the 100 years, the Company has built relationshipsof trust with customers with its cutting-edge technologies andproducts. I want all employees of the Group to take pride inhaving built this tradition as we unite for a new start.
In overseas development, it is essential that we go beyond
the framework of Japanese values and corporate culture toachieve harmony and coexistence with local industries, andcontribute to the development. The Company will continue toachieve growth in the global market.
The needs of the market become more diversified by theyear, and in order to achieve further growth, it is essential that
we create an environment where a diverse range of humanresources can actively participate. We are implementing
measures related to employment and personnel systems inorder to promote the active participation of women, as we aim
to cultivate a new corporate culture. 2017 saw newdevelopments, including female employees passing Grade 1of the National Skill Test, a national qualification, and thefemale fire-fighting team, formed for initial fire-fighting
activities, winning the top prize in a training competition in
Kanazawa, Yokohama. Furthermore, next year (the fiscal year
ending May 31, 2019), we intend to increase the speed ofmanagement decision-making and business execution as welook to strengthen corporate governance.
We hope that our shareholders look forward to the future of
the Company beyond the 100 years and we would like to ask
for their continued support.

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