DAIHATSU DIESEL MFG. CO., LTD.

Fiscal Year Ended March 31, 2018

Financial Results Briefing
May 2018

Sales Breakdown/Market Share
Sales Breakdown
Business

Internal combustion engines

SectionMarine-use

Application

Auxiliary power
approx.
generators

approx.

96％

80％

80％

4％

Other

Land-useapprox.

20％

Main
propulsion systems

approx.

20％

Market Share (Auxiliary Engines for Large Ocean-going Vessels)〈Share in Japan〉〈Overseas market share〉

DAIHATSUDIESELDAIHATSUDIESEL%%44232

DAIHATSU DIESEL MFG. CO., LTD.

Market Trends for Newbuild Vessels
Volume of orders received, by country
180,000

Volume of work in hand, by country
400,000

Other countries total
160,000

140,000

European countries total

350,000

China
South Korea

120,000

Other countries total
European countries total
China
300,000

JapanSouth Korea
Japan

250,000
100,000
200,000
80,000150,000
60,000100,000
40,00050,00020,00000

Source: The Shipbuilders’ Association of Japan Orders received showed an uneven increase overall, with a spike in 2006 to 2007 just before the 2008
financial crisis. The marine cargo market is now on a recovery trend despite the downturn in the marine
cargo market in 2016
 Volume of work in hand showed recovery following a major slump after the 2008 financial crisis, but isdecreasing at present

3

DAIHATSU DIESEL MFG. CO., LTD.

Market Trend for Marine Cargo
Global ocean cargo volumes, by product12,000Global shipping capacity(Unit: Million tons)

1,400,000(Unit: Thousand tons)

Compared to 2000

Other
Petroleum productsCompared to 2000

82% increase

112% increase

1,200,000

10,000

Crude oil

Bulk carriersContainers
1,000,000
8,000

GrainTankers

Coal
800,000

Other（cargo vessels, etc.）

Iron ore
6,000

600,000

4,000
400,000

2,000
200,000

001996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

(Estimate)

Source: The Shipbuilders’ Association of Japan

Increasing trend in shipping capacity in line with increase in ocean cargo volume→ stable increase in maintenance demand expected

4DAIHATSU DIESEL MFG. CO., LTD.

Remarks on Earnings

Stable capture of earnings overlife-cycle (30 years)▶Post-voyage maintenance services are key.

POINT

▶Cumulative total of engine units (number ofships carrying our engines) is decisive.
Sales by Horsepower(10,000 hp)
200150Level of sales
increased remarkably
153
128

100
50

154
123

125

121

108
78

7977

146

142

145

145

109

810March March March March March March March March March March March March March March March March
2003

2004

2005

2006

2007200820092010

2011201220132014201520162017

2018*Does not include technological partners in China

5DAIHATSU DIESEL MFG. CO., LTD.

Strengthening Business in the After-sales-service
Market/Overseas Strategy (Licensing)
10 years ago Sales approx. ¥15.0 billion

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

Issuesfor thefuture

Now

Sales approx. ¥26.0 billion

Shifting to the offensive

Major
increase  Creation of sales teams specializing inparts
 Launch of strategic sales targeting shipowners and ship-managers in the aftersales-service market

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

Licensing (in China)

Anqing CSSC Diesel Engine Co., Ltd.

Anqing Diesel

 Contract partner since 1982

Anhui Province, China(Yangtze River Basin, 600 km from Shanghai) Granting of rights for Manufacture
and marketing of certain classes ofinternal combustion engine

SHAANXI DIESEL ENGINE HEAVY
INDUSTRY CO., LTD.

Shaanxi Diesel

 Expand market share of DAIHATSU
brand

Shaanxi Province, China(50 km from Xi’an)

6

DAIHATSU DIESEL MFG. CO., LTD.

Recent Major Initiatives in Line withMid-term Management Plan

DAIHATSU
MFG.CO.,
CO.,LTD.
LTD.
DAIHATSU DIESELDIESEL MFG.

Business Environment
Tighter environmental regulations: Exhaust gas regulations (NOx, SOx, CO2,etc.), and diversification of fuels201620172018

2019

2020

NOx Tier III regulations:North America /Caribbean Sea

2021

2022

2023

Emissions standard: (80)％

NOx Tier III regulations:North Sea /Baltic Sea
CO2: Europe・NOx: Nitrogen oxide
・SOx: Sulfur oxide

Emissions standard: (80)％

Operating data reporting system

CO2: IMO

Operating data reporting system

CO2: EEDI regulations

Fuel economy standard: (20)％SOx: Baltic Sea /North Sea /offshore USA and Canada/Caribbean Sea
SOx: Other marine areas

Examples of exhaust gas
regulations for vessels

SOx regulations* (2020-)
・ The Baltic Sea, the North Sea, 200 nautical miles offshore
USA and Canada, and USA Caribbean Sea area: 0.1％
・ Other marine areas: 0.5%

Sulfur in fuel oil 0.1％

currently 3.5% ->Sulfur in fuel oil 0.5％

SOx regulations*（-2010）
・The Baltic Sea and the North Sea: 1.5%
・Other marine areas: 4.5%

* Regulations on sulfur concentration in fuel oil under MARPOL Annex VI

8DAIHATSU DIESEL MFG. CO., LTD.

Business Environment
Larger engines: Aggressive capital investment by domestic shipyards, energy conservation

Maximum loading
quantity of containervessels（Twenty-foot Equivalent Unit (TEU): capacity of container ships）

25,00020,00015,00010,0005,000
2003 2006 2012 2013 2015 2016 2017

Utilization of IoT: Supporting autonomous ship operation and seafarer shortage(Number of seafarers in Japan)

1980

1990

2004

2010

Foreign-going

38,425

10,084

3,008

2,256

Domestic

63,20856,10030,70828,0609DAIHATSU DIESEL MFG. CO., LTD.

Update on Recent Major Progress (1) (New Himeji Factory)

Improved efficiency of manufacturing and shipping operations*Finished products will be shipped from the adjacent public berthIn-house logistics and visual aids such as andon (electric lightboard) and abnormality display device, etc.

Introduce lead-time shortening methods

Andon (electric light board)

Transport using wheelift

Efficient assembly lines

10* Status of production lines are indicatedProduction information monitor* Status of production (plan vs. result)Update on Recent Major Progress (2) (Environment-related Products)

Mechanism of a dual fuelengineDevelop sales promotion of environmentally-conscious dual fuelengines that enable optimum selection of fuels according to theoperating status of vessels(Use examples)

Diesel fuel injection
valve (water-coolingnozzle)

Cylinderpressure
sensorOutside restrictedarea:
operate withliquid fuelWithin restrictedarea:
operate withgas

11

Pilot fuelinjection valve

Update on Recent Major Progress (2) (Environment-related Products)

Dual fuel gas turbine that uses both liquid fuel and city gas as fuelFirst dual fuel engine for JAXA
(continuous/emergency power generation)

Gas turbine power generation facility for
Crisis Management and Disaster Prevention Center12

Update on Recent Major Progress (3) (Environment-related Products)

Tier III standards require an 80% reduction in the emission rate of NOx in
exhaust gas emissions compared with Tier I standards

It can generate a highly pure urea solution that serves as an SCR reductant

Onboard trial on Hanoi Bridge ofKawasaki Kisen Kaisha, Ltd.

Aqueous urea solution generator

13

Update on Recent Major Progress (4) (Peripheral Business Domains)

14

DAIHATSU DIESEL MFG. CO., LTD.

Fiscal Year Ended March 31, 2018
Summary of Earnings

DAIHATSU DIESEL MFG. CO., LTD.

Summary(Unit: Million yen)

YoY difference

March 2016
Results

March 2017
Results

March 2018
Results

Increase/decrease(%)

Net sales

57,01958,934

60,166

1,232

2.1%

Operatingincome

5,493

3,498

3,044(453)(13.0)%

Ordinary
income

5,438

3,441

3,104(337)(9.8)%Net income

3,596

2,319

2,095(223)(9.6)%

Basic earnings
per share

112.98

72.87

65.83

(7.04)(9.6)%

Total assets

75,06078,98180,969

1,987

2.5％

Equity ratio

45.6%

46.1%

47.0%

0.9％

POINT－ Sales expanded due to increased ship size and land-use projects
 Profitability picture became increasingly severe for sales of diesel
engine units
16DAIHATSU DIESEL MFG. CO., LTD.

Trend of Sales and Earnings
Operating income

Ordinary income

Net income

Net sales(Unit: Million yen)

(Unit: Million yen)

7,000

6,000

65,00062,30457,56657,01958,93460,16660,00055,000

5,493
5,438

5,000
4,973
4,929

4,000

50,000

4,736
4,689

45,000
3,596

3,000

3,498
3,441

3,004

40,000
3,104
3,044

2,744

2,000

35,000

2,319
2,095

1,000

30,00025,0000

20,000
14/3

15/3

16/3

17

17/3

18/3

DAIHATSU DIESEL MFG. CO., LTD.

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

YoY change

Operating income for previous term: ¥3,498 million- 454
Maintenancerelated(201)

Operating income for the current term: ¥3,044 million
Other＋103
Manufacturing Cost
fixed costs reduction,etc.
(239)
+129

Foreignexchangedifference*１+167

Engine-related(1,122)Other(52)

Valuation reservefor inventory+729*1 Exchange rate: ¥108.35 for the previous term; ¥110.53 for the current term

18

DAIHATSU DIESEL MFG. CO., LTD.

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

Marine-use(Japan)
Land-use(Japan)

Internal combustion engine section earnings
Marine-use(Overseas)
Land-use(Overseas)(Unit: Million yen)

9,000

70,00060,00054,60555,40856,495

571

594

688

8,420

9,978

28,74225,08150,000

9,904

7,995

7,500

5,648

6,000

5,295

40,00025,85830,000

4,500

3,000

20,00010,00018,271

17,651

1,500

20,74700
FY2016

POINTFY2017

FY2016FY2018FY2017FY2018

 Proportion of larger diesel engines for marine-use increased, but total
units sold decreased
 Profitability picture became increasingly bleak for sales of diesel
engine units19

DAIHATSU DIESEL MFG. CO., LTD.

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

1200

Maintenance-related net sales

Marine-use(Japan)

Marine-use(Overseas)

Land-use(Japan)

Land-use(Overseas)

1000

889

800

107
250

600

30,00026,46925,000849
92(Unit: Million yen)

749

24,715

24,6272017年3月期

2018年3月期

20,000

84
264
215

400

15,00010,000

532

200

493

448

5,000

00
FY2016

POINTFY2017

FY20182016年3月期

 Total units sold decreased owing to deferral of delivery dates
 Maintenance-related sales were almost flat

20DAIHATSU DIESEL MFG. CO., LTD.

Earnings Forecasts(Unit: Million yen)March 2019
March 2018
Results

Forecast

Increase/decrease(%)

Net sales

60,16657,000(5.3)

Operating income

3,044

2,500(17.9)

Ordinary income

3,104

2,400(22.7)

Net income

2,095

1,500(28.4)

Basic earnings pershare

65.83

47.09(28.4)*Exchange rates: March 2018 (Results): ¥110.53, March 2019 (Estimate): ¥100.00

Forecast Unit sales of diesel engines for marine-use to increase, but higher
proportion of smaller engines to cause sales to decrease Profitability deterioration for main engine units to continue
 Maintenance-related sales estimated to increase slightly

21DAIHATSU 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.