Consolidated Financial Results
for the Fiscal Year Ended March 31, 2017
[Japanese GAAP]
April 28, 2017
Company name: Daihatsu Diesel Mfg. Co., Ltd.
Stock exchange listing: Tokyo Stock Exchange
Code number: 6023
URL: http://www.dhtd.co.jp/
Representative: Shigeki Kinoshita, President
Contact: Yuichi Uemura, Managing director
Phone: +81-6-6454-2331
Scheduled date of Annual General Meeting of Shareholders: June 29, 2017
Scheduled date of commencing dividend payments: June 30, 2017
Scheduled date of filing annual securities report: June 29, 2017
Availability of supplementary briefing material on annual financial results: Available
Schedule of annual financial results briefing session: Scheduled (for securities analysts and institutional investors)(Amounts of less than one million yen are rounded down.)
1. Consolidated Financial Results for the Fiscal Year Ended March 31, 2017 (April 1, 2016 to March 31, 2017)(1) Consolidated Operating Results(% indicates changes from the previous corresponding period.)
Profit attributable to
Net sales
Operating profit
Ordinary profit
owners of parent
Fiscal year ended
Million yen%
Million yen%
Million yen%
Million yen%
March 31, 201758,9343.4
3,498 (36.3)
3,441 (36.7)
2,319 (35.5)
March 31, 2016
57,019
(8.5)
5,493
17.1
5,438
14.8
3,596
19.7
(Note) Comprehensive income: Fiscal year ended March 31, 2017: 2,687 million yen [(7.9)%]
Fiscal year ended March 31, 2016: 2,916 million yen [(15.5)%]
Basic earnings
per share

Diluted earnings
per share

Rate of return on
equityOrdinary profit
to total assets

Operating profit
to net sales

Fiscal year ended
Yen
Yen
%
%
%
March 31, 2017
72.87
6.6
4.5
5.9
March 31, 2016112.9810.9
7.4
9.6(Reference) Equity in earnings (losses) of affiliated companies: Fiscal year ended March 31, 2017: - million yen
Fiscal year ended March 31, 2016: - million yen(2) Consolidated Financial Position
Total assets

Net assets

Million yen

Equity ratio

Net assets per share

Million yen%

Yen

36,460
As of March 31, 2017
78,981
As of March 31, 2016
75,06034,224(Reference) Equity: As of March 31, 2017: 36,414 million yen
As of March 31, 2016: 34,204 million yen

46.1
45.6

1,143.90
1,074.47(3) Consolidated Cash Flows

Fiscal year ended
March 31, 2017
March 31, 2016

Net cash provided by(used in) operating
activities

Net cash provided by(used in) investing
activities

Net cash provided by(used in) financing
activities

Cash and cash
equivalents at end of
periodMillion yen

Million yen

Million yen

Million yen

4,974
3,437

(3,725)(3,256)

1,661(1,510)23,442
20,606

2. Dividends
Annual dividends
1st
2nd
3rd
Year-endquarter-end quarter-end quarter-end

Total

Total
dividends

Payoutratio(consolidated)

Dividends
to netassets(consolidated)

Fiscal year ended
Yen
Yen
Yen
Yen
Yen Million yen%
March 31, 2016
0.00
15.00 15.00
477
13.3
March 31, 2017
0.00
15.00 15.00
477
20.6
Fiscal year ending
March 31, 2018
0.00
15.00 15.00
31.9(Forecast)(Note) Dividends for the fiscal year ended March 31, 2016 consist of an ordinary dividend of 10.00 yen and acommemorative dividend of 5.00 yen.

%

1.4
1.4

3. Consolidated Financial Results Forecast for the Fiscal Year Ending March 31, 2018 (April 1, 2017 toMarch 31, 2018)(% indicates changes from the previous corresponding period.)
Net salesFirst half
Full year

Operating profit

Million yen%

30,00063,000

6.6
6.9

Million yen

Ordinary profit% Million yen

400 (63.6)
2,500 (28.5)%300 (69.9)
2,400 (30.3)

Profit attributableto owners of parent
Million yen

Basic earnings
per share%Yen

100 (85.9)
1,500 (35.3)

3.13
47.09

* Notes:(1) Changes in significant subsidiaries during the period under review (changes in specified subsidiaries resulting
in changes in scope of consolidation): No(2) Changes in accounting policies, changes in accounting estimates and retrospective restatement
1) Changes in accounting policies due to the revision of accounting standards: Yes
2) Changes in accounting policies other than 1) above: No
3) Changes in accounting estimates: No4) Retrospective restatement: No(3) Total number of issued shares (common shares)
1) Total number of issued shares at the end of the period (including treasury shares):
March 31, 2017: 31,850,000 shares
March 31, 2016: 31,850,000 shares2) Total number of treasury shares at the end of the period:
March 31, 2017: 16,170 shares
March 31, 2016: 16,170 shares
3) Average number of shares during the period:
Fiscal Year ended March 31, 2017: 31,833,830 sharesFiscal Year ended March 31, 2016: 31,833,944 shares

(Reference) Summary of Non-consolidated Financial Results
1. Non-consolidated Financial Results for the Fiscal Year Ended March 31, 2017 (April 1, 2016 to
March 31, 2017)(1) Non-consolidated Operating Results(% indicates changes from the previous corresponding period.)
Net sales
Operating profit
Ordinary profit
ProfitFiscal year ended
Million yen%
Million yen%
Million yen%
Million yen%
51,612
1,445 (57.2)
March 31, 2017
1.8
2,504 (41.4)
2,037 (34.9)
March 31, 2016
50,689
(9.7)
3,374
14.6
4,272
17.7
3,131
18.4
Basic earnings per share
Fiscal year ended
March 31, 2017
March 31, 2016

Diluted earnings per share
Yen

Yen

63.99
98.36

-

(2) Non-consolidated Financial Position
Total assets

Net assets

Million yen

Equity ratio

Net assets per share

Million yen%

Yen

As of March 31, 201770,43130,18067,20728,583As of March 31, 2016
(Reference) Equity: As of March 31, 2017: 30,180 million yen
As of March 31, 2016: 28,583 million yen

42.9
42.5

948.05897.88

2. Non-consolidated Financial Results Forecast for the Fiscal Year Ending March 31, 2018 (April 1, 2017 toMarch 31, 2018)(% indicates changes from the previous corresponding period.)
Net salesFirst half
Full year

Basic earnings
per share

ProfitOrdinary profit

Million yen%

Million yen%

Million yen%

Yen

26,00055,000

5.4
6.6

900
1,700

(30.5)(32.1)

900
1,400(28.1)(31.3)

28.25
43.95

* These consolidated financial results are outside the scope of audit.
* Explanation of the proper use of financial results forecast and other notes(Note on forward-looking statements)
The financial results forecasts and other forward-looking statements herein are based on information andcertain assumptions deemed reasonable as of the date of publication of this document. Actual results may differ
significantly from these forecasts due to a wide range of factors. Please refer to “Analysis of Operating Results”
on page 3 of the attached material for the assumptions the financial results forecasts are based on, and notes on
their use.
(How to obtain supplementary briefing material on annual financial results and information on the briefing
session)Briefing session for institutional investors and analysts are scheduled to be held on Monday, May 29, 2017.
The briefing materials will be posted on the Company’s website after the session.

Table of Contents
1. Operating Results and Financial Position ........................................................................................... 3(1) Analysis of Operating Results ......................................................................................................... 3(2) Analysis of Financial Position.......................................................................................................... 5(3) Dividend Policy ................................................................................................................................. 5(4) Business and Other Risks ................................................................................................................ 5
2. Overview of the Corporate Group ......................................................................................................... 7
3. Management Policies............................................................................................................................. 9(1) Basic Management Policies of the Company .................................................................................. 9(2) Target Management Indices ............................................................................................................ 9(3) Medium- and Long-Term Business Strategies and Issues to be Addressed ................................. 9
4. Basic Stance Concerning Choice of Accounting Standards .............................................................. 10
5. Consolidated Financial Statements ................................................................................................... 11(1) Consolidated Balance Sheets ......................................................................................................... 11(2) Consolidated Statements of Income and Comprehensive Income .............................................. 13(3) Consolidated Statements of Changes in Equity ........................................................................... 15(4) Consolidated Statements of Cash Flows ....................................................................................... 17(5) Notes to the Consolidated Financial Statements ......................................................................... 19(Notes on going concern assumption).............................................................................................. 19(Important matters that form the basis for preparing Consolidated Financial Statements) ..... 19(Changes in accounting policies) ..................................................................................................... 22(Additional information) .................................................................................................................. 22(Notes to Consolidated Balance Sheets) ......................................................................................... 22(Notes to Consolidated Statements of Income) .............................................................................. 22(Notes to Consolidated Statements of Comprehensive Income) ................................................... 23(Notes to Consolidated Statements of Changes in Equity) ........................................................... 23(Notes to Consolidated Statements of Cash Flows) ....................................................................... 25(Business combinations) .................................................................................................................. 25(Segment information, etc.) ............................................................................................................. 26(Related information) ....................................................................................................................... 28(Per share information) .................................................................................................................... 29(Significant subsequent events) ...................................................................................................... 29
6. Non-consolidated Financial Statements ............................................................................................ 30(1) Non-consolidated Balance Sheets.................................................................................................. 30(2) Non-consolidated Statements of Income ....................................................................................... 32(3) Non-consolidated Statements of Changes in Equity.................................................................... 33(4) Notes to the Non-consolidated Financial Statements.................................................................. 35(Notes on going concern assumption).............................................................................................. 35(Significant accounting policies) ...................................................................................................... 35
1

(Additional information) .................................................................................................................. 37(Notes to Non-consolidated Balance Sheets) .................................................................................. 37(Notes to Non-consolidated Statements of Income) ....................................................................... 37(Significant subsequent events) ...................................................................................................... 38
7．Other ................................................................................................................................................... 38(1) Status of production, orders received, and sales (April 1, 2016 to March 31, 2017) ................. 38(2) Changes in Directors and Corporate Auditors (Scheduled for June 29, 2017) .......................... 40

2

1. Operating Results and Financial Position(1) Analysis of Operating Results1) Summary of operating results for the fiscal year under review
During the consolidated fiscal year under review, the Japanese economy saw a moderate recovery trend
against the backdrop of the government’s economic policies, but factors such as concerns over an economic
deceleration in emerging markets such as China, the Brexit, and the policies of a new administration in the
United States led to conditions for which the economic outlook remained uncertain.
In the shipbuilding and maritime industry, the primary industry to which the Company makes its sales,
global completed construction volume for newly-built vessels during the previous year was 66,202 thousand
gross tons, or a 2.1% decrease year-on-year, but order volume for new vessels was 17,966 thousand gross tons,
or a significant decrease of 76.7% year-on-year. Despite signs of a recovery in some maritime indices, anoversupply of shipping tonnage persists, and it is believed that it will take some time for demand for new
shipbuilding to recover.
Under such a corporate environment, the Company advanced active business expansion in line with theobjectives of “Solidification and expansion of existing businesses,” “Growth through expansion of peripheralbusiness domains,” and “Initiatives for future business development in preparation for 100th anniversary”
within its Mid-term Management Plan (April 1, 2015 to March 31, 2019), for which the fiscal year underreview was the second year.
Concerning “Solidification and expansion of existing businesses,” to solidify engine sales, the Company has
developed the new “DE-33” large engine and introduced it to the market in May 2016. Additionally,
preparations are progressing steadily for the new factory in Himeji for large engines, with operations scheduled
to begin in 2018. Furthermore, to establish a cost structure that can endure an appreciation of yen and harshbusiness environment, various projects have been launched and promoted. Among these, the “Production
Reform Project” promotes activities that aim to standardize processes, reduce lead times, and reduce costs, and
it is steadily beginning to take effect.
Concerning “Growth through expansion of peripheral business domains,” the Company is strengthening its
lineup of environmentally-conscious machinery and proposal abilities to advance active entry and expansion
into related business domains. As a result, orders have been strong for a selective catalytic reduction (SCR)
device that conforms to NOx regulations that went into effect from January 2016. Additionally, the Company
advanced sales of products such as its internally developed urea aqueous solution generator, as well as its shipscrubber, developed via an alliance with US-based Belco Technologies Corporation (BELCO), that conforms to
SOx emission controls which will take effect from 2020, increasing its presence as an engine manufacturer withenvironmentally-conscious technologies.
Concerning “Initiatives for future business development in preparation for 100th anniversary,” the Company
is advancing initiatives to (1) establish a growth foundation by improving shareholder value, and (2) restructure
the business portfolio. As a part of these measures, the Company is working to strengthen corporate governanceand enrich dialogue with stakeholders. Additionally, while continuing to bear in mind shareholder returns,
including improving the dividend payout ratio, the Company will engage in management that aims for longterm growth.
As a result, consolidated net sales increased by 3.4% year-on-year to 58,934 million yen, operating profit
decreased by 36.3% year-on-year to 3,498 million yen, ordinary profit decreased by 36.7% year-on-year to
3,441 million yen, and profit attributable to owners of parent decreased by 35.5% year-on-year to 2,319 million
yen.
Performance by business segment of the Company and the consolidated Group are as follows.
<Internal combustion engines>
1. Marine-use
While sales of large engines increased despite a decrease in unit sales centered on mainstay auxiliary power
generators, a deterioration in engine profitability, sluggish maintenance-related sales, and the effects of a3stronger yen resulted in an increase in net sales by 5.1% year-on-year to 46,393 million yen, and a decrease insegment income by 33.6% year-on-year to 4,933 million yen.
2. Land-use
Although engine sales decreased, factors such as an increase in maintenance-related sales caused net sales todecrease by 13.9% year-on-year to 9,014 million yen and segment income to increase by 26.7% year-on-year to714 million yen.
Consequently, including parts sales and maintenance construction, net sales for the segment increased by
1.5% year-on-year to 55,408 million yen, and segment income decreased by 29.4% year-on-year to 5,648
million yen.
<Other>
1. Industrial machinery-related
In the aluminum wheel division, a decrease in new vehicle production and sales owing to a revised
light vehicle tax caused both net sales and segment income to decrease.
2. Real estate leasing-related
In real estate leasing-related, both net sales and segment income increased slightly.
3. Electricity sales-related
In electricity sales-related, both net sales and segment income increased slightly.
4. Precision parts-related
Following the subsidiarization of Nippon Nozzle Seiki Co., Ltd., precision parts-related was newly
added.
Consequently, net sales for the segment increased by 46.0% year-on-year to 3,525 million yen, and segment
income increased by 6.4% year-on-year to 462 million yen.
2) Outlook for the next fiscal year
Concerning the outlook of the Group for the next fiscal year, in the Company’s mainstay marine-use market,
net sales are forecast to increase year-on-year due to higher unit sale prices, owing to factors such as higher
sales of large engines for mega container vessels as continued construction in applications including
automobile carriers and supply boats continues as it did in the previous year, despite an widening gap indemand for bulk carriers causing a significant decrease in orders, due to a decline in the marine cargo market.
Although there are signs of a recovery in marine indices, export ship contracts executed during 2016 were at a
24-year low, due primarily to a pullback from a rush in demand that occurred prior to the strengthening ofenvironmental restrictions and hesitation in orders due to a deterioration in the marine cargo market. As a result,the balance of orders at shipbuilders is decreasing significantly, and combined with other factors such as
instability in exchange rates, newly-built vessel prices are declining and engine sale prices remain low.
Additionally, reorganizations are accelerating in the marine cargo industry and shipbuilding industry,
demonstrated by the respective container business combination of three major marine cargo companies and abasic business partnership agreement between three major shipbuilding corporations, and amid such extremely
uncertain conditions in the sales environment, a harsh business environment is forecast to continue in the future.
Meanwhile, in the land-use market, net sales are forecast to increase year-on-year with the expectation ofsales of large gas turbines and overseas properties due to factors such as a continued movement to installemergency power generation facilities as a facet of business continuity planning (BCP) after the Great East
Japan Earthquake, further affected by the occurrence of the Kumamoto Earthquake in April 2016.
Under such circumstances, the Group will work to provide products that fit customer needs, strengthen pricecompetitiveness via thorough raw material cost reductions and expense cuts, and while responding swiftly andappropriately to changes in the market, work to expand the scale of sales and secure profits.
From the factors outlined above, the financial results forecast of the Group for the next fiscal year is 30,000
million yen in net sales, 400 million yen in operating profit, 300 million yen in ordinary profit, and 100 million
yen in profit attributable to owners of parent for the first half period and 63,000 million yen in net sales, 2,500
million yen in operating profit, 2,400 million yen in ordinary profit, and 1,500 million yen in profit attributableto owners of parent for the full year.
4(2) Analysis of Financial Position
In assets as of the end of the fiscal year under review, notes and accounts receivable - trade decreased by
1,175 million yen from the end of the previous fiscal year while the turnover period of accounts receivable was
101.4 days (compared with 106.6 days at the end of the previous fiscal year). Inventories increased by 278
million yen while the turnover period was 76.1 days (compared with 68.9 days at the end of the previous fiscal
year). Property, plant and equipment increased by 2,416 million yen from the end of the previous fiscal year to
18,563 million yen due to the building of the new Himeji factory and other factors. Total assets as of March 31,2017 amounted to 78,981 million yen, an increase of 3,921 million yen compared with the end of the previous
fiscal year.
In liabilities, notes and accounts payable - trade and electronically recorded obligations in total increased by
236 million yen from the end of the previous fiscal year while their turnover period was 76.5 days (comparedwith 78.6 days at the end of the previous fiscal year). In addition, due to newly procured long-term loans, etc.,
short-term loans payable and long-term loans payable in total increased by 2,809 million yen from the end of
the previous fiscal year to 12,677 million yen, following scheduled repayments. The ratio of interest-bearing
liabilities (excluding lease obligations) to net sales at the end of the current fiscal year was 21.5%, up 4.2 points
from the end of the previous fiscal year. As a result, total liabilities increased by 1,685 million yen from theprevious fiscal year to 42,521 million yen.
(3) Dividend Policy
The Company views the return of profits to shareholders as an important management objective, and while
maintaining internal reserves to improve profitability and strengthen its financial standing, the Company has abasic policy of implementing distribution of profits in accordance with business results, and has placed“enhancing dividend payout ratio” as a target under the Mid-term Management Plan period (April 1, 2015 toMarch 31, 2019).
(4) Business and Other Risks
Forward-looking statements, such as forecasts, anticipation, expectations, and prospects, indicated in thissection reflect the judgment of the Group as of March 31, 2017 and actual results in the future may differ
significantly from them.
1) Foreign exchange risk
For certain products and related parts and services, the Group conducts sales and procurement in regions
other than Japan, and may conduct these transactions in the US dollar, euro, or other local currency, aside fromthe yen. Some overseas consolidated subsidiaries also conduct sales in yen, and concerning these accounts
receivable at the fiscal year-end, foreign exchange losses or gains may occur due to foreign exchange
fluctuation of the standard accounting currency, and it is possible that there may be an effect on business results
or financial conditions.
2) Cash flows
Consolidated net sales of the Group amounted to 58,934 million yen while interest-bearing debt (excluding
lease obligations) was 12,677 million yen. In addition, cash and cash equivalents at the end of the fiscal year
under review increased by 2,836 million yen. This is mainly because of the procurement of long-term loans.
Moving forward, the Group will strengthen cash flow improvement activities, and work toward measures tostrengthen the financial standing through inventory reduction and improvement in transaction conditions, etc.,
but as fund procurement is dependent on indirect financing, variations in financial trends may have an effect on
cash flows.
3) Dependence on technologies of certain suppliers
The Group sources many of the parts that comprise an engine from outside sourcing, and certain key parts
are dependent upon suppliers that possess specific advanced technologies. Concerning these, it is possible thatprocurement may become unstable due to conditions at the suppliers. Additionally, the Group is working
toward continued reduction of procurement costs via measures such as domestic procurement at lower costs

5and seeking new suppliers in countries such as China, but if factors such as a rise in prices for specificmaterials arise, it is possible that cost reductions will not proceed steadily.
4) Legal restraints
Regulations regarding environmental burden reduction are becoming increasingly strict toward diesel
engines, a mainstay product of the Company. In addition to the Air Pollution Control Act for land-use,
restrictions for exhaust gases based on the International Convention for the Prevention of Pollution from Ships
are forecast to add another level of strictness for marine-use. While the Group is working toward productdevelopment to satisfy these restrictions, if delays arise during development, there may be an effect on policies
to secure and expand market share for the Company’s products.
5) Credit risk associated with accounts receivable
The Group possesses accounts receivable toward transaction partners. As a result, amid changes in financial
trends and uncertainty in the economy, the Sales and Transaction Partner Management Committee wasestablished, and countermeasures are in place to prevent occurrence of bad debts and doubtful account losses
by continuously paying close attention to business conditions of credit counterparties. However, there may be
manifestations of collection risk if unforeseen or unavoidable conditions arise due to sudden changes in themarket environment, etc.
6) Risk of natural disasters
The production of the Group’s mainstay diesel engines is concentrated at the Moriyama Factory in
Moriyama City, Shiga Prefecture, and if a large-scale earthquake occurs, production activities may be impacted.
7) Risk of oversea expansion
The economic environment surrounding the marine cargo and vessel markets, which most greatly affect theGroup, is heavily impacted by expansion of emerging markets, particularly the Chinese economy, and if
unforeseen circumstances cause the vessel market in China to shrink and engine production volume at licensees
in China to sharply decrease, there may be discord in the medium-term plan to aim for share expansion for
Daihatsu-branded engines in tandem with Chinese licensee engines.

62. Overview of the Corporate GroupThe Group is comprised of the Company and its 22 subsidiaries and other companies, and engages in thebusinesses such as production and distribution of internal combustion engines and industrial equipment as well as
real estate leasing.
Concerning the industrial equipment business, all deliveries are made to one other associated company.
Businesses and the position of the Company and each subsidiary and associated companies within the relevantbusiness are as follows.

Category

Main Products (Business)

Major Companies
Daihatsu Diesel Mfg. Co., Ltd., DAIHATSU DIESEL EAST JAPANCO., LTD., DAIHATSU DIESEL NAKANIHON CO., LTD.,

Diesel engines for marine-use

DAIHATSU DIESEL SHIKOKU CO., LTD., DAIHATSU DIESEL

Diesel engines for land-use

NISHINIHON CO., LTD.

Gas turbine

DAIHATSU DIESEL (ASIA PACIFIC) PTE. LTD.

Sales of parts for the above

DAIHATSU DIESEL (EUROPE) LTD.
DAIHATSU DIESEL (AMERICA), INC.

Internal Marine-use/
combustion land-use
engines
engines

DAIHATSU DIESEL (SHANGHAI) CO., LTD.
Information handling service

Other

Industrial
equipment
Real estateleasing
Electricity
sales
Precision
parts

DAITEK COMPANY INCORPORATEDTransportation

DS CORPORATIONInternal warehouse management

DAIHATSU DIESEL PARTS SERVICE CO., LTD.,

DesignDD TECHNICAL CO., LTD.*1

Production and distribution

DAIHATSU DIESEL ANQING IRONWORKS.CO., LTD.*2

After-sales service

MD ENGINEERING CO., LTD.*1

Sale of aluminum wheels

Daihatsu Diesel Mfg. Co., Ltd.

Rental office

Daihatsu Diesel Mfg. Co., Ltd., DAIHATSU DIESEL UMEDA
CITY CO., LTD.

Solar power generation businessDaihatsu Diesel Mfg. Co., Ltd.

Precision parts

Nippon Nozzle Seiki Co., Ltd.

(Notes)1. Marked with *1: Non-consolidated subsidiaries
2. Marked with *2: Associated companies
3. Aside from the above, there is a consolidated subsidiary “DAIHATSU DIESEL HIMEJI CO., LTD.” It is not included as thecompany is in business preparation phase.

7

The chart shows the relationship stated above.
Information handlingservice
DAITEK COMPANY
INCORPORATEDSale of internal combustion
engines and parts
9 companies

Transportation
DS CORPORATIONInternal warehousemanagement
DAIHATSU DIESELPARTS SERVICE CO., LTD.
Internal combustion
engines(Marine-use/land-use engines)

After-sales service(Non-consolidated
subsidiary)
MD ENGINEERING CO.,LTD.

Daihatsu Diesel
Mfg. Co., Ltd.

Design(Non-consolidated
subsidiary)
DD TECHNICAL CO., LTD.

Production and distribution(Affiliate)
DAIHATSU DIESELANQINGIRONWORKS.CO., LTD.

Generalcustomers
Rental office
DAIHATSU DIESELUMEDA CITY CO., LTD.
Other
(Real estateleasing-related)
Delivery of aluminum
wheels(Other associatedcompany)
Daihatsu Motor Co., Ltd.

Other
(Industrial
machinery-related)

Other(Power sellingrelated)

DAIHATSUDIESEL UMEDA
CITY CO., LTD.

Other
(Real estateleasing-related)

Nippon Nozzle

Other(Precision partsrelated)

Seiki Co., Ltd.

(Notes)1. DAIHATSU DIESEL UMEDA CITY CO., LTD. partially owns the “Umeda Sky Building,” and is in the rental office business.
2. Aside from the above, there is a consolidated subsidiary “DAIHATSU DIESEL HIMEJI CO., LTD.” It is not included as the company is inbusiness preparation phase.

83. Management Policies(1) Basic Management Policies of the Company
The Company holds as its corporate philosophy, “to strive unstintingly for the betterment of society andsymbiosis with our neighbors, drawing on the bold spirit of creativity and yearning for technologicalachievement we nurture within ourselves.”
Under this corporate philosophy, the Company holds the management policy of “(1) providing new
products and services to satisfy customers, (2) business expansion that is in harmony with the trend ofprotecting the earth environment, and (3) building an energetic and positive-minded corporate environment,
on a strong but flexible management structure which enable the Company to swiftly respond to changes in thebusiness world and secure necessary profits.” By implementing these management policies, each Group
company will expand its business activities in a unified way, and the Group aims for further growth andprosperity as a corporate group that is recognized as a significant presence for all persons that come into
contact with the Company, including customers, shareholders, transaction partners, and employees.
(2) Target Management Indices
To enhance its corporate value, the Group considers that the improvement of the net sales to ordinary
profit ratio and the equity ratio are important.
(3) Medium- and Long-Term Business Strategies and Issues to be Addressed
In the maritime and shipbuilding industry, which is the mainstay market for the Group, demand for ships
undergoes peaks and valleys at around 20 year intervals, and currently, the current supply-demand gap is at an
unprecedented level as resolution for overinvestment from prior to the 2008 global financial crisis fails toprogress, and it is forecast that an extremely harsh business environment will persist. Amid a market wheresuch fluctuations in the market are fierce, the Group recognizes that establishing a structure that cancontinuously grow and expand moving forward through securing continuous sales and profits at a certain levelis its largest management issue. The Company prioritizes the following three strategies in the medium- tolong-term management strategies to resolve such issue.
1. Solidification and expansion of existing businesses
To solidify sales of the Company’s mainstay engines, it will advance product development that meets themarket needs and pursue high-quality, low-cost production with short lead-time. It will clarify priority
markets and strategic goals and promote initiatives for continuous expansion of engine sales while advancing
structural reform including restructuring of the global sales network and after-sales service structure andhuman resource development.
2. Growth through expansion of peripheral business domains
By leveraging the management resources in existing businesses, with respect to businesses such as theenvironment-friendly products business and the accessories business, the Group will advance measures
toward expanding business into new business domains while considering the use of outside resources.
3. Initiatives for future business development in preparation for 100th anniversary
The Company celebrated its 50th anniversary since its founding in May 2016. Toward continuous growthin view of the 100th anniversary, the Company will restructure businesses across the entire group in order toimprove its market value, and advance measures toward transforming into a highly profitable corporation.

94. Basic Stance Concerning Choice of Accounting Standards
Taking into consideration the comparability of consolidated financial statements among companies, theGroup prepares its consolidated financial statements using Japanese GAAP.
With regard to International Financial Reporting Standards, the Group’s policy is to respond appropriately
based on consideration of the situation in Japan and overseas.

10

5. Consolidated Financial Statements(1) Consolidated Balance Sheets(Million yen)
As of March 31, 2016
AssetsCurrent assets
Cash and deposits
Notes and accounts receivable - trade
Inventories
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Non-current assets
Property, plant and equipment
Buildings and structures, net
Machinery, equipment and vehicles, net
LandConstruction in progress
Other, net
Total property, plant and equipment
Intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Total assets

11

As of March 31, 2017

21,412
16,967
12,148
1,873
1,548
(9)
53,94024,302
15,791
12,426
1,852
1,645
(75)
55,942

6,690
3,648
4,403
674
729
16,146
728

6,818
4,045
5,054
1,643
1,001
18,563
1,026

1,715
2
2,048
510
(33)
4,244
21,11975,060

1,094
2
1,846
520
(13)
3,449
23,03978,981

(Million yen)
As of March 31, 2016
Liabilities
Current liabilities
Notes and accounts payable - trade
Electronically recorded obligations - operating
Short-term loans payable
Lease obligations
Income taxes payable
Provision for bonuses
Provision for directors' bonuses
Accrued expenses
Other
Total current liabilities
Non-current liabilities
Long-term loans payable
Lease obligations
Provision for directors' retirement benefits
Net defined benefit liability
Asset retirement obligations
Other
Total non-current liabilities
Total liabilities
Net assets
Shareholders' equity
Capital stock
Capital surplus
Retained earnings
Treasury shares
Total shareholders' equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets

12

As of March 31, 2017

7,941
4,284
6,563
287
1,249
713
85
2,867
3,118
27,110

7,398
5,063
3,991
381
773
684
66
2,378
2,745
23,483

3,304
621
463
6,718
137
2,480
13,72540,836

8,686
824
473
6,379
165
2,509
19,03742,5212,434
2,170
30,275(10)
34,8702,434
2,190
32,101(10)
36,716

205
39
(910)
(665)
19
34,22475,060

248
(5)
6
(550)
(301)
45
36,46078,981

(2) Consolidated Statements of Income and Comprehensive Income
Consolidated Statements of Income(Million yen)
For the fiscal year
ended March 31, 2016
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Selling expenses
General and administrative expenses
Total selling, general and administrative expenses
Operating profit
Non-operating income
Interest income
Dividend income
Fiduciary obligation fee
Reversal of allowance for doubtful accounts
Miscellaneous income
Total non-operating income
Non-operating expenses
Interest expenses
Foreign exchange losses
Miscellaneous loss
Total non-operating expenses
Ordinary profit
Extraordinary income
Gain on sales of non-current assets
Gain on sales of investment securities
State subsidy
Total extraordinary income
Extraordinary losses
Loss on abandonment of non-current assets
Loss on sales of non-current assets
Loss on valuation of golf club membership
Impairment loss
Other
Total extraordinary losses
Profit before income taxes
Income taxes - current
Income taxes - deferred
Total income taxes
ProfitProfit attributable to non-controlling interests
Profit attributable to owners of parent

13

For the fiscal year
ended March 31, 201757,01940,584
16,43558,93444,616
14,317

8,005
2,937
10,942
5,493

8,205
2,613
10,819
3,498

27
30
82
2
77
220

16
16
103
0
53
190

121
113
40
275
5,438

110
117
19
247
3,441

5
7
12

0
69
69

18
0
0
5
1
25
5,425
1,828
(1)
1,827
3,598
1
3,596

66
0
3
69
3,440
1,079
38
1,118
2,322
2
2,319

Consolidated Statements of Comprehensive Income(Million yen)
For the fiscal year
ended March 31, 2016
ProfitOther comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit plans, net of tax
Total other comprehensive income
Comprehensive income
Comprehensive income attributable toComprehensive income attributable to owners ofparentComprehensive income attributable to non-controllinginterests

14

For the fiscal year
ended March 31, 2017

3,598

2,322

(69)
4
(30)
(586)

42
(5)
(32)
359

(681)

364

2,916

2,687

2,915

2,684

1

2

(3) Consolidated Statements of Changes in Equity
For the fiscal year ended March 31, 2016
(Million yen)
Shareholders’ equity
Capital surplus

Retained earnings

Treasury shares

Total shareholders’equity

2,434

2,170

26,933(10)

31,528

2,434

2,170

26,933(10)

31,528

Capital stock
Balance at beginning of current
periodEffect of changes in accounting
standards applied to foreignsubsidiaries
Restated balance reflectingchanges in accounting
policies, etc.
Changes of items during period
Dividends of surplus
Profit attributable to ownersof parent
Change of scope of
consolidation

(254)

(254)

3,596

3,596

Purchase of treasury shares
Change in ownership interestof parent due to transactions
with non-controlling interests
Net changes of items otherthan shareholders' equity
Total changes of items during
periodBalance at end of current
period

(0)

(0)

-

-

3,342

(0)

3,341

2,434

2,170

30,275(10)

34,870

Accumulated other comprehensive income

Balance at beginning ofcurrent period
Effect of changes in accounting
standards applied to foreignsubsidiaries
Restated balance reflectingchanges in accounting
policies, etc.
Changes of items during
periodValuationdifference on
available-forsale securities

Deferred
gains orlosses onhedgesForeigncurrencytranslation
adjustment

Remeasurementsof defined benefit
plans

Total
accumulated
othercomprehensive
incomeNoncontrollinginterests

Total net
assets

275

(4)

69

(324)

15

17

31,562

(9)

275

(4)

60

(9)

(324)

6

(9)

17

Dividends of surplus(254)

Profit attributable toowners of parent
Change of scope of
consolidation

3,596

Purchase of treasury shares
Change in ownershipinterest of parent due totransactions with noncontrolling interests
Net changes of items otherthan shareholders' equity

31,552

(0)

(69)

4

(20)

(586)

(672)

1

(670)

Total changes of items during
period

(69)

4

(20)

(586)

(672)

1

2,671

Balance at end of current
period

205

-

39

(910)

(665)

19

34,22415

For the fiscal year ended March 31, 2017
(Million yen)
Shareholders’ equity
Capital surplus

Retained earnings

Treasury shares

Total shareholders’equity

2,434

2,170

30,275(10)

34,870

2,434

2,170

30,275(10)

34,870Capital stock
Balance at beginning of current
periodEffect of changes in accounting
standards applied to foreignsubsidiaries
Restated balance reflectingchanges in accounting
policies, etc.
Changes of items during period
Dividends of surplus
Profit attributable to ownersof parent
Change of scope of
consolidation

(477)

(477)

2,319

2,319

(16)

(16)

Purchase of treasury shares
Change in ownership interestof parent due to transactions
with non-controlling interests
Net changes of items otherthan shareholders' equity
Total changes of items during
periodBalance at end of current
period

20

20

-

20

1,825

-

1,845

2,434

2,190

32,101(10)

36,716

Accumulated other comprehensive income

Balance at beginning ofcurrent period
Effect of changes inaccounting standards
applied to foreignsubsidiaries
Restated balance reflectingchanges in accounting
policies, etc.
Changes of items during
periodValuationdifference on
available-forsale
securities

Deferred
gains orlosses onhedgesForeigncurrencytranslation
adjustment

Remeasurementsof defined benefit
plans

Total
accumulated
othercomprehensive
incomeNoncontrollinginterests

Total net
assets

205

-

39

(910)

(665)

19

34,224

205

-

39

(910)

(665)

19

34,224

Dividends of surplus(477)

Profit attributable toowners of parent
Change of scope of
consolidation

2,319
(16)

Purchase of treasury shares
Change in ownershipinterest of parent due totransactions with noncontrolling interests
Net changes of items otherthan shareholders' equity

-

20

42

(5)

(32)

359

364

25

390

Total changes of items during
period

42

(5)

(32)

359

364

25

2,236

Balance at end of current
period

248

(5)

6

(550)

(301)

45

36,46016

(4) Consolidated Statements of Cash Flows(Million yen)
For the fiscal year
ended March 31, 2016
Cash flows from operating activities
Profit before income taxes
Depreciation
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in provision for bonuses
Increase (decrease) in provision for directors' bonuses
Increase (decrease) in net defined benefit liability
Increase (decrease) in provision for directors' retirement
benefits
Interest and dividend income
Interest expenses
Loss (gain) on sales of property, plant and equipment
Loss on abandonment of non-current assets
Impairment loss
Decrease (increase) in notes and accounts receivable trade
Decrease (increase) in inventories
Increase (decrease) in notes and accounts payable - trade
Decrease/increase in consumption taxes
receivable/payable
Increase (decrease) in guarantee deposits received
Other, net
SubtotalInterest and dividend income received
Interest expenses paid
Proceeds from compensation
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of intangible assets
Purchase of investment securities
Proceeds from sales of investment securities
Proceeds from redemption of investment securities
Purchase of shares of subsidiaries
Payments of loans receivableCollection of loans receivable
Proceeds from withdrawal of time deposits
Payments into time deposits
Net cash provided by (used in) investing activities

17

For the fiscal year
ended March 31, 2017

5,425
2,152
12
66
25
(328)

3,440
2,489
43
(58)
(25)
(123)

63

(21)

(58)
121
(5)
18
5

(32)
110
(0)
66
-

(776)

1,504

(2,767)
65

(78)
191

576

(266)

(1)
263
4,858
58
(122)
73
(1,430)
3,437

28
(615)
6,651
41
(111)
(1,607)
4,974(2,819)
49
(19)
23
1
(726)
(351)
216
1,183
(812)
(3,256)(3,575)
0
(31)
(20)
1
(5)
0
5,157
(5,254)(3,725)

(Million yen)
For the fiscal year
ended March 31, 2016
Cash flows from financing activities
Increase (decrease) in short-term loans payable
Repayments of finance lease obligations
Proceeds from long-term loans payable
Repayments of long-term loans payable
Payments from changes in ownership interests in
subsidiaries that do not result in change in scope of
consolidation
Purchase of treasury shares
Cash dividends paid
Dividends paid to non-controlling interests
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash
equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Increase in cash and cash equivalents from newly
consolidated subsidiary
Cash and cash equivalents at end of period18

For the fiscal year
ended March 31, 2017

(274)
(980)

(460)
(357)
6,250
(3,291)

-

(0)

(0)
(254)
(1,510)

(477)
(0)
1,661

(105)

(78)

(1,434)22,0402,832
20,606-

4

20,60623,442

(5) Notes to the Consolidated Financial Statements(Notes on going concern assumption)

There is no relevant information.

(Important matters that form the basis for preparing Consolidated Financial Statements)

1. Scope of consolidation(1) Numbers of consolidated subsidiaries: 14
Principal companies:
DAIHATSU DIESEL EAST JAPAN CO., LTD., DAIHATSU DIESEL NISHINIHON CO., LTD.
DAIHATSU DIESEL SHIKOKU CO., LTD., DAIHATSU DIESEL NAKANIHON CO., LTD.,DAIHATSU DIESEL (ASIA PACIFIC) PTE. LTD., DAIHATSU DIESEL (EUROPE) LTD.,DAIHATSU DIESEL (AMERICA), INC., DAIHATSU DIESEL (SHANGHAI) CO., LTD.
(2) Major non-consolidated subsidiaries:
DD TECHNICAL CO., LTD.
MD ENGINEERING CO., LTD.
Reasons for exclusion from scope of consolidation
These companies are excluded from the scope of consolidation as they are small in size and do not havematerial impact on the Consolidated Financial Statements with respect to total assets, net sales, profit or loss
and retained earnings (corresponding to the percentage of shares).
2. Application of the equity method
Major non-consolidated subsidiaries and affiliates not accounted for by the equity method:
DD TECHNICAL CO., LTD.
MD ENGINEERING CO., LTD.
DAIHATSU DIESEL ANQING IRONWORKS.CO., LTD.
Reason for not applying equity method:
As those companies have only minor impact on the consolidated profit (loss) and retained earnings, andtheir overall impact is not material, the investments in these companies are accounted for at cost rather than by
the equity method.
3. Accounting Standards(1) Valuation standards and methods for important assets
A. Securities(a)Held-to-maturity securities
Stated at amortized cost(b)Available-for-sale securities
Fair market values available ………… Stated at fair market value based on the market value,etc. of the closing date
(All valuation gains or losses are treated as acomponent of net assets, and cost of sales is computedby the moving-average method.)
Fair market values not available …… Stated at cost using the moving-average method
B. Inventories
Finished goods/work in process/raw materials
19Stated at cost using the periodic average method (The book value will be written down for decreased
profitability)(2) Depreciation methods for significant depreciable assets
A. Property, plant and equipment (excluding lease assets)
They are depreciated using the straight-line method.
However, certain consolidated subsidiaries use the declining-balance method.
Those acquired on or before March 31, 2007 will be depreciated in equal amounts over the five-year
period beginning with the year following the completion of depreciation to the permissible limit.
B. Intangible assets (excluding lease assets)
They are depreciated using the straight-line method.
Software for internal use is depreciated using the straight-line method based on their estimated useful
lives (5 years).
C. Lease assets
Lease assets under finance leases wherein ownership of the leased asset does not transfer to thelesseeThese assets are depreciated using the straight-line method over respective lease periods without
residual value.
(3) Accounting standards for significant reserves
A. Allowance for doubtful accounts
In order to prepare for probable losses on collection, estimated amount uncollectible is provided for inaccordance with the historical write-off ratio in the case of ordinary receivables and provided against
estimated future losses on collection based on the detailed credit analysis in the case of doubtful accounts
and other specific receivables.
B. Provision for bonuses
To provide for payment of bonuses to employees, provision for bonuses is provided for based on theestimated amount of payments attributable to the current fiscal year.
C. Provision for directors’ bonuses
To provide for payment of bonuses to directors, provision for directors’ bonuses is provided for basedon the estimated amount of payments attributable to the current fiscal year.
D. Provision for directors’ retirement benefits
To prepare for the payment of retirement benefits to directors, the Company and certain consolidated
subsidiaries provide for the amount of year-end payments pursuant to internal rules of retirement benefits
for directors.
(4) Accounting method for retirement benefits
A. Periodic allocation of projected retirement benefits
In calculating projected benefits obligations, periodic allocation of projected retirement benefits up to
the end of current period is based on the benefit formula basis.
B. Method of amortizing actuarial differences and prior service costs
Prior service costs are recorded as expense over a certain number of years within the averageremaining years of service of the corresponding employees at the time of occurrence (10 years) using thestraight-line method.
Actuarial differences are accounted for as expenses over a certain number of years within the averageremaining years of service of the corresponding employees (10 years) using the straight-line method,commencing with the consolidated fiscal year following the one in which they were incurred.
20

(5) Significant hedge accounting
A. Hedge accounting
Deferred hedging is applied. The appropriation procedure is applied to foreign currency receivables andpayables for which forward exchange contracts have been entered.
The special accounting procedure is applied to interest rate swap contracts that qualify for hedge
accounting.
B. Hedging instruments and hedged items
Hedging instruments and hedged items for which hedge accounting was applied for the current fiscal
year are as follows:(a)
Hedging instruments: Forward foreign exchange contracts
Hedged items: Foreign currency trade receivables resulting from product export and future anticipatedtransactions denominated in foreign currency(b)
Hedging instruments: Interest rate swap contracts
Hedged items: Loans payable
C. Hedging policy
The Group conducts derivative transactions to hedge against foreign exchange and interest-rate risks inaccordance with the “Derivative Transaction Handling and Risk Management Regulations.”
D. Evaluation of hedge effectivenessFor forward exchange contract and interest rate swap, the evaluation of hedge effectiveness is omitted
because important conditions for hedge instruments and hedged items are identical, and it can be assumed
that market fluctuations will be completely eliminated at the time hedging begins and at any time
thereafter.
(6) Capital covered by Consolidated Statements of Cash Flows
Capital comprises cash on hand, deposits available for withdrawal as needed, and short-term
investments due for redemption within three months from the date of acquisition, which are easily
cashable and are subject to minimal risk of fluctuation in value.
(7) Other significant matters on presenting Consolidated Financial Statements
Accounting for consumption taxes
Consumption taxes are accounted for by the tax exclusion method.

21

(Changes in accounting policies)

In line with revisions to the Corporation Tax Act, certain consolidated subsidiaries have adopted the“Practical Solution on a change in depreciation method due to Tax Reform 2016” (Practical Issues Task Force(“PITF”) No. 32; June 17, 2016) from the consolidated fiscal year ended March 31, 2017. As a result of the
adoption, the depreciation method for facilities attached to buildings and structures acquired on or after April 1,2016 has been changed from the declining balance method to the straight-line method.
The effect of this change to the consolidated financial statements for the fiscal year under review isimmaterial.
(Additional information)

The Company has applied the “Revised Implementation Guidance on Recoverability of Deferred Tax Assets”(ASBJ Guidance No. 26, March 28, 2016) from the fiscal year under review.
(Notes to Consolidated Balance Sheets)

1. Accumulated depreciation of property, plant and equipment(Million yen)
As of March 31, 2016

As of March 31, 201736,32339,221

As of March 31, 2016

As of March 31, 2017

Accumulated depreciation ofproperty, plant and equipment

2. Investments in non-consolidated subsidiaries(Million yen)
Investment securities (shares)

885

205

3. Pledged assets and secured payables
Assets pledged for foundation mortgage and secured liabilities are as follows.
(Million yen)
As of March 31, 2016

As of March 31, 2017

Pledged assets

2,605

2,480

Secured liabilities- (Note)- (Note)(Note) Revolving mortgage with regards to bank transactions is set for the assets of the above factory foundation. There
are no secured liabilities.

(Notes to Consolidated Statements of Income)

1. Major breakdown of selling, general and administrative expenses
For the fiscal year
ended March 31, 2016

(Million yen)
For the fiscal year
ended March 31, 2017

Salaries/wages/bonuses

3,564

3,361

Provision for bonuses

329

294

Retirement benefit expenses
Provision for directors’ retirement
benefits

234

249

186

111

22

(Notes to Consolidated Statements of Comprehensive Income)

1. Reclassification adjustment and tax effect relating to other comprehensive income(Million yen)
For the fiscal year
ended March 31, 2017

For the fiscal year
ended March 31, 2016
Valuation difference on available-for-salesecurities
Amount incurred during the period
Reclassification adjustment
Before tax effect adjustment
Tax effect
Valuation difference on available-for-salesecurities
Deferred gains or losses on hedges
Amount incurred during the period
Tax effect
Deferred gains or losses on hedges
Foreign currency translation adjustment
Amount incurred during the period
Tax effectForeign currency translation adjustment
Remeasurements of defined benefit plans
Amount incurred during the period
Reclassification adjustment
Before tax effect adjustment
Tax effectRemeasurements of defined benefit plans,
net of tax
Total other comprehensive income

(95)
(7)
(102)
33

59
59
(16)

(69)

42

6
(2)
4

(7)
2
(5)

(30)
(30)

(32)
(32)

(896)
63
(833)
247

362
156
518
(159)

(586)

359

(681)

364

(Notes to Consolidated Statements of Changes in Equity)

For the fiscal year ended March 31, 2016
1. Number of issued shares(Shares)Class of shares

Number of shares at
beginning of period

Common shares

31,850,000

Increase

Number of shares at endof period

Decrease--

31,850,000

2. Number of treasury shares(Shares)Class of shares

Number of shares at
beginning of period

Common shares

15,845

Increase
325

Increase by purchase of shares in less than a share-trading unit.

23

Number of shares at endof period

Decrease-

325 shares

16,1703. Dividends(1) Cash dividends paid
Resolution

Class ofsharesTotal cash
dividends

Dividend
per share

Record date

Effective dateJune 26, 2015
Annual General
Meeting of
Shareholders

Commonshares254
million yen

Ordinary
dividend
8 yen

March 31, 2015

June 29, 2015

(2) Dividends for which the record date falls in the current period, but the effective date falls in the following period
Resolution
June 29, 2016
Annual General
Meeting of
Shareholders

Class ofsharesFunds fordividends

CommonsharesRetainedearnings

Total cash
dividends

Dividend
per share

Record date

Effective date477
million yen

Ordinary
dividend
10 yencommemorative
dividend
5 yen

March 31,2016

June 30, 2016

For the fiscal year ended March 31, 2017
1. Number of issued shares(Shares)Class of shares

Number of shares at
beginning of period

Common shares

31,850,000

Increase

Number of shares at endof period

Decrease--

31,850,000

2. Number of treasury shares(Shares)Class of shares

Number of shares at
beginning of period

Common shares

16,170

Increase

Number of shares at endof period

Decrease-

Increase by purchase of shares in less than a share-trading unit-

16,1700 shares3. Dividends(1) Cash dividends paid
Resolution
June 29, 2016
Annual General
Meeting of
Shareholders

Class ofsharesCommonsharesTotal cash
dividends

Dividend
per share

Record date

Effective date

477 million
yen

Ordinary
dividend
10 yenCommemorati
ve dividend
5 yen

March 31, 2016

June 30, 201624

(2) Dividends for which the record date falls in the current period, but the effective date falls in the following period
Resolution

Class ofsharesFunds fordividends

Total cash
dividends

Dividend
per share

Record date

Effective dateJune 29, 2017
Annual General
Meeting of
Shareholders

CommonsharesRetainedearnings

477
million yen

Ordinary
dividend
15 yenMarch 31,2017

June 30, 2017

(Notes to Consolidated Statements of Cash Flows)

1. Relationship between cash and cash equivalents at the fiscal year end and account items listed in theConsolidated Balance Sheets(Million yen)
For the fiscal year
ended March 31, 2016

For the fiscal year
ended March 31, 2017

21,412

24,302

(806)

(859)

20,60623,442

Cash and deposits
Time deposits with deposit terms of
more than three months
Cash and cash equivalents(Business combinations)
There is no relevant information.

25

(Segment information, etc.)(Segment information)
1. Description of reportable segments
The reportable segments of the Company categorize the business composition of the Company with respect
to financial information and are based on the financial reporting for performance evaluation with regard toannual business plan for each business at periodical meetings of the Board of Directors.
The Company’s main business is the manufacture and sale of internal combustion engines; it also provides
products that are not related to internal combustion engines to certain affiliates, and conducts business toutilize the real estate held by the Company.
The operative conditions of internal combustion engines, which comprise the majority of the Company’sbusiness, are significantly different between marine-use and land-use, and the Company conducts
management and evaluation by categorizing production, sales, and after-sales service business activities forengines into marine-use and land-use.
As a result, the Company’s reportable segments are Marine-use engines and Land-use engines.
2. Information on net sales, profit (loss), assets, liabilities, and other by reportable segment

For the fiscal year ended March 31, 2016
(Million yen)Amountrecorded in
Adjustment Consolidated(Notes) *2
Financial
Statements(Notes)*3

Reportable segment
Marine-use
engines

Land-useengines

Other(Notes)*1

Total

Total

Net sales(1) Net sales to outside
customers

44,12910,47554,6052,414

57,019-57,019

-

-

-

-

-

-

-

44,12910,47554,6052,414

57,019-57,019Segment income

7,431

564

7,995

434

8,430

(2,937)

5,493

Other
Depreciation

1,471

338

1,810

203

2,013

139

2,152

(2) Inter-segment net
sales or transfers
Total(Notes)*1 The “Other” category is a business segment that is not included in reportable segments, and includes the industrial
machinery-related business, the real estate leasing-related business, and the electricity sales-related business.
*2 The adjustment for segment income represents corporate expenses, largely consisting of selling, general andadministrative expenses not attributable to the reportable segments.
*3 Segment income is adjusted with operating profit on the Consolidated Statements of Income.
*4 Assets are not allocated to the business segments.

26

For the fiscal year ended March 31, 2017
(Million yen)Amountrecorded in
Adjustment Consolidated(Notes) *2
Financial
Statements(Notes)*3

Reportable segment
Marine-use
engines

Land-useengines

Other(Notes)*1

Total

Total

Net sales(1) Net sales to outside
customers

46,3939,014

55,4083,525

58,934-58,934

-

-

-

-

-

-

-

46,3939,014

55,4083,525

58,934-58,934

Segment income

4,933

714

5,648

462

6,111

(2,613)

3,498

Other
Depreciation

1,710

329

2,039

312

2,352

136

2,489

(2) Inter-segment net
sales or transfers
Total(Notes)*1 The “Other” category is a business segment that is not included in reportable segments, and includes the industrial
machinery-related business, the real estate leasing-related business, the electricity sales-related business and theprecision parts-related business.
*2 The adjustment for segment income represents corporate expenses, largely consisting of selling, general andadministrative expenses not attributable to the reportable segments.
*3 Segment income is adjusted with operating profit on the Consolidated Statements of Income.
*4 Assets are not allocated to the business segments.

27

(Related information)
For the fiscal year ended March 31, 2016
1. Information by product and service
This is omitted as similar information is disclosed in Segment information.
2. Information by geographical area
1) Net sales(Million yen)

Japan

Asia
Latin America
30,588
19,1342,160(Note) Country and region categories are based on geographic proximity.

Other

Total
5,136

57,0192) Property, plant and equipment

This is omitted as the amount of property, plant and equipment located in Japan exceeds 90% of that stated in
the consolidated balance sheet.
3. Information by major customer
This is omitted as there were no external customers whose net sales account for more than 10% of net sales in
the consolidated statements of income.
For the fiscal year ended March 31, 2017
1. Information by product and service
This is omitted, as similar information is disclosed in Segment information.
2. Information by geographical area
1) Net sales(Million yen)

Japan

Asia
Latin America
29,59722,0582,182(Note) Country and region categories are based on geographic proximity.

Other

Total
5,095

58,9342) Property, plant and equipment

This is omitted as the amount of property, plant and equipment located in Japan exceeds 90% of that stated in the
consolidated balance sheet.
3. Information by major customer
This is omitted because there were no external customers whose net sales account for more than 10% of net sales
in the consolidated statements of income.

28

(Per share information)

For the fiscal year
ended March 31, 2016

Category
Net assets per share
Basic earnings per share

For the fiscal year
ended March 31, 2017

1,074.47 yen

1,143.90 yen

112.98 yen

72.87 yen

(Note) The basis for the calculation of basic earnings per share is as follows.
For the fiscal year
ended March 31, 2016

Category

For the fiscal year
ended March 31, 2017

Basic earnings per share
Profit attributable to owners of parent (Million yen)

3,596

Amount not attributable to shareholders of common shares(Million yen)
Profit attributable to owners of parent relating to common
3,596
shares (Million yen)
Average number of shares of common shares outstanding
31,883,944 shares
during each fiscal year
(Note) Diluted earnings per share are not presented as there is no share outstanding with dilutive effect.

(Significant subsequent events)

Not applicable.

29

2,319
2,319
31,833,830 shares6. Non-consolidated Financial Statements(1) Non-consolidated Balance Sheets(Million yen)
As of March 31, 2016
AssetsCurrent assets
Cash and deposits
Notes receivable - trade
Accounts receivable - trade
Raw materials
Work in process
Prepaid expenses
Deferred tax assets
Short-term loans receivable
Other
Allowance for doubtful accounts
Total current assets
Non-current assets
Property, plant and equipment
Buildings
Structures
Machinery and equipment
VehiclesTools, furniture and fixtures
Land
Construction in progress
Total property, plant and equipment
Intangible assets
Software
Other
Total intangible assets
Investments and other assets
Investment securities
Shares of subsidiaries and associates
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Total assets

30

As of March 31, 201716,963
1,027
15,89480
12,019
133
1,761
1,073
994
(4)
49,945

20,734890
13,932
68
11,854
136
1,799
817
1,233
(4)
51,463

2,086
474
3,597
27
709
4,140
674
11,710

2,030
463
3,572
34
911
4,470
1,641
13,124

706
7
714

980
10
990

813
2,173
2
1,614
261
(28)
4,838
17,262
67,207

872
2,179
2
1,563
244
(8)
4,853
18,96870,431

(Million yen)
As of March 31, 2016
Liabilities
Current liabilities
Notes payable - trade
Accounts payable - trade
Electronically recorded obligations - operating
Short-term loans payable
Current portion of long-term loans payable
Lease obligations
Accounts payable
Accrued expenses
Income taxes payable
Advances received
Deposits received
Provision for bonuses
Provision for directors’ bonuses
Other
Total current liabilities
Non-current liabilities
Long-term loans payable
Lease obligations
Long-term guarantee deposited
Provision for retirement benefits
Provision for directors’ retirement benefits
Asset retirement obligations
Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Capital stock
Capital surplus
Legal capital surplus
Total capital surpluses
Retained earnings
Legal retained earnings
Other retained earnings
Reserve for advanced depreciation of non-current
assetsReserve for special depreciation
General reserve
Retained earnings brought forward
Total other retained earnings
Total retained earnings
Treasury shares
Total shareholders' equity
Valuation and translation adjustments
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Total valuation and translation adjustments
Total net assets
Total liabilities and net assets

31

As of March 31, 2017

1,217
6,564
4,284
3,375
3,188
283
423
2,735
849
829
4,267
596
85
218
28,917

984
5,944
5,067
2,915
1,022
373
207
2,274
427
419
4,496
533
60
458
25,184

3,304
614
10
5,264
412
101
9,707
38,624

8,481
807
10
5,280
376
110
15,06640,250

2,434

2,434

2,150
2,150

2,150
2,150

221

221

114

102

48
19,6003,820
23,58323,805(10)
28,38033
22,7002,308
25,14325,365(10)
29,940202
202
28,583
67,207245(5)240
30,18070,431

(2) Non-consolidated Statements of Income
Non-consolidated Statements of Income(Million yen)
For the fiscal year
ended March 31, 2016
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating profit
Non-operating income
Interest and dividend income
Miscellaneous income
Total non-operating income
Non-operating expenses
Interest expenses
Miscellaneous loss
Total non-operating expenses
Ordinary profit
Extraordinary income
Gain on sales of non-current assets
Gain on sales of investment securities
State subsidy
Total extraordinary income
Extraordinary losses
Loss on abandonment of non-current assets
Other
Total extraordinary losses
Profit before income taxes
Income taxes - current
Income taxes - deferred
Total income taxes
Profit32

For the fiscal year
ended March 31, 2017

50,68939,432
11,257
7,882
3,374

51,612
42,412
9,200
7,754
1,445

1,006
134
1,141

1,136
154
1,290

123
119
242
4,272

107
123
231
2,504

0
7
7

0
69
69

18
1
20
4,260
1,163
(34)
1,129
3,131

55
3
58
2,514
478
(0)
477
2,037

(3) Non-consolidated Statements of Changes in Equity
For the fiscal year ended March 31, 2016
(Million yen)
Shareholders’ equity
Capital surplus

Retained earnings
Other retained earnings

Balance at beginning ofcurrent period
Changes of items during
periodCapital
stock

Legal
capitalsurplus

Total capitalsurplusLegalretainedearnings

2,434

2,150

2,150

221

Reserve foradvanced
Reserve fordepreciation
specialof nondepreciation
current
assets120

62

Generalreserve

Retainedearnings
brought
forwardTotal
retainedearnings

17,0003,523

20,929

(254)

(254)

(2,600)

-

15

-

8

-

(3)

-

3,131

3,131

Dividends of surplus
Provision of generalreserve
Reversal of reserve for
special depreciation
Reversal of reserve foradvanced depreciationof non-current assets
Adjustment to reserve
due to change in tax rate

2,600
(15)
(8)
2

1

ProfitPurchase of treasury
sharesNet changes of items
other than shareholders'equityTotal changes of items
during period
Balance at end of current
period

-

-

-

-

(6)

(14)

2,600

296

2,876

2,434

2,150

2,150

221

114

48

19,6003,820

23,805

Shareholders’ equity

TreasurysharesBalance at beginning ofcurrent period
Changes of items during
period(10)

Dividends of surplus
Provision of generalreserve
Reversal of reserve for
special depreciation
Reversal of reserve foradvanced depreciationof non-current assets
Adjustment to reserve
due to change in tax rate
ProfitPurchase of treasury
sharesNet changes of items
other than shareholders'equityTotal changes of items
during period
Balance at end of current
period(0)

Valuation and translation adjustments

Valuation
Total
difference onshareholders’ available-forequity
sale
securities

25,504

270

Deferred
gains orlosses onhedgesTotalvaluation andtranslation
adjustments

Total net
assets(4)266

25,770

(254)

(254)

-

-

-

-

-

-

-

-

3,131

3,131

(0)

(0)
(68)

4

(63)

(63)

(0)

2,876

(68)

4

(63)

2,812

(10)

28,380

202

-

202

28,58333

For the fiscal year ended March 31, 2017
(Million yen)
Shareholders’ equity
Capital surplus

Retained earnings
Other retained earnings

Balance at beginning ofcurrent period
Changes of items during
periodCapital
stock

Legal
capitalsurplus

Total capitalsurplusLegalretainedearnings

2,434

2,150

2,150

221

Reserve foradvanced
Reserve fordepreciation
specialof nondepreciation
current
assets
114

48

Generalreserve

Retainedearnings
brought
forwardTotal
retainedearnings

19,6003,820

23,805

(477)

(477)

(3,100)

-

15

-

12

-

Dividends of surplus
Provision of generalreserve
Reversal of reserve for
special depreciation
Reversal of reserve foradvanced depreciationof non-current assets
Adjustment to reserve
due to change in tax rate

3,100
(15)
(12)

-

ProfitPurchase of treasury
sharesNet changes of items
other than shareholders'equityTotal changes of items
during period
Balance at end of current
period

2,037

-

-

-

-

(12)

(15)

3,100

(1,512)

1,559

2,434

2,150

2,150

221

102

33

22,7002,308

25,365

Shareholders’ equity(10)

Dividends of surplus
Provision of generalreserve
Reversal of reserve for
special depreciation
Reversal of reserve foradvanced depreciationof non-current assets
Adjustment to reserve
due to change in tax rate
ProfitPurchase of treasury
sharesNet changes of items
other than shareholders'equityTotal changes of items
during period
Balance at end of current
periodValuation and translation adjustments

Valuation
Total
difference onshareholders’ available-forequity
sale
securities

TreasurysharesBalance at beginning ofcurrent period
Changes of items during
period2,037

28,380

Deferred
gains orlosses onhedges

202

-

Total
valuation andtranslation
adjustments

Total net
assets202

28,583

(477)

(477)

-

-

-

-

-

-

-

-

2,037

2,037

-

-

-

42

(5)

37

37

-

1,559

42

(5)

37

1,597

(10)

29,940

245

(5)

240

30,18034

(4) Notes to the Non-consolidated Financial Statements(Notes on going concern assumption)
Not applicable.

(Significant accounting policies)
1. Valuation standards and methods for securities(1) Investments in subsidiaries and affiliates………Stated at cost using the moving-average method(2) Held-to-maturity securities………Stated at amortized cost(3) Available-for-sale securities
Fair market values available ………… Stated at fair market value based on the market value,etc. of the closing date
(All valuation gains or losses are treated as acomponent of net assets, and cost of sales is computedby the moving-average method.)
Fair market values not available …… Stated at cost using the moving-average method
2. Valuation standards and methods for inventories
Work in process/raw materials………Stated at cost using the periodic average method (The book value will be written down for decreased
profitability)
3. Depreciation methods for non-current assets(1) Property, plant and equipment (excluding leased assets)
They are depreciated using the straight-line method.
Those acquired on or before March 31, 2007 will be depreciated in equal amounts over the five-year period
beginning with the year following the completion of depreciation to the permissible limit.
(2) Intangible assets (excluding leased assets)
They are amortized using the straight-line method.
Software for internal use is depreciated under the straight-line method based on their estimated useful lives(5 years).
(3) Leased assets
Lease assets under finance leases wherein ownership of the leased asset does not transfer to the lessee
These assets are depreciated using the straight-line method over respective lease periods without residual
value.
4. Accounting standards for reserves(1) Allowance for doubtful accounts
In order to prepare for probable losses on collection, estimated amount uncollectible is provided for inaccordance with the historical write-off ratio in the case of ordinary receivables and provided against
estimated future losses on collection based on the detailed credit analysis in the case of doubtful accounts andother specific receivables.

35

(2) Provision for bonuses
To provide for payment of bonuses to employees, provision for bonuses is provided for based on theestimated amount of payments attributable to the current fiscal year.
(3) Provision for directors’ bonuses
To provide for payment of bonuses to directors, provision for directors’ bonuses is provided for based on theestimated amount of payments attributable to the current fiscal year.
(4) Provision for retirement benefits
In order to prepare for payments of employees' retirement benefits, the amount deemed accrued at the end of
the current fiscal year is provided for, based on the projected retirement benefit obligation at that time.
A. Periodic allocation of projected retirement benefits
In calculating projected benefits obligations, periodic allocation of projected retirement benefits up to theend of the current fiscal year is based on the benefit formula basis.
B. Method of amortizing actuarial differences and prior service costs
Prior service costs are recorded as expense over a certain number of years within the average remaining
years of service of the corresponding employees at the time of occurrence (10 years) using the straight-line
method.
Actuarial differences are accounted for as expenses over a certain number of years within the averageremaining years of service of the corresponding employees (10 years) using the straight-line method,commencing with the consolidated fiscal year following the one in which they were incurred.
(5) Provision for directors’ retirement benefits
To prepare for the payment of retirement benefits to directors, the amount of year-end payments pursuant tointernal rules of retirement benefits for directors is provided for.
5. Hedge accounting(1) Hedge accounting
Deferred hedging is applied.
The appropriation procedure is applied to foreign currency receivables and payables for which forward
exchange contracts have been entered.
Special accounting procedures are applied to interest rate swap contracts that qualify for hedge accounting.
(2) Hedging instruments and hedged items
Hedging instruments and hedged items for which hedge accounting was applied for the year under review
are as follows:(a)
Hedging instruments: Forward foreign exchange contracts
Hedged items: Foreign currency trade receivables resulting from product export and future anticipatedtransactions denominated in foreign currency(b)
Hedging instruments: Interest rate swap contracts
Hedged items: Loans payable(3) Hedging policy
The Company conducts derivative transactions to hedge against foreign exchange and interest-rate risks inaccordance with the “Derivative Transaction Handling and Risk Management Regulations.”36

(4) Evaluation of hedge effectivenessFor forward exchange contract and interest rate swap, the evaluation of hedge effectiveness is omitted
because important conditions for hedge instruments and hedged items are identical, and it can be assumed thatmarket fluctuations will be completely eliminated at the time hedging begins and at any time thereafter.
6. Other significant matters on presenting Non-consolidated Financial Statements(1) Accounting method for retirement benefits
The accounting treatment for the balance of unrecognized actuarial differences and unrecognized past
service costs for retirement benefits is different from the treatment for these items in the consolidated financial
statements.
(2) Accounting for consumption taxes
Consumption taxes are accounted for by the tax exclusion method.

(Additional information)
The Company applied the “Revised Implementation Guidance on Recoverability of Deferred Tax Assets”(Accounting Standards Board of Japan (ASBJ) Guidance No. 26; March 28, 2016) from the fiscal year underreview.
(Notes to Non-consolidated Balance Sheets)
1. Pledged assets and secured payables
Assets pledged for foundation mortgage and secured liabilities are as follows:(Million yen)
As of March 31, 2016
Pledged assets
Payables to said assets

As of March 31, 2017

2,605

2,480

- (Note)- (Note)(Note) Revolving mortgage with regards to bank transactions is set for the assets of the above factory

foundation. There are no secured liabilities.
2. Balance with subsidiaries and associates
The amounts included in each item other than those listed separately are as follows:(Million yen)
As of March 31, 2016

As of March 31, 2017

Short-term monetary assets

13,507

10,612

Short-term monetary liabilities

6,080

5,786

(Notes to Non-consolidated Statements of Income)1. Transactions with subsidiaries and associates

Sales to subsidiaries and associates
Purchases from subsidiaries andassociates
Non-operational transactions withsubsidiaries and associates

For the fiscal year
ended March 31, 2016
39,392

37(Million yen)
For the fiscal year
ended March 31, 201737,396

5,376

5,586

59

32

(Significant subsequent events)
Not applicable.

7．Other(1) Status of production, orders received, and sales (April 1, 2016 to March 31, 2017)
1) Production
Production by segment for the current fiscal year is as follows:(Million yen)Segment

VolumeAmountYear-on-year change

Horsepower%

Internal combustion engines
Marine-use engines

1,368,640

46,393

5.1

Land-use engines

85,6249,014(13.9)

-

2,879

62.1

58,287

3.4

Other
Total
(Notes)*1 Amounts are based on sales prices.
*2 The figures above do not include consumption taxes.

2) Orders received
Orders by segment for the current fiscal year are as follows:(Million yen)Order received
Segment

VolumeAmountHorsepower

Order backlogs
Year-on-yearchange%Horsepower(22.0)

1,697,474

1.9

93,05871.1-

VolumeAmountYear-on-yearchange%Internal combustion engine
Marine-use engines

1,066,783

Land-use engines

88,239

Other

Total

40,168[22,045]
10,469
[794]
2,989
[-]
53,627[22,839](15.5)

31,497[16,504]
5,194
[213]
604
[-]
37,296[16,717](16.5)
38.9
482.6(10.3)(Notes)*1 Amounts are based on sales prices.
*2 Figures in brackets [ ] indicate export orders received and the balance of export orders outstanding, and areincluded in totals.
*3 The figures above do not include consumption taxes.

383) Sales results
Sales by segment for the current fiscal year are as follows:
Segment

VolumeHorsepower

AmountExport ratio%(Million yen)
Year-on-year change%Internal combustion engine
Marine-use engines

1,368,640

Land-use engines

85,624

Other

46,393[28,742]
9,014
[594]
3,525
[-]
58,934[29,336]

Total

62.0

5.1

6.6

(13.9)

-

46.0

49.8

3.4

(Notes)*1 Figures in brackets [ ] indicate export volume, and are included in totals.
*2 Major export destinations and compositions are as follows:
Asia (75.2%), Europe (13.6%), Latin America (7.4%), North America (3.2%), Others (0.6%)*3 The “Other” segment includes precision parts-related (1,558 million yen), industrial machinery-related (1,320
million yen) and real estate leasing-related (646 million yen).
*4 The figures above do not include consumption taxes.

39

(2) Changes in Directors and Corporate Auditors (Scheduled for June 29, 2017)
1. Candidates for new Directors
Yoshinobu Hotta(Current position: Plant Manager, Moriyama Factory, Production and Purchasing
Management Division)
2. Candidates for new Statutory Auditors
Norihide Bessho(Current position: Senior Managing Executive Officer, Daihatsu Motor Co., Ltd.)
Kenji Arakawa(Current position: Managing Director, METALART CORPORATION)
3. Directors scheduled to retire
Hiroaki Iwabe(Current position: Senior Managing Director)
4. Statutory Auditors scheduled to retire
Hisashi Mori
(Current position: Standing Statutory Auditor)
Kunihiko Morita(Current position: Outside Statutory Auditor
Current position: Standing Statutory Auditor, Daihatsu Motor Co., Ltd.)
Yasuhiko Sugino(Current position: Outside Statutory Auditor
Current position: Director, METALART CORPORATION)

5. Appointment scheduled at the Board of Directors meeting to be held after the conclusion of the Annual General
Meeting of Shareholders
Managing Director
Takashi Iida
(Current position: Director)

40