Financial Results Briefing
Fiscal 2017
(Ended May 31, 2018)

July 13, 2018
Toyo Denki Seizo K.K.

ProgramBriefing on Financial Results: 25 minutes
1. Overview of Financial Results for Fiscal Year
ended in May 2018
2. Outlook for Financial Results for Fiscal Yearending in May 2019
3. About New Medium-term Management Plan
“Revitalize 2020”

Q&A: 30 minutes

1. Overview of Financial Results forFiscal Year ended in May 2018
(From June 2017 to May 2018)

1-1. Overview of Consolidated Financial Results
Net sales increased, but profits declined due to the impact of some projects intransportation and industrial systems.
100 million yen

2017.52018.5YoY Change(%)

Publishedvalue

Published value ratio(%)

Net Sales

406.6

425.2

＋ 18.6

+4.6%

410.0

+15.2

+3.7%

Operating Income

15.7

3.6

-12.1

-76.7%

13.0-9.4-72.3%(%)(3.9%)(0.9%)(-3.0%)−(3.2%)(-2.3%)

Ordinary Income

16.6

5.1

-11.5

-69.0%

14.5-9.4-64.8%

Net Income

11.7

6.9

-4.8

-41.0%

15.0-8.1-54.0%[Net income per share(y en)]123.8773.33-50.54−

158.24-84.91

−

ROE

4.9%

2.7%

-2.2%

−

Orders received

433.5

395.9

-37.6

-8.7%

Ratio of overseas
sales to net sales

31.1%

25.3%

-5.8%

−

−

*Reference value (plan)

460.0

-64.1

-13.9%

3

<Reference> Changes in consolidated orders received and net sales
Net sales have been on an upward trend since 2013 when there was adecline in business in China.
Net sales 425(100 million yen)

500

Orders received 395

450
400
350
300
250
200

150
100
50
09/5

10/5 11/5 12/5 13/5 14/5 15/5 16/5 17/5 18/5Net Sales

Orders received

4

<Reference> Changes in investment gain on equity method
Changes in “Net sales” and “Investment gain on equity method, etc.” of threecompanies under equity method (in China).
Investment gain on equity method, etc.
--Line graph

Net Sales■ Bar graph

50

5.0

(100 millionyen)(100 millionyen)

40

4.0

30

3.0

20

2.0

10

1.00

0.0
09/5 10/5 11/5 12/5 13/5 14/5 15/5 16/5 17/5 18/5
Net Sales

Investment gain on equity method, etc.
(Including dividends, technology transfer fees, etc.)51-2. Factors for increase and decrease in operating income (YoY change)
Various challenges occurred in the 157th term, and the operating incomedecreased drastically.

Effect ofincrease inrevenue+240 million yen

Deterioration in
profitability-1,330 million yen<Transportation>• Additional costs of engineering expenses in overseas
projects were processed in this term.
• Delivery of Chinese high-speed railway project waspostponed.
• Expenses to compensate for shortage of operations in thefirst half increased.
<Industry>• Depreciation of Ryuo new plant occurred ahead of schedule.
• Launching of new facilities at Ryuo new plant delayed.
• Net sales of the projects whose orders were received with alow gross margin rate in the previous term were recorded inthis term.
• Cost control of machine parts of automobile testing machine
was inadequate.

<Fiscal year ended
in May 2017>

1,570 million yen

Decrease in profit ofsubsidiaries, etc. <Fiscal year ended-120 million yen
in May 2018>
360 million yen

YoY Change-1,210 million yen
6<Reference> Changes in depreciation and amortization expenses
New mission-critical system is to be in operation from this term.
Depreciation expenses of Ryuo partially occurred ahead of schedule in this term, and will
become full-fledged from next term.
(100 million yen)

Forecast of changes in depreciation expenses(related to restructuring of production system).
Hovering at a high levelof 900 to 1,000 millionyen.

12.00
10.00

The depreciation
burden is heavy in 2020
as well as 2019.

8.00

6.00
4.00
2.00
0.00
17/5

18/5

(Result)(Result)

19/5

20/5

Matters related to Yokohama
Matters related to Ryuo

21/5

22/5

23/5

Mission-critical system7

1-3. Details in non-operating profit and loss, and extraordinary profit
and loss.
The sales of part of marketable securities will be advanced to make effective useof funds.

<Breakdown of extraordinary
earnings and expenses>• Investment
securities
Gain on sale+800 million yen<Breakdown of non-operating
earnings and expenses>• Dividend income+230 million yen• Investment gain on equity
method+110 million yen• Other+100 million yen

360 millionyen
Operating Income• Plant integration
cost-330 million yen• Interest expense,
etc.
-240 million yen• Other-60 million yen

510 million
yen
Ordinary Income

960 million
yenIncome before
income taxes
81-4. Segment Performance Transportation Services
Incorporating strong domestic demand, net sales were on a par with the previous year, butthere was a decrease in profit due partially to the impact of overseas projects.
 Net sales and Segment income

300

250

267.5

281.9

279.4

Net sales

29.6

50 30030.7Segment
income25.710030(100 million yen)

293.6
270.9

258.6

Ordersreceived

40 250 Order200150 Orders received and Order backlog

245.5
backlog
200258.3

237.5

15020100
105000Fiscal year
ended in May
2016

Fiscal year
ended in May
2017

Fiscal year
ended in May
2018

500
Fiscal year ended Fiscal year ended Fiscal year ended
in May 2016
in May 2017
in May 2018

• Orders received for Chinese high-speed railway increased, but domestic orders receiveddecreased.
• Net sales greatly declined as Chinese high-speed railway was switching its train model types.
• Segment income declined due to the increase in engineering expenses in some overseasprojects.

91-5. Segment Performance Industrial Services
Despite robust net sales, a substantial decrease in profit occurred due to the increase in costs ofsome projects and the decline in the operating rate caused by the new plant relocation.
 Net sales and Segment income

140120100120.2
Net Sales Orders received and Order backlog (100 million yen)

14 140
110.7

117.6

80
7.4

880

660

40Segment
income

44020

2.7

2

20

0

00
Fiscal year
ended in May
2016

114.2

121.9

113.0

10 10010.16012 120Ordersreceived

Fiscal year
ended in May2017

Fiscal yearended in May2018

Order backlog

71.5
60.2

66.9

Fiscal year ended Fiscal year ended Fiscal year ended
in May 2016
in May 2017
in May 2018

Outline of measures for improvement(1) Improvement of profitability (new project)(2) Strengthening of supply chain (testing machine, etc.)(3) Unified management of processes (from sales to shipment)

101-6. Segment Performance Information Equipment Services
Large-sized station equipment projects contributed to net sales.
 Net sales and Segment income

 Orders received and Order backlog (100 million yen)

28.0302582015106

13.8
Net9.5
Sales

5010 30

Segment
income

3.0

3.1

0.9

20

Ordersreceived

42

17.8

13.6

150

Fiscal year endedFiscal year endedFiscal year ended
in May 2016
in May 2017
in May 2018

24.1

25

105 Order0

5.1

backlog

9.1

5.2

Fiscal year ended Fiscal year ended Fiscal year ended
in May 2016
in May 2017
in May 2018

• New-type composite ticketing machine
greatly contributed to performance.
111-7. Consolidated Financial Position
Measures aiming to rebuild production system made progress.
100 million yen
22015 June300May31, 2018
15YoY Change

549637+88

Current assets

257291+34 Raw materials, etc.+10

Fixed assets

291345+54 Softw are+7 (new mission-critical system)

Total liabilities

303

374+71117

161+44 Matters related to Shiga Ryuo new plant246

263+17 Unrealized gain (loss) on available-for-sale securities+12

44.8%

41.3%

May 31, 2017

Total Assets

Of which, interestbearing debt

Net Assets
Shareholders’ Equity
Ratio (%)

Main increase and decrease factors

Accounts receivables+17

Tangible fixed assets+35(Shiga Ryuo new plant)

Retained earnings+4-3.5%

122. Outlook for Financial Results for Fiscal
Year ending in May 2019

2-1. Forecast of financial results (whole company)
Expecting net sales of 42.5 billion yen and orders received of 40.9
billion yen.
100 million yen
FY ended in May 2018
(Result)

2Q

Full year

FY ending in May 2019
(Forecast)

2Q

Full year

YoY Change

Full year

Net Sales

186.6

425.2

190.0

425.0

-0.2

Operating Income

-2.3

3.6

-2.7

5.0

+1.4

(0.9%)(%)(1.2%)

Ordinary Income

0.5

5.1

-1.5

7.0+1.9

Net Income

2.6

6.9-1.5

5.0-1.9[Net income per share (yen)]

27.12

73.33

-15.8852.95-20.3850.0

Dividend per share (yen)Orders received
Order backlog at the end offiscal year

197.5

395.9

30.0
211.0

409.0

+13.1

309.7
14

2-2. Forecast of financial results (by segment)
100 million yen
Transportation

130.0

15.0

Segment income

25.0

6.8

2.3

Orders received

270.0

130.0

9.0

+0.6

+12.3

-13.0

Segment income

0.0

+4.1

0.0

Orders received

+11.4

+17.0

-15.1

Net Sales

YoY Change

Information
Equipment

280.0

Net Sales2019.5
forecast(Full year)

Industry15

2-3. Conceptual image of improvement in operating income(consolidated)
The increase in depreciation expenses was expected, but gross marginand plant profitability were improved.
Increase indepreciation
expenses-200 million yen
Decrease in profit
of subsidiaries, etc.
-60 million yen

Improvement ofprofitability+400 million yen<Fiscal year ended
in May 2018>

360 millionyen• Review of production line of transportation systems.
 Introduction of new equipment to eliminate thebottleneck of processes.
• Improvement of operating rate by establishing new
mission-critical system.
• Improvement of operating rate at the Ryuo new plant.
• Resurgence of Chinese projects in Transportation
Systems.
• Improvement of profitability of new projects in IndustrialSystems.
• Review of supply chain of automobile testing machine.

<Fiscal year endingin May 2019>

500 millionyen
YoY Change+140 million yen
16

3. About New Medium-termManagement Plan “Revitalize 2020”

3-1. Review of Previous Medium-term Management Plan
Although strengthening of management foundation was actualized, there still remainchallenges for speedy management regarding improvement of profitability and productdevelopment.

 Main achievements

Launching of full-fledged
operations at Shiga Ryuo
manufacturing plant.

Made Yangdian Zhanyun asubsidiary and established
Chengdu Yonggui Toyo Rolling
Stock Equipment Co., Ltd.

Development of dynamo
with 20,000 rotations.

 Challenges(1) To secure suppliers with excellent quality and cost.
(2) To secure sufficient gross margin at the time of receiving orders.
(3) To develop products in a timely way.

18

3-2. Basic policy
To enhance "Power to produce," "Power to sell," and "Power of organization" andto strengthen "Power to earn" through the relevant synergistic effect.
Cooperation with othermanufacturers.
To develop products
in a timely way.

Affiliated companies inChina (six companies)[Transportation]

VI Fostering human resources that will play important roles in the future.

Improvement of operating rate at
Shiga Ryuo manufacturing plant.

[Defense]

Strengthening ofprocess management
Reduction of fixedcosts

Power oforganizationx

IV Building a stable businessearnings structure.

Power toproduce

V Improving thefoundation for expansionof production capacity.

=Power to earn

Review of business strategy
according to development
situation of partner country.

x[Information]

II Expanding businessdomains by making fulluse of core technologies.

Power tosell

I Expanding overseas business.

III Promoting technologicaldevelopment in anticipation ofmarket needs.

[Industry][Attack]Rebuilding of productionlines at Yokohama
manufacturing plant.

19

3-3. Business environment surrounding the Company (in China)
Chinese market

The Company

High-speed railway
Investment gainon equity method

Driving gearunits<Reference> Number of train cars of Beijing Subway
electric equipment maintenance (prospect)
Chinesecompany FJapanesecompany B

Overseascompany EJapanesecompany A

Overseascompany D

Overseascompany C

Switching ofstandard trains

Affiliated companies inChina (six companies)

The Company

Urban railway
Demand formaintenanceand renewal20

3-3. Business environment surrounding the Company (Industry) Business opportunities in China and ASEAN(Guidelines on China Manufacturing 2025)(1) Energy saving(2) Progress of urbanization
 Capacity increase of processing machinery equipment(3) Sophistication of economy and industry
 Increase in demand for power
The Company
generation and power supply

Development of products
corresponding to themarkets in China andASEAN.

213-4. Major measures (1)1. Expanding overseas business
i.
ii.
iii.

Review of business strategy according to development situation ofeconomy and technology of partner country.
Expansion of new business of industrial systems in Southeast Asia.
Strategic participation in new urban transport project.

Expansion of maintenancebusiness with Beijing Jingche
Shuangyang.
Product development to SoutheastAsia.

Expansion of local production ofpantograph.

2. Expanding business domains by making full use of core technologies
i.

ii.
iii.

Promotion of commercialization focusing on business prospects andmarket trends.
Development of new business based on latest technological innovation
results.
Expansion of business domains utilizing alliances and M&A.
Development of flat-type dynamo
for automatic operation vehicle
22
evaluation.

3-4. Major measures (2)3. Promoting technological development in anticipation of market needsi.
ii.

Timely product development by strengthening market analysis
capabilities.
Establishment of new production technology for core parts(products).

Development of electrical equipment for railway vehicles.

Research and development on
wireless power supply whiledriving.

4. Building a stable business earnings structurei.
ii.

Cost reduction for improving business profitability.
Enhancement of collaboration of sales and factory system through companywide
activities.
iii. Promotion of group management focusing on "Power to earn."a) Promotion of "selection and concentration" throughout the group.
b) Building a group-wide sales and production system.
23

3-4. Major measures (3)5. Improving the foundation for expansion of production capacityi.

Strengthening process management by maximizing the functions of the mission-criticalsystem and building optimal production lines.
ii. Expansion of production capacity by restructuring production lines(Yokohama manufacturing plant).
iii. Improvement of operating rate of new production lines(Shiga Ryuo manufacturing plant).
iv. Rebuilding the supply chain.
v. Raising the level of BCP (Business continuity plan).
Utilizing TDS (Automaticwarehouse system).

6. Fostering human resources that will play important roles in the futurei.

Establishment and implementation of personnel rotation system
for activating organization.
ii. Strengthening the fostering of next-generation executives andoverseas workers.
iii. Fostering young management-level employees who shall become
key executives of the organization as early as possible.
Review of education byhierarchy.

24

3-4. Major measures (4)7. Promotion of ESG
i.
ii.
iii.

Promoting efforts to reduce environmental burden associated with business activities.
Promotion of reforms in the way of working.
Enhancement of corporate governance.

 Adding indicators of management numerical targets for the fiscal
year ending May 2022.
(1) Investment gain on equity method
 To achieve “400 million yen” by expanding overseas business.
(2) ROE (Return on equity)
 To achieve “5%” by building a stable business earnings
structure.
(3) Payout ratio To aim to achieve "30%" in order to realize stable shareholder
returns.

25

3-5. Management numerical targets (consolidated)
To achieve consolidated operating income of 2 billion yen in the fiscal
year ending May 2022.
(100 million yen, %)FY ended in May 2018
(Result)

FY ending in May 2020
(Plan)FY ending in May 2022
(Plan)Net Sales

425.27430

Over 470

Operating Income

Net Income

3.66(0.9%)
5.15
6.92

9(2.1%)
11720(4.3%)
2416

Investment gain on equity
method

1.16

1.2

4.0

ROE
(Net Income to Shareholders’Equity Ratio)

2.7%

3.3%

5.0%

Payout ratio

68.2%

30.0%

30.0%

Transportation Systems

279.63290

310

Industrial Systems

117.71

130

150

Information Equipment Systems

28.01

1010

(Operating margin ratio)
Ordinary Income<Net sales by segment>

26

<Reference> Topics (1)Development of flat-type dynamo for automatic operation
vehicle evaluation.

Conceptual image of
conventional testing machine.
Holding dynamo inthe part of tire wheel.
Newly developed dynamo
27

<Reference> Topics (2)Continuing research and development on wireless in-wheel motor, power
supply while driving, and the like.

Research and development on wireless power
supply while driving.

28

<Reference> Topics (3)Development of dynamo with 20,000 rotations.

Developed the dynamo with 20,000 rotations aiming to have it
installed in testing machines for automobile development
compatible with EV and automatic driving.
29

Thank you for your interest.
https://www.toyodenki.co.jp<Inquiries>
PR, IR, and CSR Department, Management Planning Division
Toyo Denki Seizo K.K.
Phone: 03-5202-8122
Email：contact@toyodenki.co.jp

Disclaimer• Statements concerning financial results forecasts are based ondata available as of the date of publication of this material andassumptions concerning the elements of uncertainty that willaffect future business performance as of the date of publicationof this material. Actual financial results may differ depending on
a variety of factors.
• Forward-looking statements contained in this material are thejudgments of the Toyo Denki Group based on data available atthe time of publication of this material. Such statements anddescriptions are by no means comprehensive.