Financial Results Briefing
First Half of Fiscal 2018
(Ended November 30, 2018)

January 11, 2019
Toyo Denki Seizo K.K.

Program◼ Briefing on Financial Results: 25 minutes
1. Overview of Financial Results for the First Half ofFiscal 2018
2. Consolidated Earnings Forecasts for Fiscal YearEnding May 31, 2019
3. Current Status of the Medium-Term ManagementPlan◼ Q&A: 30 minutes1

1. Overview of Financial Results for
the First Half of Fiscal 2018
(June 1–November 30, 2018)

1-1.Overview of Consolidated Financial Results
Net sales increased in all business segments. Operating income
also improved and exceeded the plan announced.
1HFY2017

1HFY2018

100 million yen
YoY Change(%)

Publishedvaluevalue

Published value ratio(%)

Net sales

186.5

196.3

+9.8

+5.3%

190.0+6.3+3.3%

Operating income-2.3-1.2+1.1—-2.7+1.5—(%)(-1.2%)(-0.6%)(+0.6%)(-1.4%)(+0.8%)

Ordinaryincome

0.4

-0.2

-0.6

—

-1.5+1.3—

Net income

2.5

1.4

-1.1

-44.0%-1.5+2.9—[Net income per share(yen)]

27.12

15.62-11.50—-15.88+31.5—Orders received

197.4

192.1

-5.2

-2.7%

211.0

-18.9

-9.0%

Ratio of overseas
sales to net sales

28.2%

22.9%

-5.3%

3

1-2. Factors for Increase and Decrease in Operating Income (YoYChange)

Higher revenues and cost cuts resulted in YoY improvement.
<1H/FY2018><1H/FY2017>

Increase in revenues /change in gross margin+¥270 million

Change in plant profitability(Depreciation andamortization, etc.)-¥380 million

Change in selling,
general &administrative
expenses+¥280 million

Decrease in subsidiary profits(Increase in relocation
expenses, rent expenses, etc.)-¥60 million-¥120 million-¥230 million

Higher revenues, improved
profitability and cuts in SGA
expenses absorbed the depreciation
burden in the industrial systems
segment (Ryuo: -¥250 million;
mission-critical system: -¥30 million).

41-3. Breakdown of Non-Operating Income/Loss and Extraordinary
Income/Loss

Non-operating
income/loss+¥100 million• Dividend income+¥180 million• Interest expense-¥70 million

Extraordinary
income/loss+¥320 million• Gain on sales ofinvestment
securities+¥340 million• Centennialanniversary
expenses-¥20 million

Income taxes

OperatingincomeOrdinary
incomeIncome before
income taxes

Net income-¥120 million-¥20 million¥300 million¥140 million51-4. Segment Performance: Transportation Systems

Business in Japan was strong. Orders overseas declined but
have hit the bottom this period.
(100 million yen)

◼ Net sales and segment income
140

127.6

126.5

131.2

120 Net sales

20 200

11.4

10.5

218.2

Orders received

136.8

Segment income

13.1

257.7 Order backlog

250.8
15 15010080◼ Orders received / order backlog

10 100300
250200126.2

111.960150100405505020001H FY2016 1H FY2017 1H FY2018

001H FY2016

1H FY2017

1H FY2018• Orders received and net sales in Japan were strong while those for China declined.
• Signs of a recovery in orders associated with the switchover to standard trains for Chinese highspeed railways have become apparent since last December. Expecting to receive orders on afull-scale basis from the next fiscal year.
• Segment income was generally as planned.

61-5.Segment Performance: Industrial Systems
Orders received and net sales remained strong. Income is also
on an upward trend.
(100 million yen)

◼ Net sales and segment income
60 Net sales

49.0

52.9

57.7

406 100
4Segment income

201.5
1H FY201670.460Orders received

75.9

83.0
73.9

59.2

57.3

1H FY2016

1H FY2017

400

1H FY2017

Order backlog

80

2

1.2-0.30-20◼ Orders received / order backlog

1H FY2018

-2200

100
9080
7060
50403020100

1H FY2018• Orders received and sales increased primarily for testing systems.
• Segment income actually improved by approximately ¥400 million YoY (depreciation burden increasedin the first half by ¥250 million).
(1) Reforms to business management structure contributed to performance and low-profitability deals
were settled in the first half.
(2) The integration of industrial works at Shiga Ryuo Plant also contributed to performance.

71-6. Segment Performance: Industrial Systems (Reference)
Conceptual image of integration effects at Ryuo
(Nonconsolidated YoY comparison for Industrial Business Unit)
50.00(100 millionyen)

40.00

Net sales
41
Cost of sales
35

Net sales
46
Cost of sales
40

30.0020.00
10.00
0.00

Selling, general& administrative
expenses

7.2 Segment
income-1.4

1H FY2017-10.00

Selling,
general &administrativeexpenses

5.3

Segment
income
1.4

1H FY2018

Net sales
Cost of sales
Selling, general & administrative expenses
Segment income• Inquiries expanded primarily for testing
systems.
• Net sales also recovered.
¥4,100 million → ¥4,600 million• Shift to a product-based operating structure
led to heightening the awareness about
profitability and reduced selling, general &administrative expenses.
¥720 million → ¥530 million• As a result, segment income entered theblack.
-¥140 million → ¥140 million• By product, performance of testing systems
significantly improved (entered the black).
• The issue lies in strengthening design
capacity to respond to expanding inquiries.

81-7. Segment Performance: Information Equipment Systems
Revenues increased as a result of consecutive large projects.
Income improved and exceeded the plan announced.
(100 million yen)

◼ Net sales and segment income
87.0

7.2

◼ Orders received / order backlog
220

Order backlog

20

15.9
6Net salesSegment income

4.64

1.5 15
Ordersreceived
1 1013.5
13.01513.8

104.2
1.220.5 550.4

6.20.300
1H FY2016 1H FY2017 1H FY2018

001H FY2016

1H FY2017

1H FY2018• Net sales and income exceeded the plan. Launch of on-board IC
device contributed to performance.
• Orders received declined YoY as a reaction to large projects
handled in the previous fiscal year.

91-8.Consolidated Financial Position
Borrowing for working capital temporarily increased. Reduced
investment securities as planned.
100 million yen

FY2018FY2017
Nov 30 2017

May 31 2018 Nov 30 2018

YoYChange590

632617－15

Current assets

278286

287＋1Fixed assets

311

346

329－17333

369

373＋4133

161

194＋33257

263

244

－19

43.5%

41.6%

39.6%

－ 2.0%

Total Assets

Liabilities
Of which, interest bearing
debt
Net Assets
Shareholders’ Equity
Ratio (%)

10

2. Consolidated Earnings Forecasts for
Fiscal Year Ending May 31, 2019

2-1.Earnings Forecasts (Whole Company)
Net sales of ¥42.5 billion and orders received of ¥40.9 billion are
projected. Upward revisions have been made to income.
100 million yen
FY ended in May 2018 (Result)

1H

Full year

FY ending in May 2019
(Forecast)
Full year
1H(Result)(Revised)

YoY Change
Full year

Net Sales

186.5

425.2

196.3

425.0

-0.2

Operating Income

-2.3

3.6

-1.2

6.0

+2.4

(%)

(-1.2%)(0.9%)(-0.6%)(1.4%)

Ordinary Income

0.4

5.1

-0.2

6.5

+1.4

Net Income

2.5

6.9

1.4

7.0

+0.1

[Net income per share (yen)]

27.12

73.33

15.62

74.69

1.36

50.0

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

197.4

395.9

30.0
192.1

409.0

+13.1

309.7
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3. Initiatives Going Forward3-1. Medium-Term Management Plan (Revitalize 2020) (1)
1. Key Measures
Cooperation with othermanufacturers[Attack]

Timely productdevelopment

I Expanding overseas business

Expanding businessdomains by making
full use of coretechnologies

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

V Improving the foundation forexpansion of production
capacity[Transportation]

VII Promoting ESG

Power oforganization IV Building a stablebusiness earnings
structure
VI Fostering human resourcesthat will play importantroles in the future
Improvement of operating rate at
Shiga Ryuo manufacturing plant[Defense]

Strengthening ofprocess management
Reduction of fixed costs=Power to earn[Industry]

IIPower toPower to
producesellPromoting technologicaldevelopment in anticipation ofmarket needs[Information]

III

Affiliated companies
in China (sixcompanies)

Rebuilding of productionlines at Yokohama
manufacturing plant143-2. Medium-Term Management Plan (Revitalize 2020) (2)2. Numerical Targets(100 million yen, %)FY ended May 31,
2018 (Result)

FY ending May 31,2020 (Plan)FY ending May 31,2022 (Plan)

425.27
3.66(0.9%)
5.15
6.92
1.16

430
9(2.1%)
117
1.2

Over 47020(4.3%)
2416
4.0

ROE
(Net income to shareholders’equity ratio)

2.7%

3.3%

5.0%

Dividend payout ratio

68.2%

30.0%

30.0%

Transportation Systems

279.49290

310

Industrial Systems

117.69130

150

Information Equipment Systems

28.01

1010Net sales

Operating income(Operating margin ratio)
Ordinary income
Net income
Investment gain on equity method<Net sales by segment>15

3-3. Expanding Overseas BusinessBusiness activities in overseas

08

Transportation

Beijing
Olympics &Paralympics

Electrical equipment
for urban
transportation
Electrical equipment
for high-speed
railways

China

S ta nd a lo neinve rte rs

2015

2010

2005

2020

1014

Shanghai Expo

Birth of CRRC Group

Entry into the maintenancebusiness

Large-scale delivery

Large-scale delivery

2025

Expansion of maintenancebusiness

Delivery for standard trains

Individually soldS ta nd a lo ne m o to rs

Aiming for local production

Thai

IndustryOEM
S yste m s
Customized response

A uto m o tivee le ctrica le q uip m e nt
S a le s structure
re info rce m e nt

Customized response

Making the representative office a local
subsidiary16

3-4. Expanding Overseas Business (Transportation Systems:
Net Sales and Investment Gain on Equity Method)
Changes in “Net sales” and “Investment gain on equity method, etc.”of three companies under the equity method (in China)
Investment gain on equity method, etc.
-- Line graph

Net sales◼ Bar graph

50

5.0

(100 million yen)(100 million yen)

40

4.030

3.020

2.010

1.00

0.0
09/5 10/5 11/5 12/5 13/5 14/5 15/5 16/5 17/5 18/5 19/5
Net sales

Investment gain on equity method, etc.

(Forecast)(including dividends, technology transfer fees, etc.)173-5. New Development (1)Commercialization of flat-type dynamo for automatic driving
vehicle evaluation (by the end of FY2018)

Conceptual image ofconventional testing machine
Holding dynamo in the tire
wheel part

Newly developed dynamo18

3-6. New Development (2)Have become the prime contractor for a superconducting
flywheel power storage system for railway applications.
Received consignment of project operation, such as overall coordination toward verification
testing and manufacturing of power conversion device.
Made efforts to build a power storage system that contributes to increasing energy efficiency
in the railroad sector and to promoting stable use and technological development of
renewable energy.
Rotations of flywheel

Superconducting flywheel power storage system

When charging:Absorbs the train’sregenerative power.
Flywheel accelerates.
At discharge:
Supplies power to thetrain.
Flywheel decelerates.

Discharge

TimePower generator
motor
Flywheel

Discharge

ChargePower conversion
deviceChargeSuperconducting
magnetic bearing
Strong magnetic repulsion achievedby the superconducting magnetic
bearing uplifts the flywheel.

Overhead power line

When the train isdecelerating
regenerative power isgenerated.

Train accelerates.
It consumes power.

Braking

Accelerating

193-7. New Development (3)On-board IC device : Ticket gate device installed on board the train.
It identifies the station where the train stops andrecords the gate entry/exit information on the IC card.

Beep

Entry

Exit R/W
Exit door

Entry
door

Entry

Driver’sseat

Exit

Exit

Fare box

Beep

Entry R/W• Movable ticket gate device. It eliminates the need to install devices atstations and promotes adoption of IC cards.

20

3-8. Other Initiatives• Corporate governance
Changed the operating officer system effective
June 1, 2018

• Succession of technology and skills
An employee of Yokohama manufacturing plant
received the Fiscal 2018 Contemporary Master
Craftsman award (third employee to beawarded).

• Advertising award received
The Company’s centennial anniversary
advertisement received the Nikkei AdvertisingAward (Nikkei Business Daily Excellence Award).

• Publication of 100 years of history• Working-style reforms, promotion of diversity• Promotion of human resources development

21

Thank you for your attention.
https://www.toyodenki.co.jp<Inquiries>
Toyo Denki Seizo K.K.
PR, IR and CSR Department, Management Planning Division
TEL: +81-3-5202-8122
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 canaffect future business performance as of the date of publicationof this material. Actual financial results may differ depending ona 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.

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