January 29, 2016

TOKAI Holdings Corporation
Katsuhiko Tokita, President & CEO(Code No. 3167 Tokyo Stock Exchange First Section)
To whom it may concern

Results for the Third Quarter of the Fiscal Year Ending March 31, 2016and Full-Year Outlook
TOKAI Holdings Corporation (Headquarters: Shizuoka City, Shizuoka; President & CEO:
Katsuhiko Tokita; “the Company”) on January 29, 2016 announced cumulative results for the thirdquarter of the fiscal year ending March 31, 2016 (the nine month period from April to December2015).
1. (Consolidated) Third Quarter Results (P/L)
Growth in customer numbers led to a 3.7 billion yen revenue increase for Hikari
Collaboration,1 and a 400 million yen revenue increase for Aqua (bottled water delivery), but thiswas not enough to offset the 8.2 billion yen in distributions to customers (6.4 billion yen
distributed for LP gas; 1.6 billion yen for city gas) resulting from price revisions in line with thefall in crude oil prices, and overall sales declined.
In terms of operating profit, LP gas profits rose by 800 million yen, and Aqua (bottled waterdelivery) profits recovered by 200 million yen due to the increase in customers. As a result,overall operating profit was lower by only 900 million yen compared to the same period last year(-17.7% year-on-year), despite 2.4 billion yen in upfront costs for Hikari Collaboration, a business
the Company has been focusing on this year.
(Unit: billion yen)
Results

Third quarter

Year-on-yearof previous year
Sales

130.1

136.0

-5.9

-4.3%

Operating profit

4.0

4.9

-0.9

-17.7%

Recurring profit

3.9

4.5-0.6-13.2%

Quarterly net income

1.4

1.8-0.4-23.3%

2. Full-Year Outlook for the Fiscal Year Ending March 31, 2016
Operating profit at the end of the first half of the fiscal year (April to September 2015) was
1.9 billion yen, 1.0 billion yen above the initial forecast of 0.9 billion yen.
For the second half, in the third quarter (October to December 2015), the pace of winning
new customers (larger profit margins than existing ISP customers who switch) for HikariCollaboration via mass retailer channels outpaced initial forecasts. The resulting growth in
upfront costs, etc. has led to a 400 million yen drag on initial operating profit forecast. For thefourth quarter, there is some uncertainty, such as the impact of fluctuating temperatures on thegas business, but at this point the Company expects full-year operating profit to meet initialforecasts.
3. Progress of Hikari Collaboration
Hikari Collaboration had 173 thousand customers as of the end of the third quarter of thefiscal year ending March 31, 2016. The Company booked a 1.0 billion yen gross profit in thisbusiness, but with customer acquisition costs being booked ahead of revenue, operating loss was
2.4 billion yen.
The Company expects this business to have 224 thousand customers by the end of the fiscal
year ending March 31, 2016. The Company forecasts 1.7 billion yen in gross profit, and an
operating loss of 3.1 billion yen after factoring in customer acquisition costs. This is roughly inline with initial forecasts.
The Company is targeting 380 thousand customers by the end of the fiscal year ending
March 31, 2017. With the growth in customer numbers this year and the resulting increase ingross profit, the Company expects earnings for Hikari Collaboration to recover significantly andcome back into balance with expenditures, in line with the initial plan.
4. Changes in Contract Price for LP Gas
Prices of raw materials for LP gas have declined with the fall in crude oil prices.
The Company expects the average LP gas price this year to be about 47,000 yen/ton, which isabout 25,000 yen/ton (34%) lower than the previous year.
Currently major LP gas suppliers are forecasting the contract price to remain low during thenext year, at around 330 to 390 US dollars/ton. The Company’s initial plan assumes a contract
price of 500 US dollars/ton for the fiscal year ending March 31, 2017, so lower procurement costs
are projected.
A fall in procurement costs is a major tailwind for gas-related businesses, and can be
anticipated to improve both competitiveness and profitability.
5. Shareholder Returns for Fiscal Year Ending March 31, 2016
For the fiscal year ending March 31, 2016, the Company forecasts the total amount ofannual dividends at 1.4 billion yen, with an interim dividend of 6 yen per share and a year-end
dividend of 6 yen per share, for a total annual dividend of 12 yen per share.
In addition, on November 6, 2015 the Company cancelled treasury shares equivalent to 10%of the total issued shares, and also began a share buyback from October 30, 2015 (maximum: 1.8billion yen), with the aim of providing a 100% return to shareholders when combining dividends
and share buybacks.
With earnings remaining solid going into the last year of the Company’s medium-termbusiness plan IP162 for FY2014 through FY2016, which was announced in June 2014, we arealso considering additional share buybacks next year.

6. Impact on Earnings
No changes have been made to the most recent consolidated earnings forecasts for the fiscal
year ending March 31, 2016.
For details, please refer to the “Q3 FY03/16 Earnings Highlights.”
1 “Hikari Collaboration” is a service where internet service providers, etc. are able to use NTT fiber-optic lines to provide
fiber-optic services under their own corporate branding.
2 “IP16” stands for Innovation Plan 2016, the Company’s medium-term business plan.

Contact: Yoshihiro Taniguchi
Public Relations and Investor Relations Office
TEL: +81-(0)54-669-7676
Email: overseas_IR@tokaigroup.co.jp

Q3 FY03/16(Third quarter of fiscal year ending March 31, 2016)

Earnings Highlights
TOKAI Holdings CO., LTD.
(Code: 3167)
January 29, 2016

(Consolidated) Q3 Earnings (P/L)
Growth in customer numbers led to a ¥3.7 billion revenue increase in “Hikari Collaboration,”1 and a ¥400 million revenue increase for
Aqua (bottled water delivery), but this was not enough to offset the ¥8.2 billion in distributions to customers (¥6.4 billion for LP gas; ¥1.6
billion for city gas) resulting from price revisions in line with the fall in prices of raw materials for gas (negative impact of 4.9%), andoverall sales declined.
In terms of operating profit, LP gas profit rose by ¥800 million, and Aqua (bottled water delivery) profit recovered by ¥200 million due tothe increase in customers. As a result, overall operating profit was lower by only ¥900 million compared the same period last year (17.7% YoY), despite ¥ 2.4 billion in upfront costs for Hikari Collaboration, a business the company has been focusing on this period.

(Unit: ¥ billion)

ActualPrevious Year

Year-on-year(April 1 to December 31, 2015) (April 1 to December 31, 2014)

130.1

136.0

-5.9-4.3％

Operating profit

4.0

4.9-0.9-17.7％

Recurring profit

3.9

4.5-0.6-13.2％

Quarterly net
income

1.4

1.8

-0.4

-23.3％

Sales1Full-year FY03/16 Outlook
1H operating profit finished ¥1.0 billion above initial 1H forecast (result: ¥1.9 billion vs initial forecast of ¥0.9 billion).
At the end of Q3, operating profit was ¥400 million behind initial forecasts (for 2H).
There is some uncertainty for Q4 such as the impact of temperatures on the gas business, but at this point full-year operating
profit is expected to meet initial forecasts.

(Unit: ¥ billion).

InitialplanResults/forecast

1H operating profit

0.9
Hikari Collaboration -1.9
Existing business
2.8

1.9
Hikari Collaboration -1.5
Existing business
3.4

2H operating profit（Q1+ Q2） + ¥1.0 billion＋¥0.3bn
Lower upfront costs due
to delays in transferring
existing ISP customers
to Hikari Collaboration＋¥0.7bn
Core businesses
performed better thanexpected (Recovery inLP Gas businessprofitability; increase incustomers in the CATVbusiness)

6.9
Hikari Collaboration -1.2
Existing business
8.1（Q3）-¥400 million-¥300 million
Higher upfront costs due tomore new customers thanexpected (with larger profit
margins than for existing ISP
customers who switch) for
Hikari Collaboration via
electronic retail channels-¥100 million
Delays in orders for corporate
information services（5.9）
Hikari Collaboration -1.6
Existing business
7.5

(Q4)
Expects to meet full-year
forecasts despite uncertain
factors, such as the impact oftemperature on the gas
business

Full-year operatingprofit

7.8
Hikari Collaboration -3.1
Existing business
10.9

Hikari Collaboration
impact limited toFY03/16（7.8）
Hikari Collaboration -3.1
Existing business
10.9¥12.6 billion
in FY03/17(Reference)

FY03/14
Results

1.8

7.2

9.02

Progress of Hikari Collaboration
Hikari Collaboration had 173 thousand customers as of the end of Q3. It booked a ¥1.0 billion gross profit, but withcustomer acquisition costs running ahead of revenue, operating profit was down by ¥2.4 billion.
TOKAI Holdings forecasts 224 thousand customers by the end of FY03/16 (¥1.7 billion in gross profit; factoring incustomer acquisition costs, we expect an operating loss of ¥3.1 billion, which is roughly in line with initialforecasts.
TOKAI Holdings is targeting 380 thousand customers by the end of FY03/17. With the growth in customer
numbers in FY03/16 and the resulting increase in gross profit, we expect earnings to recover significantly andcome back into balance with expenditures, in line with initial forecasts.

5Gross profit

Acqusition cost

Operating costs, etc.

(Unit: ¥ billion)

Operating profit(/loss)

34.01
△10.1

0.4-0.7 -0-0.6△3-1.7-0.2

-1.5

-0.4
-3.0-2.4△5Hikari
Collaboration
customernumbers0.1

1.7

1.0-0.8
-4.0

-0.8
-3.1

-3.1

Q1 Actual

Q2 Cumulative

Q3 Cumulative

Full-year 2015
forecast

FY201663 thousand

117 thousand

173 thousand

224 thousand

380 thousand3

LP Gas Contract Price Trends
The price of raw materials for LP gas has fallen, in line with the drop in crude oil prices.
The average LP gas procurement cost this year is expected to be about ¥47,000/ton, about ¥25,000/ton (34%)
lower than last year.
Currently major suppliers are forecasting prices will remain low next year at around $330 to $390/ton (TOKAIHoldings’ FY03/17 medium-term plan assumes $500/ton).
This is a major tailwind for gas-related businesses, and should improve both competitiveness and profitability.
1,000(CP: $)

913
813

800

823 828
790

800
763

740
673

Same period last year at $650/ton (¥ / $ : 110.1)
580

600

480

488

400

-$257/ton (-¥10.6 on FX) fromsame period last year
¥71,565/t
This year ¥47,435/t(-34% year-on-year)

200438 475

This year at around $393/ton (¥ / $: 120.7)

Our medium-term plan:$500/ton

463
435

428
400

380

340

378
338

403

336
326

Supplier A Supplier B Supplier C$391/ton $367/ton $329/ton

Low price continues

4Shareholder returns for FY03/16
Expected annual dividends to total ¥1.4 billion (¥6 interim dividend at the end of 1H, and ¥6 year-end dividend at the end of
FY03/16 for a total annual dividend of ¥12 per share).
This year, TOKAI Holdings plans to cancel treasury shares equivalent to 10% of its total issued shares, and to buyback anadditional ¥1.8 billion in treasury shares, providing a 100% of profits to shareholders, when combined with dividends.
With performance remaining solid going into the last year of the IP16 plan, we are also considering additional share buybacks
next year.

Currently buying back up to ¥1.8 billion in treasury shares,
to provide a 100% shareholder return.

100.0%

1.8

52.9%

44.2%

40.2%

1.2

1.3

1.4

1.4

1.4

FY03/122012/3月期

FY03/132013/3月期

FY03/142014/3月期

FY03/15
2015/3月期

FY03/162016/3月期

Dividends (¥ billion)
配当金（億円）

35.1%

自己株式取得（億円）
Share buyback (¥ billion)

Payout ratio
配当性向5The performance forecasts and forward-looking statements in this material are calculated
according to currently available information, and include potential risks and uncertainty.
Please be aware that due to the changes in various factors, there is a possibility that actual
results may differ materially from projections and other forward-looking statements madewithin these materials.

For inquiries regarding these materials, please contact us at the following.

TOKAI Holdings Corporation Public Relations and Investor Relations Office
2-6-8, Tokiwa-cho, Aoi-ku, Shizuoka City 420-0034
TEL：+81-(0)54-669-7676
FAX：+81-(0)54-275-1110
http://tokaiholdings.co.jp
E-mail：overseas_IR@tokaigroup.co.jp