Results of Operations for the First Half of
the Fiscal Year Ending March 31, 2020 (Fiscal 2020)

November 20, 2019
DAIKEN CORPORATION(Security Code: 7905)

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Contents

1. First Half of Fiscal 2020 Financial Results■1H Fiscal 2020 Market Environment・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 4■1H Fiscal 2020 Financial Results・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 5■1H Fiscal 2020 Business Segment Results・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 6■1H Fiscal 2020 Changes in Operating Profit・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 7■1H Fiscal 2020 Market Category Sales ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 8■Start of North American Wood Industrial Materials Business ･･･・・・・・・・・・・・・・・・・･･･・・・・・・･・・・・・・・・・・ 9■1H Fiscal 2020 Market Category Sales and Changes for Business Segments ・・・・・・・・・・・・・・・・・・・・・・・・・・・ 10■Acquisition of ReformQ Co., Ltd.・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 11

2. Fiscal 2020 Forecast (Revised)■Fiscal 2020 Forecast (Revised)・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 13■Fiscal 2020 Forecast of Changes in Operating Profit (Revised)・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 14■Fiscal 2020 Forecast of Market Category Sales and Changes for Business Segments・・・・・・・・・・・・・・・・・・・・・ 15

3. Financial Information■1H Fiscal 2020 Consolidated Balance Sheet・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 18■1H Fiscal 2020 Consolidated Statement of Income・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 19■1H Fiscal 2020 Consolidated Statement of Cash Flows・・・・・・・・・・・・・・・・・・･････・・・・・・・・・・・・・・・・・・・・・ 20■Sale of Green Bonds in September 2019・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・ 21

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2

First Half of Fiscal 2020
Financial Results

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3

1H Fiscal 2020 Market Environment
Domestic home marketu Housing starts in 1H fiscal 2020 (Apr. to Sep.) were down 5.0% overall due to a sharp decline (15.7%)in the residential rental property category. But there were increases of 4.4% for owner-built homes
and 4.0% for built-for-sale homes due to the increase in demand prior to the October 2019consumption tax hike.
Public and commercial buildings (non-housing sector)
u Construction demand remained firm because of projects involving the Tokyo Olympics/Paralympics
and redevelopment projects, mainly in the Tokyo metropolitan area. However, the cost of laborremains high because of the shortage of skilled construction workers.
u More opportunities to supply functional building materials for specific types of buildings, a productcategory that was expanded during the previous medium-term management plan.
High cost of raw materials and logistics
u Prices of imported plywood, wood chips and other raw materials are rising, with some exceptions,and the cost of energy is increasing. The rising cost of logistics is also exerting downward pressure on
earnings.
Effects of global eventsu Overseas market conditions worsened because of sluggish demand, chiefly for MDF in Asia, causedby the U.S.-China trade friction, U.S. economic sanctions on Iran and other events.

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1H Fiscal 2020 Financial Results◆ Sales increased 11.9% because of increasing use of Daiken building materials for construction companies, anincrease in orders for materials used at public and commercial building projects, and newly consolidated
subsidiaries. MDF sales were below the first half forecast due to sluggish overseas demand, mainly in Asia.
◆ Operating profit increased 22.9% because of the newly consolidated subsidiaries and other reasons. This was
below the first half forecast due mainly to intense competition in the MDF market and the decrease inresidential rental property construction starts in Japan.

(Unit: million yen)

1H Fiscal 2019
(Result)

1H Fiscal 2020
(Result)

YoY change
Amount1H Fiscal 2020
(Initial forecast)%Vs. 1H results

Net sales

87,20397,548+10,345+11.9%

99,000-1,452

Operating profit

3,083

3,790

+707

+22.9%

4,600

-810

Operating profit
ratio

3.5%

3.9%

+0.4pt-4.6%-0.7ptOrdinary profit

3,660

4,197

+537

+14.7%

5,000

-803

Profit attributableto owners of parent

2,446

2,087

-359

-14.7%

2,700

-613

Earnings per share(yen)

100.1580.21-19.94-19.9%

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1H Fiscal 2020 Business Segment Resultsu Industrial Materials Business: Sales and earnings increased as higher sales of tatami facing and the newly consolidated
subsidiaries more than offset weak MDF sales and the slow recovery of Dai-Lite following the problem that occurred infiscal 2019.
u Building Materials Business: Sales and earnings increased because of growth in orders for floor materials, doors,cabinets and other products in the domestic home market and public and commercial building sectors and priceincreases to reflect the higher cost of imported plywood and other raw materials and of logistics.
u Engineering Business: Sales increased as orders were higher for interior finishing work at office and other buildings but
earnings decreased because the rising cost of labor caused by the shortage of skilled construction workers and otherfactors reduced the profitability of building interior projects.
1H Fiscal 2019
(Unit: million yen)

Net sales

1H Fiscal 2020

OperatingprofitNet sales

YoY change
Amount%OperatingprofitYoY change
Amount%Industrial Materials
Business

30,281

842

36,365+6,084+20.1%

1,129

+287

+34.1%

Building Materials
Business

42,301

1,513

46,652+4,351+10.3%

2,226

+713

+47.1%Engineering Business

8,073

458

10,152+2,079+25.8%

329-129-28.2%

Others

6,546

269

4,376

-2,170-33.1%

104-164-61.2%

87,203

3,083

97,548+10,345+11.9%

3,790

+707

+22.9%Total

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1H Fiscal 2020 Changes in Operating ProfituHigher costs: Increase in prices of imported plywood, wood chips and other raw materials and cost of energyuHigher expense of logistics: Higher cargo transportation rates and storage feesuStreamlining/cost reduction: Reexamination of all categories of items purchased; effect of exchange rate changes onoverseas manufacturing subsidiaries in the industrial materials businessuHigher selling prices to reflect higher costs: Mainly in the building materials business to offset the higher costs and arise in cost of logistics
uChange in sales/composition: A net contribution to earnings as building materials business sales growth offset declines
in the profitability of MDF in the industrial materials business and building interior projects in the engineering businessuNew consolidation: A wood industrial materials company in North America and a renovation company were newly
consolidated in the second quarter of fiscal 2020
(Unit: million yen)

+217
+800
+150

-900

3,790

+400
3,083
-760

'19/3期2Q
1H
Fiscal 2019（実績）
(Result)

コストアップ
Highercosts

物流費増
Higherexpenseof logistics+800

Higherselling
合理化
売価への転嫁 売上増減・構成差
Streamlining/
prices to reflect Change in sales/
コストダウン
cost
reduction higher costs
composition

新規連結
New

consolidation

その他経費
Other
expenses'20/3期2Q
1H
Fiscal 2020
（実績）
(Result)

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1H Fiscal 2020 Market Category Sales(Unit: million yen)
Upper: sales Lower: composition

1H Fiscal 2019
(Result)

Global markets
Public and commercial
buildings
Industrial materials

Home renovation market

Domestic new home market

OthersDomestic market

Total

YoY change

1H Fiscal 2020
(Result)

Amount%9,959

16,255+6,296+63.2%

11.4%

16.7%

+5.3pt-9,122

11,024+1,901+20.8%

10.5%

11.3%

+0.8pt-16,46914,174-2,296-13.9%

18.9%

14.5%

-4.4pt-14,081

16,249+2,167+15.4%

16.1%

16.7%

+0.6pt-37,03939,447+2,407

+6.5%

42.5%

40.4%

-2.1pt

-

532

400

-132

-24.7%

0.5%

0.3%-0.2pt-77,244

81,293+4,049

+5.2%

88.6%

83.3%

-5.3pt-87,20397,548+10,345+11.9%

100.0%

100.0%--

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Start of North American Wood Industrial Materials Business
Daiken made CIPA, which operates a Canadian veneer factory and was an Itochu consolidated subsidiary, and PWT, which operates a
U.S. LVL factory, subsidiaries on June 28, 2019. This established a base to start a wood industrial materials business in North America
to serve the North American wood home market, the largest in the world. The two companies contributed to the consolidated
performance as they were added to the consolidated balance sheet at the end of the first quarter and to the consolidated income
statement at the beginning of the second quarter.

Vancouver

CIPA Lumber Co. Ltd. (CIPA)

Established: April 30, 1968
Delta, British Columbia, Canada
Location:
23,000 thousand CAD (1,955 million yen)
Capital:Exchange rates: JPY85/CAD
Manufacture of veneers
Business:

SeattlePACIFIC WOODTECH CORPORATION (PWT)

Established: January 7, 1998
Location:
Burlington, Washington, USA
Capital:26,000 thousand USD (2,860 million yen)Exchange rates: JPY110/USD
Business:
Manufacture and sales of structural LVL and wood I-joists

Business flow
Veneer manufacturing (CIPA)

LVL manufacturing (PWT)

I-Joist manufacturing (PWT)

I-Joistrafters
垂⽊

垂⽊

Cutting

VeneerLaminate and glue
veneers together

LVL header
まぐさ

I-Joist
床根太

LVL床ばりbeams

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1H Fiscal 2020 Market Category Sales and Changes for Business Segments(Unit: million yen)+111

Global markets

0+164+6,296+6,021

9,959

Public andcommercial buildings

16,255New
consolidation of
North Americanbusiness
Higher sales oftatami products
and Dai-Lite wallmaterials forhotels andcommercial
buildings

+251
9,122

Higher sales ofdoors, flooringmaterials andother products fornursery schools
and kindergartens+615
Sales of all types ofinterior building
materials increased
mainly due tohigher sales tocompanies
specializing inrenovations

Home renovation
market+81

Industrial Materials
Business+1,901+1,015

11,024

Increase in orders
for interior
finishing work at
office and otherbuildings+1,086+1,004Higher sales
because of growthof the apartment
renovation businessand new
consolidation of arenovationcompany

Building Materials
BusinessEngineering
Business

14,081
1H Fiscal 2019
(Result)+20-3+2,167

16,249Others1H Fiscal 2020
(Result)

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Acquisition of ReformQ CO.,Ltd.
Daiken acquired ReformQ CO.,Ltd., building renovation company, in July 2019. This company gives Daiken moreconstruction skills and access to more categories of the construction market. The resulting strengthening ofrenovation activities in the Tokyo metropolitan area is expected to contribute to growth of the entire engineeringbusiness.
Renovations done by ReformQ CO.,Ltd.

Profile of ReformQ CO.,Ltd.
Business

Renovations, including planning anddesigns, of buildings, apartments
and houses

Established

April 1, 2004

Capital20 million yen

Net sales

1,566 million yen (Fiscal 2019)

Acquisition dateJuly 1, 2019

Daiken investment ratio

100% (consolidated subsidiary)11
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Fiscal 2020
Forecast (Revised)

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Fiscal 2020 Forecast (Revised)u Forecast 10.4% sales growth in part because of the new consolidations. Reduced the initial forecast due to the outlook
for the continuation of negative effects of the MDF market downturn and decrease in residential rental property
construction starts in Japanu Forecast 51.8% operating profit growth as streamlining/cost reduction, higher selling prices and the new consolidations
offset the higher cost of raw materials and logistics. Earnings will also benefit from the end of problems that occurredin fiscal 2019.
However, the initial forecast was reduced because of the higher than expected decline in profitability of MDF and costof logistics.
(Unit: million yen)
Net sales

Fiscal 2019
(Result)

YoY change

Fiscal 2020

Fiscal 2020

(Initial forecast
announced on May 10)(Forecast revised on
Nov. 8)Difference

Amount%182,962

210,000

202,000-8,000+19,038+10.4%

Operating profit

5,733

10,4008,700-1,700+2,967+51.8%

Operating profit ratio

3.1%

5.0%

4.3%

-0.7pt+1.2pt-Ordinary profit

6,838

11,1009,400-1,700+2,562+37.5%

Profit attributable toowners of parent

4,402

6,000

5,000

-1,000+598+13.6%

Earnings per share (yen)174.55230.62

192.12-38.50+17.57+10.1%

Dividend per share (yen)

74

70

70

±0

-4

-

Dividend payout ratio

42.4%

30.4%

36.4%

+6.0pt+6.0pt

-

ROE

7.8%

9.8%

8.5%

-1.3pt+0.7pt-13
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Fiscal 2020 Forecast of Changes in Operating Profit (Revised)◆ Higher costs: Increase in prices of imported plywood, wood chips and other raw materials and cost of energy◆ Higher expense of logistics: Larger than expected increases in cargo transportation rates and storage fees decreased theoperating profit forecast significantly◆ Streamlining/cost reduction: Reexamination of all categories of items purchased◆ Higher selling prices to reflect higher costs: Mainly in the building materials business to offset the higher cost of raw materials
and logistics◆ Change in sales/composition: Benefit from the end of one-time problems in fiscal 2019, but a downward revision of operating
profit forecast due to the outlook for the continuation of negative effects of the MDF market downturn and decrease inresidential rental property construction starts in Japan◆ New consolidation: Overseas industrial materials business, solid flooring materials business in Japan, renovation business(Unit: million yen)

-1,000Fiscal2019'19/3期(Result)（実績）

Initialforecast-1,000↓-400
Downward
revision-1,4005,733

Higher
コストアップcosts

Initialforecast+2,000↓-1,300
Downward
revision

Higherexpense
物流費増
of logistics-233

Initialforecast
10,400↓-1,700
Downward
revision+2,400+700
8,700+1,400+1,100Higher selling
Streamlining/in sales/
合理化
売価への転嫁 Change
売上増減・構成差
prices to reflect
costコストダウン
reduction
composition
higher costs

New
新規連結

consolidation

Other
expenses
その他経費

Fiscal2020'20/3期(Forecast)（予想）

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Fiscal 2020 Forecast of Market Category Sales and Changes for Business Segments (1)u Global markets: Downturn in MDF market is continuing but higher sales due to new consolidation of the North
American wood industrial materials businessu Home renovation market: Higher sales due to growth of sales of easy-to-install products and apartment renovations
and to the newly consolidated renovation company(Unit: million yen)

+250

Global markets

0-383+18,759+18,892

38,00019,241
Home renovation
market+168+4,071+1,65832,500+2,003+243
28,429Fiscal 2019
(Result)

Industrial Materials
Business

Building Materials
BusinessEngineering
Business

OthersFiscal 2020
(Forecast)15
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Fiscal 2020 Forecast of Market Category Sales and Changes for Business Segments (2)(Unit: million yen)
Public andcommercial buildings-121+1,495+3,842+2,01525,000+452
21,158
Fiscal 2019
(Result)

Industrial Materials
Business

Building Materials
BusinessEngineering
Business

OthersFiscal 2020
(Forecast)Acquisition of T.O FLOORING CO., LTD. to start the solid flooring materials business
In November 2019, Daiken completed procedure to make T.O FLOORING CO., LTD., which is jointly owned by Daiken and
T.O. Holdings, a subsidiary in order to start a solid flooring materials business. Demand for these materials is strong for
cultural buildings, schools and other types of buildings. Expansion of the solid material product lineup is expected to make
Daiken’s flooring business even stronger.
Business

Flooring business – Manufacture, sale and installationof solid and thick veneer flooring materials

Start of operation

November 1, 2019

Location

Nerima-ku, Tokyo

Capital10 million yen

Manufacture
base

Yubari Plant (Yubari City, Hokkaido)

Investment ratio

DAIKEN CORPORATION: 50% (consolidated)
T.O. Holdings CO.,LTD.: 50%

16
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Financial Information

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17

1H Fiscal 2020 Consolidated Balance Sheet (Major components)(Unit: million yen)
Cash and deposits

Fiscal 2019
(Result)

2Q Fiscal 2020
(Result)

YoY change

16,865

14,087-2,77850,511

44,234-6,277

21,363

26,857+5,494

Other current assets

2,795

2,179

-616

Total current assets

91,55387,358-4,19541,321

51,853+10,532

6,375

16,308+9,933

20,831

19,698-1,133

160,158

175,332+15,174

30,57328,274-2,29930,682

46,643+15,961

37,15436,841-313

98,416

111,765+13,349

Total shareholders’ equity

53,46054,609+1,149Total net assets

61,741

63,566+1,825

Total liabilities and net
assets160,158

175,332+15,174

Shareholder equity ratio

36.8%

32.7%

-4.1ptDebt-equity ratio (multiple)

0.52

0.81

+0.29

Notes and accounts
receivable-trade
Inventories

Property, plant andequipment
Intangible assets
Investments and otherassetsTotal assets
Notes and accounts
payableBonds and borrowings
Other current/non-current
liabilities
Total liabilities

uNotes and accounts receivable -6,277<Major factors>
New consolidation+1,617
End of fiscal 2019 was on a Sunday, etc.
-7,894uInventories+5,494<Major factors>
New consolidation+2,986
Finished goods and merchandise
inventories+1,706Work in process+703
uProperty, plant and equipment +10,532<Major factors>
New consolidation+11,283
Acquisition/construction in progress +2,438
Depreciation-1,979Exchange rate changes, etc.
-1,210uIntangible assets<Major factors>
Increase in goodwill due to newconsolidation+9,933+10,833

uBonds and borrowings+15,961<Major factors>
Bond issuance+10,000
Increase in borrowings due to newconsolidation+7,360uTotal net assets+1,825<Major factors>
Non-controlling interests+3,375
Foreign currency translation adjustment-1,83018
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1H Fiscal 2020 Consolidated Statement of Income(Information about non-operating profit (expenses) and extraordinary income (losses))(Unit: million yen)

1H Fiscal 2019
(Result)

1H Fiscal 2020
(Result)

YoY change

Net sales

87,20397,548+10,345

Gross profit

21,60424,289+2,685

SG&A expenses

18,521

20,499+1,978Operating profit

3,083

3,790

+707

Non-operating profit(expenses)

+577

+407

-170

Ordinary profit

3,660

4,197

+537

-81

-433

-352

Profit before income taxes

3,579

3,764

+185

Total income taxes

1,042

1,223

+181

Profit

2,537

2,541

+4

91

453

+362

2,446

2,087

-359

Extraordinary income(losses)

Profit attributable to noncontrolling interests
Profit attributable to ownersof parent
Exchange rate (yen)1H Fiscal 2019
(Result)

1H Fiscal 2020
(Result)

uNon-operating profit (expenses)<Major factors>
Foreign exchange losses
Interest expenses
Dividend income

-170
-54
-54
-13

uExtraordinary income (losses)-433<Major factors>
Provision for loss on litigation-166
Loss on valuation of investment
securities-134
Loss on retirement of non-current assets-75

YoY change

USD-

107.29

-

CAD

-

81.25

-

NZD

75.64

71.20

-4.44

MYR

27.40

26.12

-1.28

19
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1H Fiscal 2020 Consolidated Statement of Cash Flows (Major components)
1H Fiscal 2019
(Result)(Unit: million yen)

1H Fiscal 2020
(Result)

Operating cash flow

+3,990+7,435Investing cash flow

-12,340-15,612

Free cash flow

-8,350-8,177

Financing cash flow

+10,990+5,490Cash and cash equivalents
at end of period

13,385

13,955

Capital expenditures

3,738

2,353

Depreciation

1,999

2,353

15,000+7,435+5,490+3,9900-5,000-10,000◆Investing cash flow
-15,612<Major factors>
Purchase of property, plant and equipment-2,890Purchase of shares of subsidiaries resulting
in change in scope of consolidation -12,778+10,990

10,0005,000◆Operating cash flow
+7,435<Major factors>
Profit before income taxes+3,764
Depreciation+2,353
Changes in trade receivables/payables+1,737
Increase in inventories-1,821
Income taxes paid
-1,956-8,350-15,000+5,490+9,949-3,424-962-8,177-12,340-20,000

1H'19/3期2Q
Fiscal 2019
(Result)
Operating cash flow

◆Financing cash flow
<Major factors>
Proceeds from issuance of bonds
Decrease in borrowings
Dividends paid

（実績）

Inv esting cash flow

-15,612'20/3期2Q
1H
Fiscal 2020
(Result)（実績）

Fi nancing cash flow

Free cash fl ow

20
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Sale of Green Bonds in September 2019
In September 2019, Daiken became the first building materials company in Japan to issue green bonds. The
proceeds will be used for new investments and the refinancing for renovation at the Okayama Plant and Takahagi
Plant. These two plants manufacture industrial materials (Dai-Lite, Dai-Lotone, Insulation boards) made primarilyof unused resources, recycled resources, wood resources that can be recycled, and other materials.
Summary of the Green Bonds
Name

DAIKEN CORPORATION First Unsecured Bonds(bonds rank pari passu with each other)(Green Bonds)

Amount5 billion yen

Maturity

September 20, 2022 (3 years)

Yield

0.20%

Underwriter

Daiwa Securities Co. Ltd.

Credit rating

BBB+ (Japan Credit Rating Agency, Ltd.)The green bonds have received a “Green1” rating from Japan Credit
Rating Agency, which is this agency’s highest green bond rating.

nDai-Lite: Effective utilization of unused resources and improves
anti-seismic performancenDai-Lotone: Effective utilization of recycled resources■Insulation boards: Recycling of wood resources

Note: Daiken procured a total of 10 billion yen by selling its second
issue of unsecured bonds (straight bonds) concurrently withthe green bonds.
Amount: 5 billion yen; Maturity: September 20, 2024 (5 years);
Yield: 0.280%

21
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Toward the future going beyond the functions of yesterdayThis presentation is intended to provide information and does not solicit an action of any kind.
This presentation (including forecasts) was created by Daiken based on information that was currently
available. This presentation includes risks and uncertainties and Daiken provides no guarantee that
information is reliable or complete.
Please use this information based on your own judgment.
Daiken is not responsible for any losses that may result from investment decisions that relycompletely on the forecasts, targets and other information in this presentation.

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