Briefing on Results for the Fiscal Yearending March 31, 2017

May 25, 2017
Photo: Denyo Europe B.V.

ContentsI. Overview of Results for FY2017/3
Toshiya Tozawa,Senior Executive Officer, Chief Executive
Administration Division

II. Outlook for FY2018/3 and Future Management
PolicyShoichi Shiratori, President

1Overview of Results forFY2017/32

Highlights of Results for FY2017/3 (Consolidated)
Key Point

Net sales is less than the previous fiscal year, Operating income and Ordinary income are more than the previous fiscal year.
Profit attributable to owners of parent decreased due to the extraordinary income (300 million) incurred on the previous fiscal year.
(million yen)

FY2016/3

FY2017/3

Change(YoY)

Rate of change(YoY)

Net sales

50,419100%

48,851100%△1,568△3.1%

Operating income

4,097

8.1%

4,247

8.7%

150

3.7%

Ordinary income

4,494

8.9%

4,526

9.3%

32

0.7%

Profit attributable to ownersof parent

3,137

6.2%

2,867

5.9%

△270

△8.6%

Capital investment

1,125

511

Depreciation

1,284

1,211

△73

△5.7%

146.8yen

134.2yen△12.6yen

△8.6%

6.5%

5.7%

30.0yen30.0yen

Net income per share

ROEInterim dividends per share△614 △54.6%

3

Sales Trends by Product (Consolidated)
Overview

1. Sales of generators decreased by 1,437 million yen (3.8%).
2. Sales of welders declined by 268 million yen (5.3%).
3. Sales of compressors increased by 336 million yen (30.4%).
(million yen)

By product

FY2016/3

Change(YoY)

FY2017/3

Rate ofchange(YoY)

Net sales

50,419100%

48,851 100% △1,568 △3.1%

Generators

38,294 76.0%

36,857 75.4% △1,437 △3.8%

Welders5,100 10.1%

4,832

9.9%

2.2%

1,440

2.9%

Compressors

Others

1,104

5,919 11.7%

5,720 11.7%△268 △5.3%
336

30.4%

△199 △3.4%
4

Engine Generators (Consolidated)
FY2016/3

Generators

38,294million yen

Rate of change(YoY)

FY2017/3△3.8%

36,857million yen• In Japan, shipment to the major leasing and rental
industry stay strong and the shipment of emergency
generator weakened.
• Overseas, shipment to America remain robust, andshipment to resource-rich countries weakened.

65%*According to a

Domestic market share of Company survey
engine generators (mobile-type) (5-year average)

Manufacturing engine-driven generators with capacityfrom 1kVA to 1100kVA

Mobile-type generator

Stand-by generating sets

Mobile-type generators
Power source on a construction site and for civil engineering workand disaster recovery/restoration, etc.
Stand-by generating sets (stationary type)Back-up power source for disaster prevention equipment
and offices, etc.
Power-supply vehicles, etc.

5Engine Welders (Consolidated)
FY2016/3

Welders

5,100 million yen

Rate of change(YoY)

FY2017/3△5.3%

4,832million yen• Overseas, the shipment to Europe increased and theshipment to the domestic market decreased.

55%

Domestic market share ofengine welders*According to aCompany survey(5-year average)

The Company developed the first engine-driven welder for outdoor work inJapan.
Ranging from 135A for welding light-gauge steel to a 500A engine-driven
welder for heavy-gauge steel, a TIG welder and a CO2 welder, etc.
Welding of steel construction for buildings, condominiums and bridges.
Welding of important structures such as petroleum storage tanks and pipelines.
Engine welder

6

Engine Compressors (Consolidated)
FY2016/3

Compressors

Rate of change(YoY)

FY2017/3

1,104 million yen

1,440 million yen• The shipment to the domestic and overseas market
both increased.

30.4%
20%

Domestic market share ofengine compressors

Engine compressor

Motor compressor*According to aCompany survey(5-year average)

Manufacturing compressors with air discharge
amounts from 1.6㎥/min to 42.4㎥/min.
 Breaking-up of roads and ground improvement workof roads
 Mortar spraying work for preventing landslides ofmountain roads.
 For artificial snow machines on ski slopes, etc.
7

Others (Consolidated)
FY2016/3

Others

FY2017/3

5,919 million yen

5,720 million yen

Rate of change(YoY)△3.4%• Sales of self-propelled lifters,etc. decreased.

Sales of other products
Self-propelled lifters
Water-related Equipment
PartsSecondhand equipment and purchased
merchandiseRepair sales, etc.
Self-propelled lifter

Load testing
equipment

8

Sales Trends by Region (Consolidated)(million yen)

By region

FY2016/3

Change(YoY)

FY2017/3

Rate ofchange(YoY)

Net sales

50,419100%

48,851

100% △1,568△3.1%

Domestic sales

30,115

59.7%

29,252

59.9%

△863

△2.9%

Overseas sales

20,304

40.3%

19,599

40.1%

△705

△3.5%

North/Central
America

9,776

19.4%

10,310

21.1%

534

5.5%

Asia

6,921

13.7%

6,479

13.3%

△442

△6.4%

Others

3,606

7.2%

2,808

5.7%

△798 △22.1%

FY2016/3

Japan

North/Central
AmericaAsia

FY2017/3

Japan

North/Central
AmericaAsia

0

10,00020,00030,00040,000

OthersOthers
50,00060,000

million yen

9Factor Analysis of Changes in Operating Income
Increase in Operating Income

Operating income increased by the improvement of Gross profit margin andratios of SG&A to sales.
(million yen)
FY2016/3

FY2017/3

Change (YoY)

Operating income

4,097

4,247150

Operating income margin (%)

8.1%

8.7%

0.6percentage points

FY2016/3

FY2017/3

Rate of change (YoY)

Gross profit margin

24.1%

24.5%

0.4percentage points

Ratio of SG&A to sales

16.0%

15.8%

△0.2percentage points

Ratio of operating income tosales

8.1%

8.7%

0.6percentage points••

Gross profit margin improved by the stable production in Vietnam plant and an increase in the shipment ofrelatively profitable large-sized machines.
Ratio of SG&A to sales improved by a decrease in the shipping cost and a rise in personnel expenses iscovered by it.

10Consolidated Balance Sheets
Overview

1. Current assets increased by 1,568 million yen mainly due to an increase in cash anddeposits, etc.
2. Current liabilities decreased by 859 million yen mainly due to a decrease in trade
payables.

(million yen)

At the end ofFY2016/3

At the end ofFY2017/3

Change from theend of FY2016/3Current assets

42,24643,814

1,567

Non-current assets

24,863
68,678
11,596
3,936

115
1,683

Long-term liabilities

24,747
66,994
12,455
3,726

Total liabilities

16,181

15,532

Total net assets

50,812
66,994

53,14568,678

Total assets
Current liabilities

Total liabilities and net assets

△859
209
△649
2,333
1,683
11

Changes in Consolidated Cash Flows
Overview

1. Cash flow from operating activities was 2,948 million yen decreased mainly due to adecrease in trade payables .
2. Balance of cash and cash equivalents increased by 473 million yen from the end of theprevious fiscal year.

(million yen)

FY2016/3

FY2017/3

I Cash flow from operating activities

2,973

2,948

II Cash flow from investing activities△ 775△ 1,253

I + II Free cash flows

2,198

1,695

△ 1,181△ 1,080△ 47△ 141969

473

11,745

12,219III Cash flow from financing activities

IV Foreign currency adjustments on cash and cashequivalents
V Net increase or decrease in cash and cash equivalents
VI Cash and cash equivalents, end of period12Outlook for FY2018/3 andFuture Management Policy13

Outlook for FY2018/3: Consolidated Income and Loss
Key points

1. Net sales are expected to be 52.0 billion yen.
2. Assumed exchange rate is 105 yen/dollar.

FY2017/3(million yen)

FY2018/3 (forecast)

Change(YoY)

Rate ofchange(YoY)

Net sales

48,851100%

52,000

100%

3,149

6.4%

Operating income

4,247

8.7%

4,600

8.8%

353

8.3%

Ordinary income

4,526

9.3%

5,000

9.6%

474

10.5%

Net income

2,867

5.9%

3,150

6.1%

283

9.9%

Capital investment
Depreciation
Net income per share

511

1,000

489

95.7%1,211

1,200△11△0.9%

134.2yen

148.3yen

14.1yen

ROE

5.7%

Cash dividends per
share (yen)30.0yenis calculated by using the amount of money at
6.2% *Equity
the end of FY2017/3.

30.0yen14

Changes in the Amount of Capital Investment(million yen)

End of March2015

End of March2016

End of March2017

End of March2018 (plan)

2,531

1,125511

1,000

Cost ofequipment••

Main uses•••

Machinery of Fukui plant,
etc. 440
Nishinihon Generator Mfg.
160
U.S. Plant 50
Vietnam Plant 1,630
Singapore 180••••

Machinery of Fukui plant,etc. 430
Nishinihon Generator Mfg.
80
Vietnam Plant 100
Singapore 280••••

Machinery of Fukui plant,etc. 100
Nishinihon Generator Mfg.
50
U.S. Plant 250
Vietnam Plant 20

••
•
•
•

Machinery of Fukui plant,etc. 600
Nishinihon Generator Mfg.
70
U.S. Plant 200
Vietnam Plant 100
Others 30

Amountinvestment
Amount of capital investment
millionmillionyen
yen

3,000
3,000
2,500
2,500
2,000
2,000
1,500
1,500
1,000
1,000
500
500
00

End ofMarch
Endof2014
March2015

End ofMarch
Endof2015March2016

End ofMarch
End of2016
March
2017

End ofMarch
End of2017
March(plan)
2018(plan)

Denyo Vietnam

15Outlook for Sales by Product (Consolidated)
Overview

1. Sales of generators are expected to increase by 2,143 million yen (5.8%).
2. Sales of welders are anticipated to rise by 568 million yen (11.8%).
3. Sales of compressors are forecasted to grow up by 60 million yen (4.2%).
(million yen)

FY2018/3 (forecast)

Change (YoY)

Rate of change(YoY)

52,000 100%

3,149

6.4%

Generators

36,857 75.4% 39,000 75.0%

2,1435.8%

Welders

4,832

9.9%

5,400 10.4%

568

11.8%

Compressors

1,440

2.9%

1,500

2.9%

60

4.2%

6,100 11.7%

380

6.6%

FY2017/3

By productConsolidatedsales

Others48,851100%

5,720 11.7%

16

Outlook for Sales by Region (Consolidated)(million yen)

FY2017/3

FY2018/3 (forecast)

Change (YoY)

Rate of change(YoY)

48,851 100%

52,000 100%

3,149

6.4%

Domestic sales

29,252 59.9%

31,400 60.4%

2,148

7.3%

Overseas sales

19,599 40.1%

20,600 39.6%

1,001

5.1%

North/ Central
America

10,310 21.1%

10,700 20.6%

390

3.8%

Asia

6,479 13.3%

6,700 12.9%

221

3.4%

Others

2,808

6.2%

392

14.0%

By region

Consolidated sales

FY2017

5.7%

3,200

North/Central
AmericaJapan

FY2018/3(forecast)

North/Central
AmericaJapan010,000Asia

20,00030,00040,000

OthersAsia

Others
50,00060,000

million yen

17Details of the Operating Income Forecast
Increase in operating income

The operating income margin slightly increased from the previous fiscal year
and the operating income is expected to increase by 353 million yen.

FY2017/3•Change (YoY)

Operating income

4,247

4,600353

Operating income margin

8.7%

8.8%

0.1percentage points

FY2017/3•

FY2018/3(forecast)(million yen)

FY2018/3(forecast)

Change (YoY)

Gross profit margin

24.5%

25.0%

0.5percentage point

Ratio of SG&A to sales

15.8%

16.2%

0.4percentage point

Ratio of operating income to sales

8.7%

8.8%

0.1percentage point

The gross profit margin are expected to be improved by an increase in the profitable product and the improvement ofproduction efficiency.
The ratio of SG&A to sales are expected to be worsen due to an increase of personnel expenses and shipping cost, etc.

18

Future Management Policy
Management philosophy:
Devoting our attention to manufacturing products focusing on safety, economy andenvironment under the theme of power sources while pursuing“benefits for three parties”(so those who use, sell and manufacturer will benefit).
Management strategies:(1) As a pioneer in power sources, we aim to become the leader in the highperformance generator market, employing our strong technical capabilities
and extensive sales network.

(2) Enhancing the peripheral businesses of generators.
(3) Entering into new related businesses.
Target management indicators:(1) ROE: 8% or more (5.7% in FY2017/3)(2) Ratio of ordinary income to sales: 12% or more (9.3% in FY2017/3)
19

Profit Distribution Policy
Profit distribution: Denyo recognizes the importance of returning profits toshareholders, while aiming to strengthen future competitiveness and profitability, andwe will implement an interim and term-end dividend payouts of distribution ofresults comprehensively calculated by achievement and payout ratio.

Changes in cash dividends:30 yen in FY2016/3 ⇒ 30 yen in FY2017/3 ⇒ 30 yen (forecast) in FY2018/3yen35
3025
20

Year-end dividents

15Interim dividends

1050
FY2015/3

FY2016/3

FY2017/3

FY2018/3(forecast)20

Future Business Strategies
Key Points

 Enhancement of products for other than construction-related markets
 Development of products with high environmental performance Strengthening of overseas business strategies

Enhancement of products forother than constructionrelated markets

Eco-base generator↓Enhancement of the stand-bygenerating set business
Sales expansion of power-supplyvehicles

Development of Product withhigh environmental
performance↓Contributing to the protection of theenvironment by manufacturing a seriesof standard feature eco-based(ecologically-minded) generators,welders and compressors.

Stand-by generating setsStrengthening of overseas
business strategies↓
・Selling products in the American, Asianand European markets in a balancedmanner.
・Manufacturing finished products at theVietnam Plant to respond to the robust
Asian market.

21Notes on Our Outlook

This material contains assumptions and outlooks for the future andforecasts based on plans as May 10, 2017.
Actual results may differ materially from projected values due to future
economic changes and competition.
This material is prepared for the purpose of providing information and is
not meant to solicit investment in securities issued by the Company.
Investors are responsible for making their own final investment decision.

22

Reference Materials

23Overview of the Company
The leading manufacturer of outdoor power sources such as engine generators and engine welders
History:

July 2,1948

Established as Japan Power Welding Machine Co., Ltd.

1959

Developed and launched Japan’s first engine-driven welders.

1961

Began to manufacture and sell engine-driven generators.

1966

Developed soundproof engine-driven generators.
Changed its corporate name to Denyo Co., Ltd.

1983

Listed on the Second Section of the Tokyo Stock Exchange.

2000

Listed on the First Section of the Tokyo Stock Exchange.

● Company size, etc. (FY2017/3 on a consolidated basis)(million yen)
Net sales

48,851

Overseas sales

19,599Ordinary income

4,526

Net income

2,867

Total assets

68,678

Net assets

53,145Market capitalization (as of March 31)

38,496

Number of employees

1,215 persons

Head Office (Nihonbashi-Horidomecho)

24

The Group Companies
100%( Nishinihon Generator Mfg. Co., Ltd. )
100%

80%

100%

100%

76%

51%
100%

*1. Other than the above, the New Japan Machinery Corporation is an equity-method affiliate (investment ratio 15.7%).
2. Underlined companies are manufacturers.

25Trends and Forecasts by Product Sales
Sales by productmillion yen

60,000Generators

50,000Compressors

5,504

5,334
6,701

40,000Welders

5,181

993

1,126
5,556

5,919
1,104

6,100

5,720

1,500

1,440

5,400

1,094
3,844

805
4,834

5,263

36,84938,241

40,07936,465

38,29436,857FY2012/3

FY2013/3

FY2014/3

FY2015/3

FY2016/3

FY2017/3

5,100Others

4,832

30,00020,00039,00010,0000FY2018/3(Forecast)

26

Changes in Sales by Region and Forecasts
Sales by region

million yen

60,000
Japan

North/Central America

Asia

2,945

50,000

2,137
2,466
5,647

40,000

2,410

6,959

3,606
6,619

6,862

9,548

Europe and others
3,200

2,808
6,700

6,921

6,479

9,776

10,310

9,007

11,23431,727

31,46830,15529,252FY2014/3

FY2015/3

FY2016/3

FY2017/3

10,753

10,70030,00020,00030,445

27,64531,40010,0000
FY2012/3

FY2013/3

FY2018/3(forecast)27

Changes in Results for the Last 30 Years
Ordinary income, 100 million yen

Net sales,100 milion yen

600
Bubble periodJapanOverseas

Great East Japan
Earthquake

500
40060

Ordinary income

Y2K boom

Lehman shock

50
40300

30200

20100

1000
Fiscal Year28