Briefing on Results for the First Half of theFiscal Year ending March 31, 2016

November 19, 2015

Photo: Denyo United Machinery Pte Ltd (Singapore)ContentsI. Overview of Results for the First Half of FY2016/3
Shoichi Shiratori, Director and Managing Executive Officer
Administration Division

II. Outlook for FY2016/3 and Future Management
PolicyShigeru Koga, President

1Overview of Results for
the First Half of FY2016/3

2

Highlights of Results for the First Half of FY2016/3 (Consolidated)
Key Point

Net sales, etc. decreased year on year, while Net income increased year on year.
(million yen)First half of FY2015/3

Net sales
Operating income
Ordinary income
Net income
Capital investment
Depreciation
Net income per share

ROE
Interim dividends per share

24,281
1,951
2,123
1,398

100%
8.0%
8.7%
5.8%

First half of FY2016/3

23,560
1,743
1,895
1,414

858
480

818
598

65.00 yen

66.21 yen

6.4% Annualized
12.0 yen

6.0%

Rate of change(YoY)

100% △3.0%
7.4% △10.7%
8.0% △10.7%
1.2%
6.0%

Annualized

14.0 yen3

Sales Trends by Product (Consolidated)
Overview

1. Sales of generators decreased 611 million yen (△3.4%).
2. Sales of welders decline 269 million yen (△9.0%).
3. Sales of compressors were up 24 million yen (4.7%).
(million yen)

By productFirst half ofFY2015/3

Rate ofchange(YoY)△721 △3.0%

18,206 75.0%

17,595 74.7%△611 △3.4%

3,000 12.4%

2,731 11.6%△269 △9.0%

24,281

Generators
Welders

OthersChange(YoY)

100%

Net sales

Compressors

First half ofFY2016/3

515

100%

2.1%

2,560 10.5%

23,5602.3%

244.7%

2,693 11.4%

1335.2%5394Engine Generators (Consolidated)
First half of FY2015/3

Generators

18,206 million yen

First half of FY2016/3

Rate of change(YoY)△3.4%

17,595 million yen• In Japan, shipment to the major leasing and rental industry
declined.

65%• Overseas, shipment to the Asia and the Middle and Near East
increased.
Domestic market share of*According to aengine generators (mobile-type) Company survey

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 such as disaster prevention equipment
and offices, etc.
Power-supply vehicles, power light, etc.

5Engine Welders (Consolidated)
First half of FY2015/3

Welders

3,000 million yen

First half of FY2016/3

Rate of change(YoY)△9.0%

2,731 million yen• In Japan, the shipment is essentially unchanged form
the pervious year.

55%• Overseas, the shipment to the Europe decreased.
Domestic market share ofengine welders*According to aCompany survey

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)
First half of FY2015/3

Compressors

515 million yen

First half of FY2016/3

Rate of change(YoY)

539million yen• Shipments to the overseas market increased slightly.

4.7%

20%

Domestic market share ofengine compressors

Engine compressor

Motor compressor*According to aCompany survey

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)
First half of FY2015/3

Others2,560 million yen

Rate of change(YoY)

First half of FY2016/32,693 million yen

5.2%• Sales of self-propelled lifters and Parts sales increased.

Sales of other products
Self-propelled lifters
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

First half of FY2015/3

First half of FY2016/3

Change(YoY)

Rate ofchange(YoY)

Net sales

24,281

100%

23,560

100%

△721

△3.0%

Domestic sales

13,951

57.5%

12,96255.0%

Overseas sales

10,33042.5%

10,597

45.0%

△989
267

△7.1%
2.6%

North/Central
America

5,388

22.2%

4,785

20.3%

△603 △11.2%

Asia

3,270

13.5%

4,041

17.2%

771

23.6%

Others

1,671

6.9%

1,771

7.5%

100

6.0%

First half of FY2015

North/Central
America

Japan

First half of FY2016

North/Central
AmericaJapan05,000

10,00015,000Asia

Asia
20,000

OthersOthers
25,00030,000

million yen

9Factor Analysis of Changes in Operating Income
Decrease in Operating Income•It is affected by the increase of deprecation expense and personnel expense.
(million yen)First half ofFY2015/3

First half of
FY2016/3

Change (YoY)

Operating income

1,951

1,743

△208

Operating income margin

8.0%

7.4%

△0.6 percentage points

First half of
FY2015/3

First half of
FY2016/3

Rate of change (YoY)

Gross profit margin

23.9%

24.5%

0.6 percentage points

Ratio of SG&A to sales

15.9%

17.1%

1.2 percentage points

Ratio of operating income tosales

8.0%

7.4%

△0.6 percentage points••

Gross profit margin is improved to an increase in the shipment of highly profitable products in U.S. and thecontribution of a weaker yen.
Ratio of SG&A to sales increased due to increase of the deprecation expense and personnel expense.

10Consolidated Balance Sheets
Overview

1. A 2,259 million yen decrease in current assets was mainly due to an decrease in tradenotes and accounts receivables.
2. A 3,179 million yen decrease in current liabilities was mainly due to declines in tradenotes and accounts payables.
(million yen)First half of
FY2015/3

At the end of
FY2015/3

First half ofFY2016/3

Change from theend of FY2015/3

Current assets

38,12940,85638,597△2,259Non-current assets

24,875

26,46825,219Total assets

Long-term liabilities

63,004
12,257
4,918

67,324
13,396
4,732

63,817
10,2174,165△1,249△3,507△3,179△567

Total liabilities

17,17618,12814,382

Total net assets

45,82849,19549,434△3,746239

Total liabilities and net assets

63,004

67,32463,817△3,507

Current liabilities

11Changes in Consolidated Cash Flows
Overview

1. A 1,506 million yen cash flow from operating activities was mainly due to a decrease intrade notes and accounts receivable.
2. Balance of cash and cash equivalents increased 368 million yen from the end of theprevious fiscal year.
(million yen)First half ofFY2015/3

First half ofFY2016/3

I Cash flow from operating activities

2,347

1,506

II Cash flow from investing activities△ 1,254

△ 510

1,093

996

△ 1,000△ 652△ 752516368

9,848

11,144

I + II Free cash flows
III 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 FY2016/3 andFuture Management Policy

13Outlook for FY2016/3: Consolidated Income and Loss
Key points

1. Net sales are expected to be 55.0 billion yen.
2. Assumed exchange rate is 110 yen/dollar.

FY2015/3(million yen)

FY2016/3 (forecast)

Change(YoY)

Rate ofchange(YoY)

Net sales

52,267100%

55,000

100%

2,733

5.2%

Operating income

5,348

10.2%

5,500

10.0%

152

2.8%

Ordinary income

5,757

11.0%

5,800

10.5%

430.7%Net income

3,857

7.4%

3,600

6.5%

△257△6.7%

Capital investment

2,531

1,200

△1,331△52.6%

999

1,300

301

30.1%

179.4yen

168.5yen△10.9yen

8.6%

7.3%

28.0yen

28.0yenDepreciation

Net income per share
ROE
Cash dividends pershare (yen)14Changes in the Amount of Capital Investment(million yen)

End of March2013

End of March2014

End of March2015

End of March
2016 (plan)

1,457

2,453

2,531

1,200

Cost ofequipment••

Main uses••

Laboratory & Training
Center 814
Machinery of Fukui plant,etc. 150
U.S. Plant 237
Vietnam Plant 127••••

Machinery of Fukui plant,etc. 480
Nishinihon Generator Mfg.
270
Vietnam Plant 440
Singapore 1,100

•
••
••

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. 450
Nishinihon Generator Mfg.
35
Singapore 255
Vietnam Plant 85
Others 375

Amount of capital investment
million yen

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

1,000
500
0
End ofMarch2013

End ofMarch2014

End ofMarch2015

End ofMarch2016(plan)

Denyo Vietnam the 2nd factory15

Outlook for Sales by Product (Consolidated)
Overview

1. Sales of generators are expected to increase by 2,021 million yen (5.0 %).
2. Sales of welders are anticipated to rise by 144 million yen (2.6%).
3. Sales of compressors are forecasted to be up by 274 million yen (24.3%).
(million yen)

FY2016/3 (forecast)

Change (YoY)

Rate of change(YoY)

Consolidated
sales

52,267 100%

55,000 100%

2,733

5.2%

Generators

40,079 76.7%

42,100 76.5%

2,021

5.0%

Welders

5,556 10.6%

5,700 10.4%

1442.6%2.5%

274

24.3%5,800 10.5%

296

5.4%

By product

FY2015/3

Compressors
Others

1,126

2.2%

5,504 10.5%

1,40016

Trends and Forecasts by Product Sales
Sales by productmillion yen

60,000Generators

Welders

Compressors

Others

5,800

50,000

5,504
5,334

6,701
1,094
3,844

40,00030,000

5,181
805

4,834

993

1,126

1,400

5,700

5,556

5,263

5,611
929
2,935

20,00036,46536,84938,241FY2012/3

FY2013/3

FY2014/3

40,07942,10023,811

10,000

0FY2011/3

FY2015/3

FY2016/3(forecast)17

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

FY2015/3

FY2016/3 (forecast)

Change (YoY)

Rate of change(YoY)

52,267 100%

55,000 100%

2,733

5.2%

Domestic sales

31,468 60.2%

32,600 59.3%

1,132

3.6%

Overseas sales

20,799 39.8%

22,400 40.7%

1,601

7.7%

North/ Central
America

11,234 21.5%

10,950 19.9%

△284

△2.5%

Asia

6,619 12.7%

7,900 14.4%

1,281

19.4%

Others

2,945

6.5%

605

20.5%

By region

Consolidated sales

5.6%

FY2015

JapanFY2016/3(forecast)

Japan
0

10,0003,550

North/Central
America

North/Central
America
20,00030,00040,000AsiaOthers

Asia
50,000

Others60,000 million yen

18

Changes in Sales by Region and Forecasts
Sales by region

million yen

60,000
Japan

North/Central America

Asia

Europe and others
3,550

2,945

50,000

2,137
2,466

2,410

5,647

6,862

40,000

6,959

9,548

30,000

6,619

7,900

9,007

11,234

10,95031,727

31,46832,600FY2014/3

FY2015/3

FY2016/3(forecast)

10,753

2,954

4,731
6,652

20,00030,445

10,00027,645

18,9490

FY2011/3

FY2012/3

FY2013/3

19

Details of the Operating Income Forecast
Increase in operating income

The operating income margin slightly decreased from the previous fiscal year
and the operating income is expected to increase by 152 million yen.

(million yen)

FY2015/3

FY2016/3(forecast)

Change (YoY)

Operating income

5,348

5,500

Operating income margin

10.2%

10.0% △0.2percentage points

FY2015/3

FY2016/3(forecast)

152

Change (YoY)

Ratio of SG&A to sales

25.1%
14.9%

25.5%
15.5%

0.4percentage point
0.6percentage point

Ratio of operating income to sales

10.2%

10.0%

△0.2percentage point

Gross profit margin••

The gross profit margin are expected to improve due to an increase in the shipment of highly profitable products inJapan and U.S.
The ratio of SG&A to sales are expected to rise due to increase of depreciation expenses and personnel expenses,etc. year on year.

20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 (8.6% in FY2015/3)(2) Ratio of ordinary income to sales: 12% or more (11.0% in FY2015/3)
21

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:
24 yen in FY2014/3 ⇒ 28 yen in FY2015/3 ⇒ 28 yen (forecast) in FY2016/3
yen

30
25
20Year-end dividents

15Interim dividends

1050FY2013/3

FY2014/3

FY2015/3

FY2016/3(forecast)22

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-supply
vehiclesDevelopment 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.

LEG standby generator

Strengthening of overseas
business strategies↓
・Selling products in the American, Asianand European markets in a balancedmanner.
・Start manufacturing finished products
at the Vietnam Plant to respond to therobust Asian market.

23

Notes on Our Outlook

This material contains assumptions and outlooks for the future andforecasts based on plans as November 19, 2015.
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.

24

Reference Materials

25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 high-speed 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. (FY2015/3 on a consolidated basis)(million yen)Net sales

52,267

Overseas sales

20,799Ordinary income

5,757

Net income

3,857

Total assets

67,324

Net assets

49,195Market capitalization (as of March 31)

41,010

Number of employees

1,121

Head Office (Nihonbashi-Horidomecho)

26

The Group Companies
100%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.

27

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

Net sales,100 milion yen

600

60
Bubble periodJapan

Overseas

Ordinary income

Great East Japan
Earthquake

500

400

50
Y2K boom
Lehman shock

40300

30

200

20100

1000
Fiscal Year28