TOP INTERVIEWREVIEW OF SEGMENT OPERATIONSTOP INTERVIEW

By laying a foundation topromote globalization, wewill accelerate our initiatives.
In fiscal 2014, we launched our new medium-term
management plan, “NEXT 100: Beyond 100 years.” Alongwith a report on business conditions for the first half of fiscal
2014, we hereby explain the initiatives based on the principal
measures of “NEXT 100,” and its future development.
President Kenzo Terashima

QPlease tell us about the businessconditions for the first half.

Overall results for orders maintained the same level as thecorresponding period for the previous fiscal year, as robust
results in the Transportation Systems segment made up forthe rather stagnant performance of Industrial Systems
segment and the Information Equipment Systems segment.
Although demand for domestic projects was flat, orders
received in the Transportation Systems segment were up
due to strong performance in overseas projects, such as
expanded demand for components in the Chinese market.
Concerning net sales, revenue was up thanks tocontributions from electrical equipment for use in Chinese
high-speed railroads, which has recorded increasing orders
since the previous fiscal year.
Orders received and net sales in the Industrial Systems
segment continued to be strong in areas such as testing
equipment for automobile development, but capital
investment was slow to recover in the domestic market,
leading to weak growth in production facilities. In
September 2014, we opened a representative office in
Bangkok, Thailand, aiming to capture the needs for
manufacturing facilities in the Southeast Asian market, and1

will further enhance our information collection activities inthe future.
There were no remarkable movements in the Information
Equipment Systems segment compared with thecorresponding period of the previous fiscal year, and its
performance remained at low level. We hope that it willbounce back in the second half, when such events as thelaunch of the Hokuriku Shinkansen and the train timetablerevisions at various lines are scheduled.
Amid these business conditions, in terms of consolidated
business results for the first half of fiscal 2014, both revenue
and profits increased significantly compared with thecorresponding period of the previous fiscal year. This wasattributable to net sales and operating income that largely
met the initial plans, and ordinary income and net incomethat greatly exceeded plans due to foreign exchange gain
being recorded.

Q

Please explain new initiatives forthe future.

“NEXT 100: Beyond 100 years,” the three-year mediumterm management plan started in fiscal 2014, sets

“establishing new businesses” as one of its principal
measures. As part of this measure, in August 2014, weestablished a subsidiary, Beijing Jingche Shuangyang
Traction System Co., Ltd. in Beijing, China, which willdevelop a maintenance business for electrical equipment forrailroads. The company was established as a joint venture
between Toyo Denki (Beijing) Co., Ltd., one of oursubsidiaries, and a local trading company, and will beengaged in the promising periodic inspection business forelectrical equipment mainly for the rail vehicles of the Beijing
Subway.
The Beijing Subway has currently expanded its total track
length beyond that of the Tokyo metropolitan area, boasting
approximately 4,000 rail vehicles in operation. We deliverelectrical equipment to 34% of all its rail vehicles and haveestablished a strong relationship of trust with the subway
system operators based on our solid performance. The
purpose of launching this maintenance business is toensure our sustainable growth in the Chinese market by
expanding the business from manufacturing tomaintenance, leveraging these firm relationships with them.
Rail vehicles undergo periodic inspection approximately
every eight years (about 1.20 million kilometers) in travel
distance, meaning that in the Beijing Subway, which wasdeveloped for the 2008 Beijing Olympics, increasing
number of vehicles will become subject to periodic
inspection beginning in 2015, and we believe that there will
be a continuous demand for maintenance.
Additionally, another principal measure of “NEXT 100” isadvancing the “restructure production system” inpreparation for future increase in orders in both in Japanand overseas.
With the aim of achieving “net sales of 50.0 billion yen”
and “overseas net sales ratio of 50%” by the final year (fiscalyear ending May 31, 2017) of “NEXT 100,” we will continue
to expand overseas production, but our mainstay parts willcontinue to be produced primarily in Japan. Therefore, theTransportation Systems segment of which major production
base is the Yokohama Plant, are particularly underconditions where further improvement in efficiency andexpansion of production volume are required. We will
respond to this by optimizing production system including
the Shiga Factory which is engaged in production for theIndustrial Systems segment and other affiliates.

Q the second half.

Please tell us about the outlook for

Results for the second half for the Industrial Systems
segment will be affected to an extent by the recovering
status of domestic capital investment, but basically, thestrong Transportation Systems segment is continuously
expected to serve as the driving force.
Concerning the Transportation Systems segment, inaddition to expanded orders for components in China, weexpect higher revenue as a result of full-fledged productionof electrical equipment for a new type of light rail vehicle(LRV) in Los Angeles, U.S.
In the Industrial Systems segment, we will enhance oursales activities to capture orders for industrial systems thatmeet demand for energy saving in Southeast Asia, to makeup for the weak capital investment in the domestic market.
Additionally, for testing equipment for automobile
development, we will introduce a newly developed highspeed rotation testing device for motors used in hybrid
vehicles in an effort to expand our market.
Concerning the Information Equipment Systems segment,
we expect increased orders for railway station operating
equipment following the aforementioned launch of theHokuriku Shinkansen and the train timetable revisions, aswell as contribution to sales of the railway service
information system utilizing remote monitoring technology,
which was adopted by the Kagoshima City Transportation
Bureau.
Focusing on the 100th anniversary of our founding in
2018, we are currently laying a foundation for growth furtherinto the future with the measures outlined above. Moving
forward, in order to promote globalization, which is the main
theme of “NEXT 100,” we will accelerate these measures.
We would like to ask for the continued support of ourshareholders in anticipation for our businesses to expand
into the new areas.

2TOP INTERVIEWREVIEW OF SEGMENT OPERATIONSREVIEW OF SEGMENT OPERATIONST O P I C STransportation
Systems Segment
Percentage oftotal net sales

68.4%

Orders Received

12,557 million yen(Up 18.2% year on year)

Net Sales13,031 million yen

7,958

29.7%

10,622

12,557
7,657(Up 27.0% year on year)

Orders Received



6,458



2013/5

2014/5Net Sales

2015/55,666 million yen

1.9%(Up 140.4% year on year)

Orders Received






3

2015/5589

2014/5

6,348

6,592

6,458

2013/5

2014/5

2015/5Full fiscal year

1,100

12,600

11,542 10,924

11,457 11,097(Forecast)

433
5,236

5,332

5,666

2013/5

2014/5

2015/5

536

414

172
-45
2013/5

2014/5

2015/5

Orders Received (Unit: Million yen) Net Sales (Unit: Million yen) Segment Income (Unit: Million yen)First half

364 million yen

1,544
967

1,673

1,500

1,701

1,828(Forecast)

669

364
2013/5(Forecast)

630

million yen(Up 7.1% year on year)

240

265

1,034
589

2014/5

2015/5

2013/5Full fiscal year

348

1,400

(Forecast)

2014/5

2015/554
2013/5

Orders received recorded an increase both in Japanand outside Japan. In overall terms, orders received
increased 18.2% compared with the corresponding
period of the previous fiscal year to 12,557 million yen.
Net sales were flat in Japan, but increased sharply
outside Japan, and totaled 13,031 million yen
representing 32.2% year-on-year increase.
Due to increased revenue, segment income totaled
1,351 million yen representing 27.0% year-on-yearincrease.

2015/5(Forecast)(Forecast)(Down 42.1% year on year)18

2013/5

15,500

Segment Income

2014/5First half

million yen(Down 43.0% year on year)

Net Sales

2013/5414 million yen



1,351

Orders Received (Unit: Million yen) Net Sales (Unit: Million yen) Segment Income (Unit: Million yen)(Up 6.3% year on year)



1,064

million yen

Segment IncomePercentage of
total net sales

9,860565(Down 2.0% year on year)

Information Equipment
Systems Segment

1,913
13,031

1,351 million yenPercentage of
total net sales

2,374

17,324(Up 32.2% year on year)

(Forecast)

22,19820,940

Segment Income

Industrial
Systems Segment

Orders Received (Unit: Million yen) Net Sales (Unit: Million yen) Segment Income (Unit: Million yen)First half
Full fiscal year
29,790 28,000
26,000(Forecast)
2,800(Forecast)

1718

2014/5

2015/5

Orders received decreased 2.0% compared with thecorresponding period of the previous fiscal year to
6,458 million yen, due to weak orders received forcapital investment related such as printing equipment
and processing equipment, and testing equipment for
automobile development, despite strong infrastructure
system related.
Net sales in this segment increased 6.3% year on
year to 5,666 million yen, mainly due to increased
testing equipment for automobile development.
Segment income increased 140.4% year on year to414 million yen, which was attributable to increased
revenue and improved profitability.

Orders received in this segment decreased 43.0%
compared with the corresponding period of theprevious fiscal year to 589 million yen, due to adecrease in both railway station operating equipment
and remote monitoring systems.
Net sales in this segment decreased 42.1% year on
year to 364 million yen, mainly for the same reasons
underlying the decrease in orders received.
Segment income for this segment increased 7.1%
year on year to 18 million yen, which was attributable toimproved profitability.

Opened a representative officein Bangkok, Thailand
In Southeast Asia, where higheconomic growth rate and vigorous
investments in infrastructure-related
Buddhist opening ceremonyand other industries are expected, we(Praying for a prosperous andestablished a representative office insafe business)
Bangkok, Thailand as a sales support
base to expand and strengthen business opportunities in the region.
(1) Name: TOYO DENKI SEIZO K.K. Bangkok Representative Office(2)	Address: No. 1 Q-House Lumpini, Room No. 2722, 27th Floor, South
Sathorn Road, Tungmahamek, Sathorn, Bangkok 10120, Thailand(3) Established: September 1, 2014(4)	Business activities: Market research, information collection and sales
supportEstablished a subsidiary in Beijing, China, withprimary business in maintenance of electricalequipment for railroads
Our business in China has centered on the delivery of electricalequipment for rail vehicles for high-speed railroads and subways. In
order to further reinforce our business, we have established a new
subsidiary to capture the demand for maintenance, which isexpected to increase in the future.
(1) Name: Beijing Jingche Shuangyang Traction System Co., Ltd.
(2)	Address: B2-3 Metro Industrial Park, 9 Second Street East, Beijing
Economic and Technological Development Area
(3) Established: August 19, 2014
(4) Capital stock: CNY20 million(5) Business activities:	Maintenance of traction systems forlight rail vehicles; sale, import andexport of related equipment andancillary business(6) Shareholders:
Toyo Denki (Beijing) Co., Ltd.* 50%	Beijing Xin Xing Ri Xiang Science &Technology Trade Co., Ltd. 50%*	Wholly owned subsidiary of Toyo Denki
Seizo K.K.

The outward appearance

4