Ryosan Company, Limited
Supplementary Materials for
FY2019 Financial Results
Fiscal year ended March 31, 2020

May 14, 2020

Blank Page22

Financial Results for FY2019
Counter Measures for Profitability Enhancement
Plan for Full Year FY2020

NoticeBusiness forecasts and all statements related to the future contained in this document
are based on information currently possessed by Ryosan Company, Limited (Ryosan)
and on certain assumptions which are judged to be rational. Actual business performance
may differ greatly depending on a variety of factors. The following is a list of major factors:・Economic conditions in key markets (Japan and the rest of Asia), rapid changes
in consumption trends and supply-demand balance for products
・Sharp fluctuations in the dollar-yen exchange rate
・Substantial fluctuation in prices in capital markets

33

Financial Resultsfor FY2019

Consolidated Statements of Operation

 Both net sales and operating income decreased compared with the previous fiscal year (YoY), impacted bysluggish demand and inventory scrappage.
 The decline in ordinary income eased due to foreign exchange gains from revaluations in previous term. Net
profit declined 19.3% YoY because of impairment losses from domestic branch restructuring and voluntary
retirement, carried out as part of counter measures for profitability enhancement.
（単位：億円）(Unit: ¥Bil)

FY18

FY19 (Act)AmountAmount

FY18 (Plan)(*)

ChangeAmountGap

Net Sales

249.6

227.2

–9.0%

235.0

–3.3%

Gross Profit

20.6

17.7

–14.0%

19.3

–8.0%

(% of Net Sales)(8.3%)(7.8%)(–0.5pt)(8.2%)(–0.4pt)

Operating Income

5.2

3.1

–40.6%

4.2–26.0%(% of Net Sales)(2.1%)(1.4%)(–0.7pt)(1.8%)(–0.4pt)

Ordinary Income

3.9

2.9-26.6%

3.6–19.0%(% of Net Sales)(1.6%)(1.3%)(–0.3pt)(1.5%)(–0.2pt)

1.4

1.1–19.3%

1.9–37.2%(0.6%)(0.5%)(–0.1pt)(0.8%)(–0.3pt)

EPS (¥)

62.07

50.96

–17.9%

81.09–37.2%US Dollar Average Rate (¥)

110.91108.74–2.0%

108.00+0.7%

Net Profit(% of Net Sales)(*)Announced May 14, 201944

Financial Resultsfor FY2019

Segment Information

Sales of Semiconductors for industrial equipment and in-vehicle electrical equipment declined amid faltering demand.
Operating income fell due to a decline in gross profit, prompted by disposition of immobile stock as the result of thecounter measures for profitability enhancement.
In Electronic Components, sales and income shrank due to slow sales of high-value-added products for industrial
equipment.
In the Electronic Equipment segment, sales decreased amid a decline in sales to major producers of in-vehicle electricalequipment, while operating income was largely unchanged YoY, supported by stable sales of high-value-added products.

FY18（単位：億円）(Unit: ¥Bil)

AmountTotal

Amount

Gap

–9.3%

141.5

–3.8%

Operating Income

2.4

1.1

–52.9%

2.1–46.0%(% of Net Sales)(1.6%)(0.9%)(–0.7pt)(1.5%)(–0.6pt)

77.4

74.2

–4.2%

74.5

–0.4%

Operating Income

2.6

2.1

–19.2%

2.2–4.8%(% of Net Sales)(3.4%)(2.9%)(–0.5pt)(3.0%)(–0.1pt)

22.1

16.9

–23.5%

19.0–10.9%

Operating Income

0.3

0.3

+0.2%

0.4

–4.3%

(% of Net Sales)(1.7%)(2.3%)(+0.6pt)(2.1%)(+0.2pt)

Net Sales

249.6

227.2

–9.0%

235.0

–3.3%

Operating Income

5.2(2.1%)

3.1(1.4%)–40.6%(–0.7pt)

4.2(1.8%)–26.0%(–0.4pt)

Net Sales

ElectronicEquipment

Change136.1

Net Sales

ElectronicComponents

Amount

FY18 (Plan)(*)

150.1

Net Sales

Semiconductors

FY19 (Act)(% of Net Sales)(*)Revised October 31, 201955

Financial Resultsfor FY2019

Trend in Net Sales and Operating Margins by Quarter Net sales have trended below ¥60 bil from Q4 2018 onward. Sales as a whole were subdued,
affected by declining demand in the industrial equipment and other markets.
 Operating margin recovered to 1.9% in Q3 FY2019, buoyed by a decrease in selling, general andadministrative expenses. However, this figure decreased in Q4 due to inventory scrappage, etc.
Net Sales (Unit: ¥Bil)
80.0
Semiconductors

58.9

64.7

66.2

6.5

6.4

5.5
18.4
40.0

2.6%

34.9

21.0
2.7%

37.0

21.9

Electronic Components

64.1
7.8

20.4

2.6%

37.8

63.5

65.4

5.2

6.3

19.6
2.0%

1.2%
35.7

38.6

Electronic Equipment

63.2
5.7

20.7
2.5%

38.3

Operating Margin5.0%
Operating Margin

19.4

2.3%
38.1

57.4

57.9

4.8

4.7

17.6

1.6%
34.9

18.7

58.5
4.4

57.9
4.2

19.2

18.7

1.8%

1.9%

34.7

35.0

4.0%

52.8
3.4

3.0%

17.4
2.0%

1.4%
34.4

31.9

1.0%

0.3%
0.0

0.0%
Q1

Q2

Q3
FY17Q4Q1Q2Q3FY18Q4

Q1

Q2

Q3

Q4

FY1966

Financial Resultsfor FY2019

Segment Trend Information

 Net sales by region were relatively unchanged YoY. By application, the rate of decrease was relatively small forin-vehicle electrical equipment, so this segment’s share of total increased. By product, electromechanicalcomponents expanded its share, amid solid demand for in-vehicle electrical equipment for these components.

By Region

By Product

4%

4%

5%

37%

43%

42%

59%

FY1753%

FY1853%

OthersAsia

FY199%

1%
8%

3%
4%

3%
4%

25%

24%

26%

Electromechanical
Components

4%

4%

Memory

13%

16%

17%

Discrete
Semiconductors

41%

40%

39%

System LSIs

FY17

FY18

FY194%

8%

8%

13%

12%

14%

13%

12%

OthersIndustrial
Equipment
Information &Communication

18%

15%

15%ConsumerIn-Vehicle
ElectricalEquipment

15%1%

49%51%53%

FY17

FY18

FY191%6%3%4%

Facilities Equipment
Systems Equipment
Power Supplies
Display Devices

Japan

By Application
4%■ Semiconductors ■ Electronic Components■ Electronic Equipment

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Financial Resultsfor FY2019

Consolidated Balance Sheet / Consolidated Statements of Cash Flow Net assets fell ¥2.7 bil YoY to ¥84.9 bil, affected by items such as dividend payments of ¥2.9 bil. The
ratio of net assets to total assets was 61.7%.
 Factors such as reduction in notes and accounts receivable - trade of ¥7.8 bil and contraction ofinventories of ¥6.7 bil contributed to positive cash flow from operating activities of ¥17.9 bil. Cash andcash equivalents at the end of the period increased to ¥24.5 bil.
(Unit: ¥Bil)

End of Mar. 18

End of Mar. 19

End of Mar. 20

Gap (20-19)

Total Assets

162.2

146.5

137.7

–8.8

Current Assets

143.5

129.3

121.7

–7.6

Non-Current Assets

18.7

17.2

15.9

–1.3

Liabilities

67.9

58.7

52.8

–5.9

Net Assets

94.3

87.8

84.9

–2.7

58.1%

59.9%

61.7%

+1.8ptNet Assets to Total Assets (%)(Unit: ¥Bil)

FY17

FY18

FY19Gap (FY19-18)

Cash Flow from Operating Activities

–19.2

13.0

17.9

+4.9

Cash Flow from Investing Activities

0.6

–0.4

–0.3

+0.1

Cash Flow from Financing Activities

–6.5

–11.5

–7.4

+4.1

Cash and Cash Equivalents at the Endof the Period

13.4

14.5

24.5

+10.088

Financial Resultsfor FY2019

Return to Shareholders

 In view of the business results for FY2019 and in anticipation of full-fledged impact from the COVID-19
pandemic in FY2020, the FY2019 year-end dividend is reduced from ¥50 to ¥30, resulting in a full-year
ordinary dividend of ¥80.
 Ryosan plans to accumulate internal reserves with a view to ensuring sustainable growth.
Dividend per Share
Ordinary Dividend

Dividend (yen)150

Special Dividend

150
140

Acquisition of Treasury Shares
Dividend Ratio

Dividend Ratio
250%

150

140

Year

242%
200%

50

100

5050

50

157%
150%

117% 120%

50

79%
80

90

90

86%
100

100%

100
80
50%

No. ofAcquired
Shares(Thousand)Amount(¥Bil)

FY14450

1.8

FY151,550

4.6

FY161,3704.4

FY173,61015.9FY181,0504.2

FY19000%0
FY14

FY15

FY16FY17FY18FY1999

Blank Page1010Financial Results for FY2019
Counter Measures for Profitability Enhancement
Plan for Full Year FY2020

1111

Counter Measures for Profitability Enhancement

Counter Measures forProfitability Enhancement

 A series of measures to enhance profitability resulted in a 45% increase in one-time costs in FY2019, comparedwith the original plan, to ¥1.3 bil. Some measures are expected to continue into FY2020.

Financial reform

Reorganization

Project Name

Measures Implemented

FY2019 Results (compared with FY2018)

I

Withdraw from non-profitablebusinesses

Reduction in transaction volume,reduction in personnel

Assigned personnel reduced by 10 people

II

Optimize organizations

Merger and/or elimination of rented
buildings, branch offices, etc.

Branches: Reduced from 21 to 20 (–1)
Logistics bases: Reduced from 4 to 2 (–2)

III

Evaluate and concentrate on key
projects for Solution Businessinitiatives

Streamlining of projects and reduction ofrelated personnel

Number of projects: Reduced from 24 to 18(–6)
Assigned personnel: Reduced from 34 to28 (–6)

IV

Streamline control function

Slimming of head-office functions

Integration of HQs in FY2020: –2
Integration of divisions: –2 (June 2020)

VOptimize headcounts

Canvassing for voluntary early retirees

62 early retirees

VI

Expand Renesas businessthrough non-organic approach

Taking area for commercial rights

Under current consideration

VII

Introduce business model tochange the engineering function
to the profit center

Under reorganization

Technologies are being sorted andorganizational structures put in place forpractical implementation

VIII

Reduce inventory volume andminimize US$ borrowing

Downsizing of unprofitable businesses,
strengthening of management

Interest expenses: Reduced by ¥140 milIX

Maximize head office space
usage

Termination of agreements on somerental properties around head officeand bringing those functions into thehead office building

Number of rental properties: Reduced from
5 to 4 (–1) (October 2020)

X

Dispose of non-working assets
including investment securities

Sale and disposition of real estate andinvestment securities

Impairment accounting applied to 2 offices
and 2 logistics bases
Sale of investment securities (April 2020)

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Counter Measures forProfitability Enhancement

Expected Quantitative Effects

 Several counter measures have been accomplished ahead of schedule and are taking effect. As a result,
Ryosan has achieved some of its original plan of reducing expenses by over ¥600 mil in FY2019.
 In FY2020, further inventory reductions and canvassing of voluntary retirees will be implemented.
Ryosan expects these measures to result in a total reduction in expenses for FY2019 and FY2020 of ¥1bil (80% of plan).
Cost Reduction Forecast(Unit: ¥Mil)

Cost reduction

80% achievement oforiginal plan expected

Cost increase

15,852Distribution
Inventoryreduction
Optimize HR

15,226
General exp.
review

FY19
original
plan
SG&A+Interest

SystemDistribution
depreciation

Inventory
reduction

Officeconsolidation 14,540
Optimize HR

FY19results

FY20
original
plan

FY19

FY20

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Financial Results for FY2019
Counter Measures for Profitability Enhancement
Plan for Full Year FY2020

1414

Impact of COVID-19 and Counter Measures

Plan for Full YearFY2020 While short-term effects are limited, the aftereffects of the COVID-19 pandemic are expected to be significant.
 In the short term, the Company will strengthen counter measures focusing on business risk and market risk.
Under the assumption that medium-term counter measures will be unavoidable, Ryosan will focus on crisis
management in this term.
CategoryRisk

Managem Business risk Sudden decrease in orders received and sales
ent
Sudden decrease in supplies
Steep rise in operating expenses

Status of response

Forecast

Increased frequency of monitoring of statusof customer order placement

Enhanced going
forward

Monitoring and sharing of information on
supplier production trends

Confirmation of risk

Focus on current situation and future
prospects

Shipping expenses, etc.
becoming apparent

Management Inability to obtain management information
risk

Refinement of management information and No impact
securing of reporting routes

Strategic risk Major changes in business plan preconditions

Strengthened monitoring of domestic andoverseas market trends

Reputationrisk

Insufficient corporate counter measures for
major outbreaks

Thorough diversification risk throughNo current impact
working at home, staggered work hours, etc.

Disaster

Infectious
diseaseOutbreak among key persons

As above. Thorough confirmation ofbusiness backup systems

No current impact

BusinessBusiness risk Outbreak among employees, suspension ofoperations at affected locations

As above

No current impact

As above

No current impact

Delay of receipt and placement of work orders

Finance

Market risk
Credit risk

Difficult to forecast in
the short term

Reduction of effectiveness of business activities Thorough calls to attention to key points on
from working from homeworking from home

Will partially become
apparent

Sudden changes in exchange and interest rates Reduction of exposed assets

No current impact

Decrease in value of assets held

Monitoring of market trendsConfirmation of risk

Customer bankruptcy

Review of customers’ management ofConfirmation of risk
operation of risk assets and strengthening ofmonitoring

1515

Plan for Full YearFY2020

FY2020 Plan (1) While it remains unclear when and how the current COVID-19 pandemic will be resolved, market
conditions for electronic components in China, Europe, North America and elsewhere globally cannot
avoid a major slowdown. Ryosan expects this deceleration to worsen in the coming months.
 Ryosan set up an original scenario in which Ryosan attains the target by expanding revenues while
cutting costs and disposing of non-working assets, none of which can be realized at this moment. On thecontrary, Ryosan must unavoidably conduct defensive business management focusing on crisismanagement.
FY2020 Income Plan
Increased income

ROE 5％ line

Decreased income

FY20
original
plan
FY19
originalplan

Macroeconomic
factors, etc.

Costreduction

FY19

FY19
results

Effects ofCOVID-19(unknown)

Businessreorganization

Disposal ofnon-workingassets
Cost reduction

FY201616

FY2020 Plan (2)Plan for Full YearFY20201. Key Points of Measures
1) Crisis Management Response• Ryosan will thoroughly implement measures against business risk and against market risk. Measuresagainst business risk cover all of the circumstances involved in operating its business, including not
only cases in which employees are infected but also cases in which customers are infected. Measuresagainst market risk from changes in market conditions are also implemented.
2) Counter Measure Projects for Profitability Enhancement• These measures have already borne fruit to a degree in terms of cost reduction, from efforts conductedin FY2019. However, some issues remain in terms of personnel systems and organizational
streamlining. Efforts to create a truly robust financial constitution are ongoing.
3) Fleshing Out Ryosan’s Long-Term Vision• Ryosan has just prepared RS Innovation 2030, Ryosan’s long-term vision for the next 10 years(announced May 14, 2020). This plan envisions three pillars for growth: business models, sales channels
and products (networks). While keeping a close eye on the status of COVID-19 clusters and the businessenvironment, Ryosan is fleshing out a detailed growth strategy in the 11th Medium-Term Business Plan
to achieve the Vision.
2. Forecast of Business Results and Shareholder Return Plan• Ryosan will publish the FY2020 forecast of consolidated business results and shareholder return plan assoon as reasonable calculations become possible.

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