Message from the President

Contributing to the society throughtechnology based on the keywords ofenergy saving, high efficiency,
and cleanliness
The medium-term management plan “NEXT 100:
Beyond 100 years” got off to a good start as
the overseas net sales ratio grew to 38.0%.
Both revenue and profits increased significantly during the fiscal
year ended May 31, 2015 as sales grew mainly in overseas for
the Transportation Systems segment and performance was alsostrong in the Industrial Systems segment. In terms of profits, contributions were made by the effects of the improved profitability offactories in addition to foreign exchange gains.
In the Transportation Systems segment, order backlog wasmaintained at high level despite lower orders compared to theprevious fiscal year led by factors such as delays in some scheduled overseas projects. Net sales increased significantly, especially in China and the United States, boosting profits. A subsidiary inthe maintenance business for electrical equipment for railroads,
established in August 2014 in Beijing, China, is also off to asteady start. Business is developing based on the strong relationships of trust we have built in China, and further expansion going
forward can be expected.
In the Industrial Systems segment, a greater number of ordersof testing equipment for automobile development and infrastruc-President

Kenzo Terashima

5

ture-related systems were received, and the level of orders received was restored to levels before the bankruptcy of Lehman
Brothers. Overseas, we received orders of factory systems inSoutheast Asia, centered on our representative office in Bangkok,
Thailand, which was established in September 2014, as weresponded to rising demand for energy saving at manufacturing
sites. For net sales, a significant increase in profits was achieved
as revenue grew in particular for testing equipment for automobile
development and profits were improved through structural reform.
In the Information Equipment Systems segment, the year
marked a low point in demand for updates to railway station operating equipment, and coupled with a decreased number of orders
for remote monitoring systems, net sales and profits were both
lower than the previous fiscal year.
From the results above, we believe that we were able to makea strong start for the first year of the three-year medium-term
management plan “NEXT 100” during the fiscal year ended May
31, 2015. In particular, the overseas net sales ratio grew from
27.3% in the previous fiscal year to 38.0%, as we took a big step
forward towards global growth.

We will restructure our production system as we
aim for net sales of 50.0 billion yen.
We are also promoting launch of new businesses
in preparation for the future.
In the medium-term management plan “NEXT 100,” we have set
the targets of achieving net sales of 50.0 billion yen in the fiscalyear ending May 31, 2017, of which 25.0 billion yen are overseas
net sales (overseas net sales ratio of 50%), through the promotionof globalization. In order to achieve this, we will further strengthen
overseas expansion and promote the restructuring of production
system to support future growth in orders. This will mainly consistof the expansion of the Yokohama Plant, which is the mainstay
production base for the Transportation Systems segment, and thenew establishment of a factory and consolidation of functions in
the Shiga region, which is responsible for production of the Industrial Systems segment. (Please see page 7 to 8 for information on
the strengthening of overseas expansion and the restructuring of
the production system.)

At the same time, in an aim to improve company-wide operations
efficiency in addition to production, we plan to install a core systemthat will comprehensively manage operations from the sales stage to
production processes and accounting processing. Preparations areunderway to begin operation of the system in summer 2016.
On the other hand, launching new businesses in preparation
for future growth is one of the fundamental policies of “NEXT100.” In the Transportation Systems segment, we will make themaintenance business in China for electrical equipment for railroads fully operational and capture rapidly-increasing demand forthe overhaul of electrical equipment for the Beijing Subway. In theIndustrial Systems segment, we will focus on industrial electric
power generators as a new measure as we develop markets forsales both domestically and overseas, such as renewable energy
systems including biomass power generation and waste disposal
furnaces, and emergency and non-emergency power equipment.
During this second year of “NEXT 100” (the fiscal year ending
May 31, 2016), we expect continued growth in revenue and profits through maintaining favorable performance in the Transportation Systems segment and further recovery in the Industrial Systems segment. As growth investments is planned to be increased
significantly from the fiscal year ending May 31, 2017, mainly forthe restructuring of the production system and the introduction of
the core system, the policy is to control such investments during
the current fiscal year for preparation.

We will work on establishing transparency andefficiency in management that is appropriate for
a company striving for global growth.
In response to the “Corporate Governance Code” introduced by
the Financial Services Agency and the Tokyo Stock Exchange,
which took effect on June 1, 2015, we have established independence guidelines for Outside Executives and the election of one
Outside Director was approved. We will continue to take steps tocomply with each item set forth by the “Corporate Governance
Code,” and aim to establish transparency and efficiency in management that is appropriate for a company striving for global
growth.
While we have decided upon 6 yen per share for the year-end
dividends for the current fiscal year, the same as the previous
fiscal year, based on our fundamental profit return policy of providing continuous and stable dividends, in the future, we will work
to improve return on equity (ROE) and the level of profit return.
Through technologies centered on the keywords of “energy
saving,” “high efficiency,” and “cleanliness” that contributes toenvironmental preservation, we would like to fulfill even moresignificant social contribution and live up to the expectations ofstakeholders as a sustainably developing company.

Medium-term management plan <Fiscal 2014 to Fiscal 2016>“NEXT 100: Beyond 100 years”
The Toyo Denki Group is committed to drastically enhancing its corporate value and thoroughly strengthening its management foundation in order to become a Group well adapted to the new era in anticipationof the year of our 100th anniversary of founding in 2018 and beyond.
Fundamental Policy

123

Numerical TargetsStrengtheninternational
competitiveness

Build a stablebusiness earnings
structure
Restructure
productionsystem

465

Train humanresources tosupport global
development
Establish newbusinesses

Promotedevelopment oftechnology(Unit: Billion yen)NEXT 100Net sales

Fiscal 2013

Fiscal 2014

(Actual Results)(Actual Resultsfor the First Year)

34.95

39.61

Fiscal 2016
(Forecast forthe Final Year)

50.00

Operating income

1.07

1.59

3.00

(Operating income ratio)(3.1%)(4.0%)(6.0%)

Ordinary income

1.03

2.05

3.20

Net income

0.64

1.10

1.90

Overseas net sales

9.55

15.06

25.00

(Overseas net sales ratio)(27.3%)(38.0%)(50.0%)

Toyo Denki Seizo Report 20156