Ryosan Co., Ltd
FY2018 Results
Supplemental Information
Fiscal year ended March 31, 201914th May, 2019

Financial results for FY2018

Existing Medium-Term Business PlanCounter Measures for Profitability Enhancement

Business Plan for Full Year FY2019

22

FY2018
ResultConsolidated Statements of Operation

 Both Net Sales and Operating Income decreased mainly due to the slow down of FA business during the2nd half of the fiscal year.
 Ordinary Income and Net Profit decreased further due to the increase of interest expense, the foreignexchange losses from the US$ borrowing, the extraordinary tax payout at overseas subsidiary and the
lump-sum depreciation of goodwill.
（単位：億円）(Unit: ¥Bil)a
FY17bcAmountAmountFY18(Act)deFY18(Plan)(*)

ChangeAmountGap

Net Sales

254.0

249.6

-1.7%

254.0

-1.7%

Gross Profit

20.3

20.6

+1.5%

21.1

-2.4%

(% of Net Sales)(8.0%)(8.3%)(+0.3pt)(8.3%)(0.0pt)Operating Income

5.6

5.2

-7.6%

5.6

-6.5%

(% of Net Sales)(2.2%)(2.1%)(-0.1pt)(2.2%)(-0.1pt)

Ordinary Income

6.3

3.9

-37.9%

4.0-0.6%(% of Net Sales)(2.5%)(1.6%)(-0.9pt)(1.6%)(0.0pt)4.4

1.4-67.0%

2.8-47.1%(% of Net Sales)(1.8%)(0.6%)(-1.2pt)(1.1%)(-0.5pt)

EPS (¥)

173.9862.07-64.3%

117.21-47.0%US Dollar Average Rate (¥)

110.85110.91+0.1%

107.63+3.0%

Net Profit(*)Revised in Oct. 201833

FY2018
ResultSegment Information ①

 Semiconductor sales showed stable volume even if the China market slowed down in FY2018. Its
Operating Income decreased due to the inventory revaluation and the revisions of sales margins fromsuppliers.
 Net Sales shrank in Electronic Components during the 2nd half FY2018 mainly due to weak sales in theConsumer segment. Its Operating Income ratio remains stable.
 Net sales and Operating Income in Electronic Equipment decreased because of the termination of thelarge business.
FY17（単位：億円）

Amount（Unit：¥Bil）

Net Sales
Semiconductors

ElectronicComponents

ElectronicEquipment

Total(*)Revised in Oct. 18

FY18(Act)
AmountFY18（Plan)(*)

ChangeAmount

Gap

145.7

150.1

+3.0%

152.0

-1.2%

Operating Income2.6

2.4-6.1%

2.7-10.4%(% of Net Sales)(1.8%)(1.6%)(-0.2pt)(1.8%)(-0.2pt)

Net Sales

81.9

77.4

-5.5%

78.5

-1.4%

Operating Income

2.8

2.6-5.8%

2.8-5.4%(% of Net Sales)(3.4%)(3.4%)(0.0pt)(3.6%)(-0.2pt)

Net Sales

26.3

22.1

-16.1%

23.5

-5.8%

Operating Income

0.6

0.3

-37.0%

0.4-4.5%(% of Net Sales)(2.3%)(1.7%)(-0.6pt)(1.7%)(0.0pt)Net Sales

254.0

249.6

-1.7%

254.0

-1.7%

Operating Income

5.6

5.2

-7.6%

5.6-6.5%(% of Net Sales)(2.2%)(2.1%)(-0.1pt)(2.2%)(-0.1pt)
44

FY2018
ResultSegment Information ② The gradual increases of Asia (By Region) and Semiconductor (By Product) do not change
for FY2018. In-vehicle Electrical Equipment has more than a 50% share (By Application).
By Region

By Product

3%

4%

4%

Others

38%

37%

43%

Asia

59%

FY1659%FY1753%

Japan

FY18

■ Semiconductors ■ Electronic Components■ Electronic Equipments
1%8%Facilities Equipment

10%

1%
9%

3%
5%

3%
4%

3%
4%

Power Supplies
Display Devices

24%

25%

24%Electromechanical
Components

4%

4%

Memories

1%

By Application

Systems Equipment

8%

Others3%

13%

Information &Communication

14%

13%

16%

Discrete
Semiconductors

15%

13%

Industrial Equipment

18%

15%

Consumer

In-Vehicle
ElectricalEquipment

40%

41%

40%

System LSIs

FY16

FY17

FY18

4%
14%

4%
14%

14%
17%

51%

49%

51%

FY16

FY17

FY1855

FY2018
ResultConsolidated Balance Sheet / Consolidated Statements of Cash Flow Net Assets decreased to ¥87.8 bil through the stock repurchase of ¥4.2 bil and a dividend payout of ¥3.5bil.
 Operating cash flow recorded plus ¥13 bil as the result of account receivable securitization, a countermeasure to improve asset efficiency. Cash and Cash Equivalents increased to ¥14.5 bil.
(Unit: ¥Bil)

End of Mar.17

End of Mar.18

End of Mar.19

GAP(19-18)

Total Assets

161.6

162.2

146.5

-15.6

Current Assets

142.8

143.5

129.3

-14.2

Non-Current Assets

18.7

18.7

17.2

-1.4

Liabilities

52.1

67.9

58.7

-9.1

Net Assets

109.5

94.3

87.8

-6.4

Net Assets to Total Assets (%)

67.8%

58.1%

59.9%

+1.8pt(Unit: ¥Bil)

FY16

FY17FY18GAP(FY18-17)

Cash Flow from Operating Activities-1.8-19.2(*1)

13.0(*2)+32.2

Cash Flow from Investing Activities

-0.8

0.6

-0.4

-1.0

Cash Flow from Financing Activities

-9.2

-6.5

-11.5

-5.0

Cash and Cash Equivalents at the End of
the Period

38.6

13.4

14.5

+1.1

(*1) Inventory increase ¥16.2 bil, AR increase ¥7.2 bil, (*2) AR decrease ¥15.1 bil

66

Financial Results for FY2018

Existing Medium-Term Business PlanCounter Measures for Profitability Enhancement

Business Plan for Full Year FY2019

77Existing (the 10th) Medium-Term Business Plan: Directions and Targets

Medium-TermBusiness Plan

• We defined two key directions: ①Reconstruct business portfolio, and ②
Strengthen profit and capital structure.
• We set up three strategies pillars (Growth strategy, Financial strategy &Infrastructure strategy) to realize our aspiration.
• Growth strategy: Strengthen business through diversifying portfolio byexpanding solution business, overseas semiconductor suppliers’
businesses and businesses with non-Japanese customers.
• Financial strategy: Reach ROE5% target in FY2019 through profitabilityenhancement, asset liquidation and continuous capital allocation.
• Infrastructure strategy: Revise operation systems, HR framework, etc..
• The targets as the result of the initiatives were Net Sales of ¥300 bil andOperating Income of ¥8.5 bil in FY2020.
① Reconstructbusiness portfolio
Financialstrategy

Growthstrategy②

Strengthen profit
and capital structure

Infrastructure
strategy

88Medium-TermBusiness Plan

Medium-Term Business Plan Suspension

IssuesAssessment

 Drastic changes of the key suppliers’ marketing policies （Reduction of sales
incentives and sales margins） Requests for the inventory holdings from customers and suppliers to mitigate
the issues of product EOL, Business continuity, PCN etc.
 Additional HR cost burden to attain the growth strategies, which has notbrought about enough business returns
 Interest burden coming from 1) the increase of US$ loan amount for
US$ base inventory, and 2) the rise of US$ interest rate Global market slowdown including China
Direction Planned

Assessment

Business Portfolio

Overseas semiconductors are hard to make core business.

Profit and CapitalStructure

Net Sales and Profits remain weak for FY2018. Same forFY2019 and onwards.
ROE5% target cannot be attained for FY2019.
No signs of profit improvement are foreseen for FY2020.

 Fundamental (non-seasonal) business environment changes have occurred torealize Medium-Term Business Plan.
 We will suspend the existing business plan and launch company-wide initiatives
for profitability enhancement.
99Medium-TermBusiness Plan

Financial KPIs Long Term Trend

Key volume indicators do not show any drastic changes for the last ten years, while
profit indicators show negative signs for the same period.
FY08

FY14

FY18FY18FY08Analysis

1Net Sales(¥Bil)

220.8

233.5

249.6

2Gross Margin

8.9%

8.4%

8.3%

28.8 Net Sales show gradual growth, while every profitability-0.6% index has been deteriorating for the last 10 years

3Net Profit/Net Sales

1.8%

1.4%

0.6%

-1.2%

4KPI

5Sales Incentives/Net Sales

0.6%

0.2%

0.2%

-0.4% The profit size reduction of the key supplier led to thereduction of incentives for the last fiscal years.

6Gm with Overseas
Semiconductor-12.6%

8.5%-4.1% The margin condition was revised in FY16, which impacts(FY18- expanded due to the expansion of its business volume.
14)

7

HR Cost/Net Sales

3.3%

3.2%

3.4%+0.1% The employment of additional staff for the Mid-TermBusiness Plan, and the increase of bonus months in FY17
were the background of the cost increases.

8Distribution cost
/Net Sales

0.4%

0.6%0.7%+0.3% The increase in unit cost was due to the shortage ofdistribution staff in Japan, and the change of delivery
conditions with suppliers also increased costs.

9Interest expense:¥ mil (% of Sales)

140(0.1%)

169(0.1%)

717+577 Distribution agreement with overseas suppliers changed(0.3%) (+0.2%) requesting minimum three month inventory1010

Financial Results for FY2018

Existing Medium-Term Business PlanCounter Measures for Profitability Enhancement

Business Plan for Full Year FY2019

1111

Counter Measures for Profitability Enhancement•••

CounterMeasures

Through reassessing its business portfolio, we pursue cost minimization, and thereby
enhance profitability for the Renesas and Electric components business as the competitive
key business driver.
Through these profit enhancement measures, we construct the business portfolio which
realizes 5% ROE in FY2020.
We reevaluate new business areas that will provide future business growth. New MediumTerm Business Plan will be released during FY2020.

Counter measures for profitability enhancement (FY2019：Phases of Actions)
Business Withdrawal from non-profitable businesses
 Optimize organizations and headcounts
 Evaluate and concentrate on key projects with Solution Business initiatives
 Expand Renesas business through non-organic approach Introduce business model to change the technical support function to the profit centerALM

 Reduce inventory volume and minimize US$ borrowing Streamline control function and minimize head office space usage
 Disposition of non-working assets including investment securities One-time costs ： ¥900 million in FY2019
 Reduction of fixed cost ： ¥1,300 million annually since FY2020
1212

Scenario for Profitability Enhancement and Capital Efficiency(FY2020: Cost Reduction)⇒No additional profit is assumed from new sales.

【Break-down of cost reduction (FY2020)】
15,852

Unit: ¥MilSystemDepreciation

All additional income comes from cost controls.
⇒Net assets remains the same level of ¥88 biltoward FY2020.
1,312

Distrubution

FY19CounterMeasures②In addition to cost reduction, we willcontinue to reduce non-active assets,
including investment securities, andreach profit level which realizes ROE
target in FY2020.

Inventoryreduction

SG&A+Interest

OfficeConsolidation

Decrease
Increase
Optimize
HRUnit: ¥Mil
14,540Generalexp. review

FY20+147①As the results of counter measures inFY2019, distribution costs, interest
expense (Inventory reduction), HR costs
etc.. will be reduced by ¥1.3 bil in FY2020.
⇒Additional disclosures are made, once details are+892

ROE5% Line
(Effective tax rate 30%)

3,934

NonProfit
Business+1,312

NonActiveAssetCost
Reduction

6,285
FY20IBTFY19IBT【Break-Down of profit increase】

fixed and if necessary.
1313

CounterMeasures

Ryosan Strategy Map During Profit Enhancement Period
Strategies

StatusActions

1

Profitability enhancement

New

Initiate several new initiatives for cost
minimization

2

Growth Solution Businessstrategy

Review

Concentrate on key projects

3

Creation of new
suppliers

Review

Withdrawal from non-profitable business

4Local overseas
business

Continue

Continue to find out 1) strategic investmentopportunities and 2) new overseas
businesses with Electronic Components

5

New business models

ChangeIntroduce new initiative to change businessmodel of technical function (P15)6

Financial strategy

Review

Revise actions during profitability
enhancement

7

Infrastructure strategy

Continue

No change

Suspend current Medium-Term Business Plan

1414

Counter
Measures

Initiative as a New Business Pillar

 We will introduce new services which will change our Technical function from the costcenter to the profit center. Expected markets are current Ryosan customers and those newcustomers who use semiconductors in daily manufacturing operations.
 We will pursue the possibilities of strategic business alliance with partner companies in thisarea.

①CurrentCustomer

NewCustomer

MarketingFunction②Technical③Suppliers

Function① Technical support for sales promotion with NO time charges to CURRENT Ryosan customers② NEW technical support for customer manufacturing with TIME charges to CURRENT Ryosancustomers

New③ NEW technical support for customer manufacturing with TIME charges to NEW customers
1515

CounterMeasures

Management Responsibility

Upon starting counter measures, the following actions will be applied to clarify
management responsibility of business deterioration.
 For directors and senior officers, annual remuneration, including bonuses,
shall be reduced by 20% for FY2019.
 Board members have changed as follows and shall be proposed for AGM
approvals this June.
Current

New

Representative
Director

Naoto Mimatsu

Representative
Director

Hiroyuki Kurihara

Representative
Director

Hiroyuki Kurihara

Director

Iwao Sakamoto(*)

Director

Kazunori Sato

Director

Masahide Nishiura

Director

Masahide Nishiura

Director

Kazuhiko Inaba(*)Mr. Iwao Sakamoto will resign Full-time Audit and Supervisory Committee Member (Director) at the conclusion of the63rd Ordinary General Shareholders Meeting held on June 25, 2019.
1616

Financial Results for FY2018

Existing Medium-Term Business PlanCounter Measures for Profitability Enhancement

Business Plan for Full Year FY2019

1717

FY2019
Plan

Business Objectives

 Both Net Sales and Profit are projected to decrease in FY2019. The impact of themarket slowdown is expected to become less around FY2019 Q1.
 As the results of the counter measures for profit enhancement, Extraordinary costof ¥0.9 bil will be recorded.
FY18(Unit: ¥ Bil)

1st HF

2nd HF

FY19(Plan)Total

1st HF

2nd HF

Total

ChangeNet Sales

128.9

120.7

249.6

115.0

120.0

235.0

-5.9%

Gross Profit

10.7

9.9

20.6

9.3

9.9

19.3

-6.5%

(% of Net Sales)(8.3%)(8.2%)(8.3%)(8.1%)(8.3%)(8.2%)(-0.1pt)

Operating Income

2.8

2.3

5.2

1.7

2.5

4.2

-19.8%(% of Net Sales)(2.2%)(1.9%)(2.1%)(1.5%)(2.1%)(1.8%)(-0.3pt)

Ordinary Income

1.6

2.3

3.9

1.4

2.2

3.6

-9.4%

(% of Net Sales)(1.3%)(1.9%)(1.6%)(1.2%)(1.8%)(1.5%)(-0.1pt)

1.0

0.4

1.4

1.0

0.9

1.9

+28.4%(0.8%)(0.4%)(0.6%)(0.9%)(0.8%)(0.8%)(+0.2pt)

EPS (¥)

43.62

18.45

62.07

42.68

38.41

81.09

+30.6%US Dollar Average Rate (¥)

110.26111.55110.91108.00108.00108.00-2.6%

Net Profit(% of Net Sales)

1818

FY2019
PlanOverview of Business Plan by Business Segments

 The Semiconductor business will decrease both for Net Sales and Operating Income dueto the market slowdown in automotive and FA segments.
 The Electronic Components business will continue to follow the slow-down trend after
business expansion until the 1st HF of FY2018.
 Both Net Sales and Operating Income remain the same for Electronic Equipment.
FY2018
1st HF（Unit：¥Bil)
Semiconductor

Total

1st HF

2nd HF

Total

Change

77.0

73.1

150.1

69.5

72.5

142.0

-5.4%

Op. Income

1.3

1.0

2.4

0.9

1.3

2.2

-8.7%

(1.8%)(1.5%)(1.6%)(1.3%)(1.9%)(1.6%)(0.0pt)Net Sales

40.4

37.0

77.4

35.5

36.0

71.5

-7.7%

Op. Income

1.4

1.12.60.9

1.0

1.9

-28.3%(3.7%)(3.1%)(3.4%)(2.5%)(2.8%)(2.7%)(-0.7pt)

Net Sales

11.5

10.5

22.1

10.0

11.5

21.5

-2.9%

Op. Income

0.1

0.2

0.3

0.1

0.3

0.4

+4.7%

(%)

(1.5%)(2.0%)(1.7%)(1.0%)(2.6%)(1.9%)(+0.2pt)

Net Sales

128.9

120.7

249.6

115.0

120.0

235.0

-5.9%

Op. Income

2.8

2.3

5.2

1.7

2.5

4.2

-19.8%(2.2%)(1.9%)(2.1%)(1.5%)(2.1%)(1.8%)(-0.3pt)(%)
Electronic
Equipment

Total

Net Sales(%)
ElectronicComponents

2nd HF

FY2019(%)

1919

FY2019
Plan

Plan of Return to Shareholders• Maintain ordinary dividend of ¥100 p.s. for FY2019• No share buy-back program will be planned.

Dividend per Share
Ordinary Dividend(Yen)Special Dividend(Yen)Dividend Ratio

150

150

140

Acquisition of Treasury Shares

150

250%

140
242%

200%
10050

50

50

117%

120%

79%
80

90

90

50

50

100
123%

86%
100

150%

100%

100

100
50%

00%
FY14

FY15

FY16

FY17FY18Year

FY19(Plan)

No. ofAcquiredShares（Thousand）Amount（¥ Bil）

FY121,0001.9FY131,000

1.9

FY144501.8

FY151,5504.6

FY161,370

4.4

FY173,61015.9

FY181,050

4.2

FY19(Plan)

Nil

Nil2020