Report on Financial Results
f o r t h e F i s c a l Ye a r E n d e d M a r c h 2 0 1 7May 25, 2017
KAGA ELECTRONICS CO., LTD.
(TSE 1st section, 8154)

■ Contents(1) Consolidated Performancefor FY2017

・・・ P. 4(2) Consolidated Performance Forecasts
for FY2018

・・・ P. 11(3) KAGA ELECTRONICS Group’s
Mid- to Long-Term Growth Strategy© 2017 KAGA ELECTRONICS CO., LTD. All Rights Reserved.

・・・ P. 162

Points

123Results for FY2017
 Profit attributable to owners of parent increased for four
consecutive years despite year-on-year decreases innet sales, operating income, and ordinary income.

Forecasts for FY2018
 Net sales are expected to increase year-on-year.
 Operating income and ordinary income will maintain profitability.

Mid- to long-term strategy


Aim at enhancing sales growth potential in addition tostrengthening profitability.
Accelerate globalization to expand EMS business.

© 2017 KAGA ELECTRONICS CO., LTD. All Rights Reserved.

3

Consolidated Performance forFY2017© 2017 KAGA ELECTRONICS CO., LTD. All Rights Reserved.

4

■ Financial Highlights(comparison with past 2 fiscal years)(Million yen)

FY2015FY2016FY2017
YoYNet sales

255,143

245,387

227,209-18,178

Gross profit

32,73833,64831,225-2,423

Gross profit margin

12.8%

13.7%

13.7%

－Selling, general andadministrative expenses

26,37625,85924,346-1,513Operating income

6,362

7,788

6,879-909

Ordinary income

7,664

7,908

7,343-565

Profit attributable to ownersof parent

4,416

5,437

6,975

1,538

© 2017 KAGA ELECTRONICS CO., LTD. All Rights Reserved.

5■ Corporate GroupFY2016FY2017
YoY

Consolidated subsidiaries49 companies

45 companies

Decreased 4 companiesof which, domestic

22 companies

17 companies

Decreased 5 companiesof which, overseas

27 companies

28 companies

Increased 1 company

New:
2 companies
Excluded: 6 companies

TAXAN MEXICO S.A de C.V./SANKOH Engineering
KAGA HIGHTECH CO., LTD./KAGA EDUCATIONAL MARKETING CO., LTD.
and 4 other companies■ Major reorganization

MergerKAGA SOLUTION NETWORK CO., LTD.

Surviving company:
KAGA SOLUTION NETWORK CO., LTD.

KAGA HIGHTECH CO., LTD.
KAGA EDUCATIONAL MARKETING CO., LTD.

WORKBIT CORPORATIONBusiness transfer
ELECOM CO., LTD

Decrease in income taxes resulting from business reorganization, etc.:
Approx. ¥1,400 million© 2017 KAGA ELECTRONICS CO., LTD. All Rights Reserved.

6

■ Financial Highlights by Business Segment(comparison with the previous year and forecasts as of 2Q)(Million yen)

FY2017FY2016

Net sales

Electronic
components Segment
incomeNet sales

Informationequipment

Software

Others

189,486(forecastsas of 2Q)

FY2017

176,000

171,227

YoY-18,259

6,515

4,350

4,917

-1,59840,88041,00042,547

1,667

vs. forecasts
as of 2Q

SummaryThe volume of domestic semiconductors-4,773 decreased due to stagnant amusement567

machines business and a change in theagency policy by semiconductor
manufacturers. Reduction of SG&A
contributed to securing profits.
Sales of housing-related products and the1,547 volume of PCs and other consumer

products increased.
The reorganization of the groupcompanies with the aim of improving
management efficiency resulted in
improved operating margin.

Segment
income

811

900

1,491

680

591

Net sales

2,897

3,000

3,159

262

159 Operating margin declined despite

Segment
income695

630

528-167

Net sales

12,123

10,00010,274-1,849Segment
income-102

274 Sales of arcade amusement machines

-343

-180

-212

131

-32

245,387

230,000

227,209-18,178-2,791

7,788

5,700

6,879

-909

1,179

Total

© 2017 KAGA ELECTRONICS CO., LTD. All Rights Reserved.

focused efforts to produce computer
graphics for animation and develop
various kinds of software.

and golf products in Japan were sluggish
due to a downturn in consumer spending.

* Figures of each segment income are notinter-segment adjusted other than total.

7

■ Net Sales by Region(comparison with the previous year and forecasts as of 2Q)(Million yen)

FY2017FY2016FY2017(forecasts as of 2Q)

Summary
Net sales

Net sales

Net sales

YoYvs. forecasts
as of 2Q
A decrease in sales ofelectronic components andsemiconductors for domestic
machines and a-4,088 amusement
decrease in the transaction
volume due to changes incommercial distribution ofsemiconductors.

Japan

167,91469%

156,000

68%

151,91267%-16,002

North
America

5,840

2%

5,600

2%

5,995

3%

155395

Europe

2,662

1%

2,400

1%

2,518

1%

-144

118

East Asia

68,97028%

66,00029%

66,78329%-2,187783

227,209 100%

-18,178-2,791Total

245,387 100%

230,000 100%

© 2017 KAGA ELECTRONICS CO., LTD. All Rights Reserved.

8

■ Consolidated Balance Sheet(Million yen)March 31,2015

March 31,2016

March 31,2017

104,424

101,961

103,684

1,723

Cash and deposits

18,13022,516

26,423

3,907

Notes and accounts
receivable - trade (*)

58,16754,79552,009-2,787

Inventories

22,703

19,17519,325

150

Other

5,422

5,473

5,925

453

Current assets

March 31,2015

March 31,2016

March 31,2017

54,612

51,16950,242-927

Notes and accounts
payable - trade40,54336,85837,553695

Short-term loans payable

5,925

6,295

4,883

-1,412

Other

8,142

8,015

7,806

-209

13,733

11,303

9,576-1,727Long-term loans payable

8,253

6,007

4,603

-1,404

Other

5,480

5,295

4,973

-322

Total liabilities

68,34562,47259,819-2,653

YoY

Current liabilities

Non-current liabilities

YoY

23,524

22,31922,067-252

Shareholders' equity

56,53860,70264,481

3,779

Property, plant and equipment

12,725

12,058

11,745-313

Capital stock

12,133

12,133

12,1330Intangible assets

1,131

1,003

841

-162

Capital surplus

13,912

13,912

13,9120Investments and other assets

9,667

9,257

9,479

222

Retained earnings

31,02935,19540,476

5,281

Treasury shares

-537

-539

-2,040-1,501

Valuation and translation
adjustments

3,026

1,061

1,391

330

Non-controlling interests

38

44

59

15

Total net assets

59,60361,80865,932

4,124

Total liabilities and net assets

127,948

124,281

125,751

1,470

Non-current assets

Total assets

127,948

124,281

125,751

1,470(*) Notes and accounts receivable - trade includes electronically recorded monetary claims - operating© 2017 KAGA ELECTRONICS CO., LTD. All Rights Reserved.

9■ Consolidated Statement of Cash Flows(Million yen)

FY2015FY2016FY2017

YoY

Cash flows from operating activities

9,127

9,546

10,746

1,200

Cash flows from investing activities-1,465-1,263

-258

1,005

Cash flows from financing activities-4,431-3,067-6,118-3,051

Cash and cash equivalents at beginning ofperiod

13,361

17,56921,8794,310

Cash and cash equivalents at end ofperiod

17,56921,87926,021

4,142

Summary■ Cash flows from operating activities: Recording of profit before income taxes■ Cash flows from investing activities: Purchase of property, plant and equipment■ Cash flows from financing activities: Repayments of long-term loans payable, cash
dividends paid, and purchase of treasury shares© 2017 KAGA ELECTRONICS CO., LTD. All Rights Reserved.

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Consolidated Performance
Forecasts for FY2018© 2017 KAGA ELECTRONICS CO., LTD. All Rights Reserved.

11

■ Consolidated Performance Forecasts
Comparison of consolidated statement of income (FY2017 results vs FY2018 forecasts)(Million yen)

FY2017(Results)

FY2018(Forecasts)
YoY

Net sales

227,209230,000

2,791

Gross profit

31,22531,500275

Gross profit margin

13.7%

13.7%

－Selling, general andadministrative expenses

24,346

24,500154

Operating income

6,879

7,000

121

Ordinary income

7,343

7,500

157

Profit attributable to owners ofparent

6,975

5,500

-1,475© 2017 KAGA ELECTRONICS CO., LTD. All Rights Reserved.

12

■ ROE Forecast (Y o Y Comparison)(Yen)

FY2016FY2017FY2018(Forecasts)

YoY

Earnings per share(EPS)

192.43249.43200.47-48.96

Dividend per share

5560

60

±0

Ordinarydividend

40

4060

+20

Extraordinary
dividend

1520－－

9.0%

10.9%

8.1%

-2.8%

Return on equity(ROE)© 2017 KAGA ELECTRONICS CO., LTD. All Rights Reserved.

13

■ Consolidated Forecasts by Business Segment(Million yen)
FY2017

Electronic
components

Informationequipment

FY2018(Forecasts)

YoY

171,227

175,000

3,773

Segment income

4,917

5,350

433

Net sales

42,54742,000-547

Segment income

1,491

1,400

-91

Net sales

3,159

3,000-159

528

450-78

10,27410,000-274-212

-200

12

227,209230,000

2,791

6,879

7,000

121

Net sales

SoftwareSegment income
Net sales
OthersSegment incomeTotal* Figures of each segment income are not inter-segment adjusted other than total.
© 2017 KAGA ELECTRONICS CO., LTD. All Rights Reserved.

14

■ Consolidated Forecasts by Region(Million yen)

FY2017FY2018 (Forecasts)

Net sales

Net sales

YoY

Japan

151,91267%

152,000

66%

88

North
America

5,995

3%

5,500

3%

-495

Europe

2,518

1%

2,500

1%

-18

East Asia

66,78329%

70,000

30%

3,217

Total

227,209100%

230,000

100%

2,791

© 2017 KAGA ELECTRONICS CO., LTD. All Rights Reserved.

15

KAGA ELECTRONICS Group’sMid- to Long-TermGrowth Strategy© 2017 KAGA ELECTRONICS CO., LTD. All Rights Reserved.

16

Mid- to Long-Term Growth Strategy:
Medium-term Management Plan 2018
Medium-term Management Plan 2018:
A plan to achieve
FY2019PlanFY2015
Results

Net sales¥255.1 billion

Ordinary
income¥7.6 billion

ROE

7.8％

290.0 billion¥

10.0 billion¥8% or higher(1) Enhancerevenue base Establish profit-oriented management
 Prepare for a leap as “Next-generation
KAGA ELECTRONICS”
 Become the industry leader in Japanand aim at sustainable growth as a(2) Create new world-class company

businesses© 2017 KAGA ELECTRONICS CO., LTD. All Rights Reserved.

(3) Strengthen
managementfoundation17

Review of Medium-term Management Plan 2018:
Business Environment(1) Trend of the electronics industry
 Reorganization of leading Japanese manufacturers
accelerated
 Increasing use of electronics in automobiles and medicalsectors
 Rise of new sectors including IoT, big data, and artificial
intelligence(2) Current status of electronics trading companies
 Intensified competitions with peer companies and sharp
fluctuation in foreign exchange market
 Production adjustments by major customers had an impacton performance Many companies experienced a decrease in both sales andprofit year-on-year© 2017 KAGA ELECTRONICS CO., LTD. All Rights Reserved.

18

Review of Medium-term Management Plan 2018:
Business Results
Promoted profitability enhancement,
improved profit margin and drove profit growth
Net sales/
Ratio of ordinary income to net sales

Ordinary income/Gross profit margin/
SG&A ratio
13.7%

3.2%

3.2%

13.7%

13.7%

7.3

7.5

10.7%

10.7%

FY2017FY2018(Forecast)

3.3%

3.0%
12.7%

12.8%
12.6%

2.3%

12.1%

257.8

255.1245.3

216.4

227.2

230.0

7.6

7.9

5.8

0.9%

10.6%
10.3%

1.9
FY2013

FY2014FY2015Net sales (Billion yen)

FY2016FY2017FY2018(Forecast)

Ratio of ordinary income to net sales© 2017 KAGA ELECTRONICS CO., LTD. All Rights Reserved.

FY201310.5%

FY2014FY2015

Ordinary income (Billion yen)

FY2016Gross profit margin

SG&A ratio

19Review of Medium-term Management Plan 2018:
SG&A Expenses
Total SG&A decreased for three consecutive years,
with a policy to control its increase for FY2018
257.8

255.1
245.3
227.2

230.0

24.3

24.510.7%

10.7%

FY2017FY2018(Forecast)

216.4

12.1%

26.2

27.4

26.3

10.6%
10.3%
FY2013

FY2014

Net sales (Billion yen)
© 2017 KAGA ELECTRONICS CO., LTD. All Rights Reserved.

FY201525.8
10.5%
FY2016

SG&A (Billion yen)

SG&A ratio

20Review of Medium-term Management Plan 2018:
To the Next Stage
Next stage: Further strengthening of profitability along withenhancement of sales growth potential

5 growth keywords of KAGA ELECTRONICS Group
Promotion of
M&A

Investment inventures

Telecommunication (IoT)• Industrialequipment• Environment

EMS• Amusement• MedicalAutomotive devices© 2017 KAGA ELECTRONICS CO., LTD. All Rights Reserved.

21

EMS Business of
KAGA ELECTRONICS Group© 2017 KAGA ELECTRONICS CO., LTD. All Rights Reserved.

22

Strengths of KAGA ELECTRONICS Group’s EMS (1)Our service doesn’t stop at contract manufacturing but
offer after-sales service

Support

Proposal
Planning/design/development

Components
procurement/kitting

EMS/
contract manufacturing

Sales/
distribution

Support services

One--stop service
One• Technological/
development
capabilities capableof total support• KAGA ELECTRONICS• KAGA DEVICES• KAGA AMUSEMENT• KAGA SOLUTIONNETWORK• DIGITAL MEDIA LAB• Components• Unique and flexible • Sales capability
procurement capability manufacturing skill
using extensive
accumulated since itssales channels
foundation• KAGA ELECTRONICS• KAGA TECH
• KAGA DEVICES• AD DEVICE• KAGA (DALIAN) ELECTRONICS• KAGA (TAIWAN) ELECTRONICS• KAGA (SINGAPORE)
ELECTRONICS• KAGA (KOREA) ELECTRONICS• KAGA ELECTRONICS (USA)© 2017 KAGA ELECTRONICS CO., LTD. All Rights Reserved.

• KAGA ELECTRONICS• KAGA COMPONENTS• KAGA AMUSEMENT• MICRO SOLUTION• KAGA (H.K.) ELECTRONICS• KAGA (SHANGHAI)
ELECTRONICS• KAGA ELECTRONICS(THAILAND)• KD TEC• TAXAN MEXICO• KAGA ELECTRONICS• KAGA SOLUTION NETWORK• KAGA AMUSEMENT• MICRO SOLUTION• After-sales service
and call centerfunction• KAGA TECHNO SERVICE• MICRO SOLUTION• SANKOH Engineering

23Strengths of KAGA ELECTRONICS Group’s EMS (2)Global response to all products
Sales Composition of the Group’s EMS

Air-conditioning

Office equipment（FY2017）
Precisionmachinery
2%

Others18%

Amusement
products
2%
Medical5%Air-conditioning
19%

Office equipment
17%

Communicationequipment
6%
Electric tool7%

Automotivedevices
8%

Amusementmachines
Industrial
8%equipment
8%

Substrate for
air-conditioner

Substrate formultifunction printers

Automotive devices
Industrial equipment

AC inverter

Substrate forservo amplifiers

Servo amplifier/Servo motor© 2017 KAGA ELECTRONICS CO., LTD. All Rights Reserved.

LED headlights

LED taillights

Body control module24

Strengths of KAGA ELECTRONICS Group’s EMS (3)Global network
East Asia* Expand transactions with local Chinese companies* Expand transactions with European and the U.S.
companies* Expand sales to Japanese companies conducting
sales in China

EuropeThe AmericasJapanCzechChina

ChicagoDalianKorea

ChengduXiangyang Shanghai

San JoseShenzhen
Taiwan* Expand domestic EMS
Mexico* Increase sales of components* Reorganization of bases
Vietnam* Integrate businesses in the U.K. India Thailand
kitting* Production in Thailand⇒Start withPhilippines
and Russia to Czech (KDTEC)
delivery to North America* Develop new customers
Malaysia
Production in Mexico⇒Shift to* Install mounting equipment indelivery to North America
KDTEC with an aim to receive*Targetcustomers
Indonesia
new orders in Europe
Automotive devices, air-conditioning
and office equipment
ASEANChongqing
Hong Kong

South Africa* Further deepening relationship with Japanesecustomers* Centralize the procurement operation to improve
efficiency

Sales bases
Productionbases
Consideringadvancement© 2017 KAGA ELECTRONICS CO., LTD. All Rights Reserved.

25

Sales Target of Group EMS BusinessImage in 5 years
Others5%

Amusementmachines
5%

Present(FY2017 results)

About

2 times
Precisionmachinery
2%

Others18%

Amusement
products
2%
Medical5%

Office equipment
17%

Communicationequipment
6%
Electric tool7%

Air-conditioning
19%

Automotivedevices
8%

Medical7%

Automotive devices
20%

Communicationequipment
7%Electric tool7%

Air-conditioning
18%

Office equipment
15%
Industrialequipment
16%

Amusementmachines
8%

Industrialequipment
8%© 2017 KAGA ELECTRONICS CO., LTD. All Rights Reserved.

26

KAGA ELECTRONICS Group’s EMS Business:
Conclusion
Initiatives for EMS business with an aim tostrengthen profitability and sales growth potential together

 Focus on overseas expansion of EMS
Focus on automotive devices, air-conditioning, industrial equipment, officeequipment, medical, and electric tool sectors

 Further development of overseas local customers
 Enhancement of bases (everywhere EMS)
(1) Expand sales channel to inland China (2) Increase production in ASEAN
regions (3) Advance into North America from Mexico (4) Expand sales
channel to local customers in Europe

Future Plan FY2018

 From FY2019 onwards

 Establish manufacturing base inVietnam
 Consider establishment ofmanufacturing base in India

 Consider advancement into the western areaof China (Chongqing, Chengdu)
 Consider advancement into Germany
 Consider advancement into South Africa© 2017 KAGA ELECTRONICS CO., LTD. All Rights Reserved.

27

Shareholder Return Plan: Trend of Dividend
Basic policy of profit
distribution

 Aim at stable dividend payments while maintaining consolidated dividend payout ratio of 25% to 35%
 Share buyback as needed, taking into account the market environment and capital efficiency
 Use internal reserve to business investment, capital expenditures and M&A that will contribute toenhancement of corporate value

株主還元計画：配当金の推移

Shareholder return rate: 45.4%

Share buyback of ¥1,499 million

29.9%
28.6%
25.5%

25.6%
24.1%

55.0

60.0

40.0

35.0

FY201460.0

FY2015

Annual dividend (Yen/share)

FY2016FY2017(*)
Consolidated payout ratio

FY2018(Forecast)(*) Year-end dividend of ¥35 per share will be proposed in the 49th Ordinary General Meeting of Shareholders (→ Annual dividend of ¥60 per share)© 2017 KAGA ELECTRONICS CO., LTD. All Rights Reserved.

28

Trend of ROE
ROE increased to 10.9% in FY2017 andcan stably achieve 8% or higher in FY2018
10.9%
9.0%
7.6%

8.1%

7.8%

6.9
4.4

3.8

FY2014FY2015FY2016

Profit attributable to owners of parent (Billion yen)
© 2017 KAGA ELECTRONICS CO., LTD. All Rights Reserved.

5.5

5.4

FY2017FY2018(Forecast)
ROE

29

Announcement on venture investment activities
Plan to invest ¥5 billion in venture companies/businesses
over approx. 3 years from FY2018, our 50th anniversary

 BackgroundWe have collaborated with many venture companies through investments asa source of our growth potential, and recently, investment in venturecompanies with advanced technology for the purpose of collaboration has
become more important.

 Purpose
By combining our global corporate network and venture companies’ unique
ideas and high technological capability, we aim to create new innovation toachieve sustainable growth of the Group.

* The announcement is available in the Company’s website:
http://www.taxan.co.jp/jp/news© 2017 KAGA ELECTRONICS CO., LTD. All Rights Reserved.

30

“Everything we do isfor our customers”
20 Kandamatsunagacho,Chiyoda-ku,Tokyo 101-8629
Contact: Secretarial & Public Relations Office
TEL:+81-3-5657-0106
FAX:+81-3-3254-7133
E-mail： webmaster@taxan.co.jp

http://www.taxan.co.jp
Forward-looking statements in these materials are based on information available tomanagement at the time this report was prepared and assumptions that management believes
are reasonable. Actual results may differ significantly from these statements for a number ofreasons.

© 2017 KAGA ELECTRONICS CO., LTD. All Rights Reserved.

31