For Institutional Investors/Analystssts

Consolidated Financial Results
for the Fiscal Year ended March 2018

May 24, 2018
KAGA ELECTRONICS CO., LTD.
TSE 1st section 8154

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 of reasons.

Agenda1. FY2018/3 Summary and FY2019/3 Outlook
2. Medium-Term Management Plan Progress
3. FY2018/3 Full-Year Financial Results2

Today’s Main Topics

Results for
FY2018/3

Forecast for
FY2019/3● Net sales and operating income – exceeded the plan in all phases of profit● Ordinary income posted record high for the first time in 13 years● Year-on-year increase achieved in both net sales and incomes
Net profit declined, reflecting previous year’s special factor related to tax effect● A reasonable forecast is difficult to calculate at this time – yet the Company
will aim to achieve the numerical targets* set out for the final fiscal year of theMedium-term Management Plan.
* Medium-term Management Plan Numerical Targets:
Net sales ¥290 billion, Ordinary income ¥10 billion, ROE 8％ or higher

Perception ofBusiness
Environment

Shareholder

Returns● Electronic components: growth of demand is expected notably in the EMS
business, but tight supply of electronic parts and materials looms● Information equipment: housing facility related large-lot demand to slow
down after the previous year
● FY2018/3 results : annual dividend of 70 yen per share, dividend increasefor 5 consecutive years● FY2019/3 plan: annual dividend of 70 yen(interim dividend of 30 yen, year-end dividend of 40 yen)

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

3

Agenda1. FY2018/3 Summary and FY2019/3 Outlook
2. Medium-Term Management Plan Progress
3. FY2018/3 Full-Year Financial Results

4

Results for the FY2018/3

Summary Two upward revisions were made during the term, and the plan was
exceeded in all measures from Net sales to net income
 Shrinkage in leisure devices was more intense than expected, but recovery
was made in the EMS business, housing, and commercial facilities
 The profit rate exceeded initial expectations and there was a response to
the “profit-first management”(Unit: Million yen)

Ordinary income

8,740

8,700
8,200

7,500

6,490
6,300

6,450

5,500

Initial Forecast(May 10, 2017)

Net income

Second Forecast(November 8, 2017)

Previous Forecast(February 6, 2018)

230,000

232,000

232,000

235,921

Ordinary income margin

3.3%

3.5%

3.8%

3.7%

Net income margin

2.4%

2.7%

2.8%

2.8%

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

Result(May 9, 2018)5

Outlook for the FY2019/3

Environmental
Awareness

Risk
Awareness

Earnings
Forecasts● The environment for orders in the main electronic components

business will be good
● The EMS business will acquire new projects in conjunction with the
expansion of overseas sites● Supply of semiconductors cannot keep up with demand, andthere is tight supply for some materials● Timing mismatches because of changes in customer requests(advances and postponements)● There are many uncertain elements, and earnings forecasts are notdisclosed at this time.
● However, the entire Group will work together to achieve targets
in the final year of the Medium-term management plan

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

6

Awareness of the Environment During the FY2019
and Issues to be Addressed

Awareness of the Environment

Electronic
Components
Business

Issues to be Addressed

Direction of Performance
Net Sales

Segment Income• Orders are firm both in the EMS business and parts
sales business• On the supply side, production cannot keep up withsemiconductor demand, and there are concerns
regarding tight supplies of some materials
Reinforce measures in automotive, airconditioning, healthcare, and other priority fields

Information
Equipment
Business
SoftwareBusiness

Other Business• In consumer electronics, large-scale demand forhousehold equipment has slumped
Focus on large commercial facilities and energysaving equipment for convenience stores• Demand in the amusement related market will remain
weak
Accelerate measures in new fields such as VR and AR• Demand for repair, service, reuse, and recycling isincreasing
Reinforce capacity for environmentally-conscious
business including repair and reuse
7© 2018 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

Agenda1. FY2018/3 Summary and FY2019/3 Outlook
2. Medium-Term Management Plan Progress
3. FY2018/3 Full-Year Financial Results

8

Framework of the Medium-Term Management Plan
Basic Policies

Management Target(FY Ending March 2019)（１）Reinforce profit foundations

Sales¥290 billion（２）Create new business

Ordinary income¥10 billion（３）Reinforce managementfoundations

ROE

8% or higher

Medium- to Long-Term Vision
 Establish management that prioritizes profits
 Prepare for a major advance as “next-generation Kaga Electronics”
 Become No. 1 in Japanese industry and aim for continuous
growth as a company that can do business globally

9© 2018 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

Summary of the Fiscal Year Ended March 2018:
Improvement in Profitability
Changes in Gross Profit Margin The ratio of gross profit to sales improved by
3 points compared to the FY2005/3 (record
high recurring income).
 The medium-term target is 14% - 15%.
12.8%

400 00350 00

13.7%

13.7%

13.8%
14

300 0010

250 008

200 00

6

33,648100 00 Expansion of EMS business• Increase profitability by expanding added value
business Reduce ratio of amusement equipment• Market demand has been shrinking due toregulation changes

Gross Profit
Margin Large commercial facilities and energy-saving
equipment for convenience stores(Million Yen)

• Increase value-added type business such as nergysaving equipment

12

10.2%

32,738150 00Measures to Increase Added Value

31,22532,498 Gross Profit

25,624

4

2

Aim to be a “Company that
Definitely Generates Profit”

Mid term Management Plan
500 0

0

0

-2

FY2005/3
Result

FY2015/3FY2016/3FY2017/3FY2018/3
ResultResultResultResult© 2018 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

10Summary of the Fiscal Year Ended March 2018:
Improvement in Profitability
Changes in SG&A to Sales Ratio

Progress in Structural Reforms
 January 2016: Information equipment
business reorganized In the past three years both amounts andratios have been controlled However, the absolute value has increased
compared to FY2005/3. The medium-termtarget is 10% or less.
12.8%

400 00

13.7%

13.7%

10.2%

300 00

10.3%

10.5%

10.7%

 October 2017: Share transfer of board
development company

13.8%
13

350 00• Kaga Solution Network, Kaga High Tech, andKaga Educational Marketing merged

10.3%

Gross Profit
Margin
SG&A to
Sales Ratio

8

250 00(Million Yen)

6.9%

• 51% of the Sicoxs shares, which develops SiC
boards, were transferred to Sumitomo Metal Mining,
and a joint venture company was established January 2018: Domestic manufacturingsubsidiaries reorganized

200 003

SG&A Expenses• Kaga Micro Solution and Kaga Component
integrated

150 0026,37625,85924,346

24,379100 0017,149-2

Mid term Management Plan

500 0

0

-7

FY2005/3
Result

FY2015/3 FY2016/3FY2017/3FY2018/3
ResultResultResultResult© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

Reorganization andConsolidation of Group Companies
is Generally Completed
11

Status of Progress of “Five Keywords” in the Group Growth Strategy

Priority Themes

EMS Business・ Expand overseas sites toincrease the scale of business

Automotive

・ Respond to new ADAS and DMS
technologies
・ Respond to the shift to hybrid
and electric vehicles

Telecommunications(the IoT)

・ Develop the LPWA market andcreate cloud business using AI

Main
主な実績
Results

Progress
Evaluation

・ Started business in Vietnam, Mexico,
Turkey・ andベトナム、メキシコ、トルコに進出
Started activities to obtain orders in・・ India
インドで受注活動を開始◎

・ Firm sales to Tier 1 clients inexisting business・・ New
メキシコでTier1から受注獲得
development of current sensor
madeby
IH in Germany
・ 独IH社製電流センサーを発売
・ Firm sales of communications
modules for Internet compatible
automobile navigation systems
・ Development of module device
venders and new customers in the
LPWA market

M&A

・ Reinforce managementfoundations and profit
foundations while monitoring
industry reorganization

ERP systems to reinforce
・・ Updated
グローバルでの経営管理基盤を
globalmanagementfoundations
強化のため、ERPシステムを刷新

investment inventures・ Start investment activity
targeting venture companies
and businesses using ¥5 billion
over three years

・ 17
17社/約10億円に出資
companies© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

・ Invested approximately ¥1 billion in

○

○
○
○
12

<Topic (1)> Overseas Development of EMS Business

Expansion of Overseas Sites

Opening Ceremony for Mexico Site Mexico site established in September 2016
• TAXAN MEXICO S.A. de C.V.
• Operation started in January 2018

 Vietnam site established in July 2017
• KAGA ELECTRONICS (VIETNAM) CO., LTD.
• Operation started in March 2018

 Turkey site established in December 2017
• KD TEC Turkey• Operation will start in October 2018

<Future Plans> 2018Establishment of a site in India

TAXAN MEXICO S.A. de C.V. (Mexico Plant)

Phase 1 of Global Site
Development Completed© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

13

<Topic (2)> Update of ERP (backbone business systems)● Until now, the proprietary system for scratch development was operated on-site

Background &Developments● In anticipation of future growth, development of a system that can withstandoperations in the trillion Yen class is a pressing issue● In conjunction with the development and expansion of overseas EMS business,

Objectives
and Aims

reinforce global management foundations● Promote cost reductions through operational reforms including
standardization of operations and high efficiency

Introduced
Systems● Introduce SAP S/4HANA and build cloud-based IT infrastructure● Evaluate introduction results by global companies and the level of package
completeness● April 2018: Launch introduction project

Future Schedule● April 2020: Begin operations at Kaga Electronics and some domestic subsidiaries(Subsequently deploy to domestic and overseas group companies in stages)© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

© 2018 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

14

<Topic (3)> Investment in Ventures
 Fund to invest ¥5 billion in venture companies/businesses for three years
started from FY2018/3 on the occasion of our 50th anniversary.
 Aim at achieving sustainable growth of the Group through discovery of venturecompanies broadly and create new innovation in priority markets including automotive
devices, environment, and communication equipment, etc. set forth in “Medium-termManagement Plan 2018” and new business areas such as medical/healthcare, etc.
Business domains

Investees

Business description

cado Co., Ltd.

Environment• Development, manufacture, and sales of air
purifier and humidifier, etc.

PicoCELA Inc.

Telecommunication(IoT)• Development of multi-hop wirelesscommunication technology

mama square Co., Ltd.

Amusement

SKYROBOT Inc.
BONX Inc.

TelecomAutomotive
munication
devices(IoT)
Telecommunication(IoT)© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

• Operation of working space with nursery service

New
area

New
area

• Development of industrial drone-related business• Development of wearable/telecommunication
devices15

Shareholder Returns

Basic policy ofprofit 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 environmentand capital efficiency
 Use internal reserve to business investment, capital expenditures and M&A
that will contribute to enhancement of corporate value
29.6%

28.6%

120

25.5%

25.6%

30. 0%

24.1%

100

25. 0%

Shareholder Return Rate：
45.4%

80

Share Buyback o ¥1,499 million¥55（＋¥15）

60

40

¥35
（＋¥5）

5

¥40
（＋¥5）

¥70

20. 0%

10
15. 0%

Extraordinary
dividend20
10. 0%

10

20

30

15

¥60
（＋¥5）

¥70
（＋¥10）

30

60

40

Commemorative
dividend

70

40

5.0 %

0

Ordinary
dividend

0.0 %FY2014/3
Results

FY2015/3
Results© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

FY2016/3
Results

FY2017/3
Results

FY2018/3
Results

FY2019/3
Forecast

16

Agenda1. FY2018/3 Summary and FY2019/3 Outlook
2. Medium-Term Management Plan Progress
3. FY2018/3 Full-Year Financial Results

17

Financial Highlights(Million Yen)FY2017/3

FY2018/3

FY2018/3

Results

Previous Forecasts

Results

YoY

vs Forecasts

Net sales

227,209

232,000

235,921

8,712

3,921

Gross profit

31,22532,25032,498

1,273

2,348

13.7%

13.9%

13.8%

SG&A

24,34624,25024,37932

129

Operating income

6,879

8,000

8,119

1,240

119

Ordinary income

7,343

8,700

8,740

1,397

40

Profit attributableto owners of parent

6,975

6,450

6,490

-485

40

EPS (Yen)

249.43235.10236.58-12.85

1.48

Gross profit margin© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

18

Financial Highlights by Business Segment(Million Yen)

Net Sales

227,209

232,000

10,274
3,159

11,0002,500

42,54747,000235,921
13,522
2,568
47,582

Segment Income
Total
YoY：
＋8,712
vs Forecast：＋3,921

6,879

OthersYoY：＋3,248
vs Forecast：＋2,522

171,227

171,500

172,248

8,119

250
150

308
172

Total
YoY：
＋1,240
vs Forecast： +119

Others

2,100

2,202

YoY：
+521
vs Forecast： ＋ 58

1,491

SoftwareYoY：
vs Forecast：

528

8,000

Software

-591
＋68

YoY：
vs Forecast：

-355
+22

Information equipent

Information equipment

YoY：＋5,034
vs Forecast： ＋582

YoY：
＋710
vs Forecast： ＋102

4,917

5,500

5,312

Electronic Component

Electronic component

YoY：＋1,020
vs Forecast： +748

YoY：
＋395
vs Forecast： -187

-212
FY2017/3
Result

FY2018/3
Previous
Forecast

FY2018/3
Result© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

FY2017/3
Result

FY2018/3
Previous
Forecast

FY2018/3
ResultNote: Figures of each segment income are not inter-segment adjusted.
Total amount is inter-segment adjusted (operating income).

19

Financial Highlights: Electronic Component Segment(Million Yen)

Net sales/Segment income

YoY Net sales

180 000

171,227

 Segment Income

172,248

171,500＋1,020 million Yen 0.6％up＋395 million Yen 8.0％up

670 0

vs Forecast

170 000

620 0

160 000+748 million Yen 0.4％up

 Segment Income-187 million Yen 3.4％down

570 0

5,500

150 000

 Net sales

5,312
520 0

While amusement machine-related business was
sluggish, EMS business for industrial equipment,
medical equipment, and office equipment showedfavorable growth.

140 000

4,917

470 0

130 000

120 000

420 0

FY2017/3
Result

FY2018/3
Previous Forecast© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

FY2018/3
Result20

Financial Highlights: Information Equipment Segment(Million Yen)

Net sales/Segment income

YoY

600 00500 0

 Net sales
 Segment Income＋5,034 million Yen 11.8％up＋710 million Yen 47.7％up

550 00450 0

vs Forecast

47,58247,000500 00400 0

450 0042,547

 Net sales+582 million Yen 1.2％up

 Segment Income+102 million Yen 4.9％up

350 0

400 00350 00300 0

300 00

250 0

2,100

250 002,202

Housing-related and commercial facility-related
products showed favorable growth.
PC sales were also solid despite severe market
environment.

200 0

200 00

1,491
150 0

150 00100 00100 0FY2017/3
Result

FY2018/3
Previous Forecast© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

FY2018/3
Result21

Net Sales by Region(Million Yen)

Net sales

227,209

232,000

YoY

235,921

 Japan-2,887 million Yen 1.9％down

 North America＋2,633 million Yen 43.9％up

 Europe＋1,515 million Yen 60.2％up

 East Asia

＋7,451 million Yen 11.2％up

Japan

151,912

5,995
2,518

66,783

FY2017/3
Result147,000

149,024

vs Forecast

North America

7,500
2,500

8,628
4,034

Europe75,00074,234

East Asia

FY2018/3
Previous Forecast

FY2018/3
Result© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

1.4％up Japan+2,024 million Yen

 North America＋1,128 million Yen 15.1％up

 Europe＋1,534 million Yen 61.4％up

 East Asia

-765 million Yen 1.0％down

Japan: Amusement machine-related business was
sluggish.
Overseas: Every region showed solid growth.
22

Exchange Rate/FOREX Sensitivity

FY2017/3
Result

FY2018/3
Result

（Yen）

（Yen）

（Reference）
Effect of 1-Yen change（Million Yen）
Net sales

Ordinary income

USD

108.38110.85

476

24

THB

3.08

3.36

6,098

343

RMB

16.37

16.63

856

61

HKD

13.97

14.20

1,246

37

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

23

Statements of Financial Position(Million Yen)

Total assets

124,281

125,751

Total liabilities and net assets

129,493

124,281

62,472

101,961

103,684

125,751

59,819129,493

58,861
Total liabilities

105,097
Current assets

61,80865,932

70,631
Total net assets

22,31922,067

24,395

2016/32017/3

2018/3© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

Non-current assets

2016/32017/3

2018/324

Statements of Financial Position(Million Yen)

Inventories

Accounts receivable/Accounts payable
30. 0

50, 000

28. 0
80, 000

36.0

81.5

83.5

77.1
80. 0

34.9

A/R turnover

26. 0

70, 000

Inventory turnover

40, 000

33.1

69.9

24. 0

（Day）

60, 000

63.5

65.3

A/P turnover
60. 0

（Day）

22. 0
40. 0

30, 000
50, 000

Notes and A/R

20. 0

20. 0

40, 000

18. 0

20, 000

0.0

30, 000

16. 0

54,795Inventories

52,008Notes and A/P

49,841-20.0

20, 000

10, 000

19,17519,325

19,45514. 0

36,85837,55336,392-40.0

10, 000

12. 0

0

10. 0

2016/32017/3

2018/3© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

0

-60.0

2016/32017/3

2018/325

Cash and Deposits/Interest Bearing Debt/Cash Flows(Million Yen)

Cash and deposits
35, 000

0.21

0.15

0.13

Cash flows

0.2 0

D/E ratio
30, 000

0.0 0

25, 000

9,546

-0.20

10,746

10,077

Cash flows fromoperating activities

20, 000-0.40

30,80315, 000

Cash and deposits

26,423▲ 258▲ 1,263

22,516▲ 3,067

12,7398,900

0▲ 2,811

Cash flows fromfinancing activities▲ 6,118

Interest bearing debts-1.00

2016/3

Cash flows frominvesting activities

-0.80

9,805

5,0 00▲ 4,173-0.60

10, 000

2017/3

2018/3© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

FY201 6/3

FY201 7/3

FY201 8/3

ResultResultResult

FY2016/3
Result

FY2017/3
Result

FY2018/3
Result26

Major Business Indicators(Million Yen)

Equity ratio

ROE
10.9%

52.4%

150 ,000

54.5%

9.0%

9.5%

49.7%
50. 00130 ,000

110 ,000

40. 00Total assets

2.2

3.1

2.8

Net profit margin

1.8

1.8

Total asset turnover

1.9

1.8

90, 000

30. 0070, 000

124,281

125,751

129,493
Shareholders’ equity

2.0

50, 000

20. 0030, 000

61,76470,55665,8722.0
10. 00Financial leverage
10, 000

2016/32017/3

2018/3-10,000

0.0 0© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

FY2016/3
Result

FY2017/3
Result

FY2018/3
Result27

（Reference）Comparison with Competitors（％）

Gross profit margin
13.7

13.7

10.9

11.6

14.8

13.8

14. 0

12. 0

ROE

11.1

KAGA
A

10. 0

8.4

8.0

6.0

5.5

4.0

9.5

9.7

6.3

5.8

12. 0

10. 0

B

13.3

10.9

6.9

B
A

10.0

9.0

8.0

C

13.1

13.3

14. 0

9.5

KAGA

8.7

8.0

C

6.0

6.3

2.0

4.0

0.0

FY2016/3
Result

FY2017/3
Result

FY2016/3
Result

FY2018/3
Result

Net income margin
2.9

3.1

3.0
B

2.5

2.2

53. 0

KAGA

1.5

1.8

1.6

2.3

A

1.6

C

1.2

1.0

47.9

49.7

47.0

KAGA

48. 0

43. 0

2.0

54.5

52.4

52.6

58. 0

2.8

FY2018/3
ResultEquity ratio

3.0

3.1

FY2017/3
Result

A

46.8

45.1

43.9

38. 0

C

28. 0

1.2

B

33. 0

23. 0

28.1

27.4

27.5

2016/32017/3

2018/30.5
18. 0

FY2016/3
Result

FY2017/3
Result

FY2018/3
ResultReference© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

A

A major trading company

BC

A major EMS company

28

Future IR Schedule

Relating to
Short-Term Results

Relating toMedium- to
Long-Term Results● Those items relating to the forecast of results in the fiscal year ending
March 2019 that have not been released will be released whenreasonable forecasts become possible
It is expected that a forecast will be released at theannouncement of results for the first two quarters of thisfiscal year

● Start formulating the next medium-term management plan in
anticipation of continued growth in Group results
Expected to be announced around this autumn© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

29

(Reference) Products and Services by Business Segment

Electronic components• Sale of semiconductors (general-purpose products and customized
products)• Sale of electronic components (transformers, condensers, cables,
connectors, and switches, etc.), LED, and storage devices• Development, manufacture and sales related to EMS (airconditioning, office equipment, automotive devices, industrial
equipment, amusement machines, communication equipment,
medical equipment, etc.)

Information equipment• Sales of PCs and PC peripherals, home electric appliances/lighting
fixtures, photograph and imaging products, original brand products,
etc.)

Software• Production of computer graphics, planning and development of
amusement products, and other activities

Others• Repair and supports for electronics equipment, manufacture andsales of amusement equipment, and wholesale/retail of sports goods,
etc.)© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

30

(Reference) Glossary

EMS(Electronics Manufacturing
Service)・ Provide high-volume lot production based on an agreement withcustomers, in contrast to simple subcontract services
・ The Company excels in offering one-stop service to customers bygetting involved in processes including design, components
procurement, sales, and support in addition to manufacturing.

AR・ Technology which augments a reality environment perceived byhuman using computers. Also refers to the computer-augmented
reality environment itself

VR・ Technology which scientifically generates an environment that is notreal or original but essentially functions in the same way, by stimulating
human senses including users’ five senses(Augmented Reality)(Virtual Reality)

ADAS(Advanced DriverAssistance Systems)

・ Systems developed to automate, adjust, and enhance the vehicle
systems for safe and better driving

DMS

・ Driver support system for safe and comfortable driving. It consistsof sensor, image/signal processing and indicator.

(Driver Monitor System)

LPWA(Low Power Wide Area)© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

・ Wireless communication technology with lower power consumptionthat enables long-distance telecommunication in relatively wider areawith one base station
・ It is expected to be customized for IoT (all things are connected to
the Internet) and M2M (direct communication between devices via theInternet).

31

“Everything we do isfor our customers”

20 Kandamatsunagacho, Chiyoda-ku, Tokyo 101-8629
Contact: Investor Relations & Public Relations Office
TEL:+81-3-5657-0106
FAX:+81-3-3254-7133
E-mail： webmaster@taxan.co.jp
https://www.taxan.co.jp© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

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