Financial Results Briefing
Fiscal 2020(Ended May 31, 2021)

July 16, 2021
Toyo Denki Seizo K.K.

Program◼ Briefing on Financial Results: 40 minutes
1. Overview of Financial Results for Fiscal 2020
2. Outlook for Financial Results for Fiscal YearEnding May 2022
3. Progress and Specific Initiatives in MediumTerm Management Plan

◼ Q&A: 20 minutes

11. Overview of Financial Results for
Fiscal 2020
(From June 2020 to May 2021)

1-1. Overview of Consolidated Financial Results
Although sales and profits declined from the previous fiscal year due to the impact of thenovel coronavirus, profits exceeded the published value. Orders received decreased year
on year.
FY2019FY2020Net Sales

390.7

331.4

Operating Income

10.6

100 million yen
YoY Change%

Publishedvalue(May 2021)

Published value ratio
%

-59.2

-15.2%

340.0

-8.6

97.4%

4.2

-6.4%

-60.3%(1.3%)

2.5

169.2%(2.7%)－+1.7(-1.4pt)(0.7%)(+0.6pt)－

Ordinary Income

12.0

7.5

-4.5

-37.3%

5.0+2.5

151.4%Net Income

-9.6%

7.0

+2.7

139.5%

78.28+31.10

－

315.0

-14.5

95.4%

(%)

[Net income per share(yen)]

10.8

9.7

120.98109.38-1.0-11.60

ROE

4.4%

4.1%

-0.3pt－Orders received

385.2

300.5

-84.7

-22.0%

Ratio of overseas
sales to net sales

20.7%

15.9%

-4.8 pt－－3

<Reference>

Review of Business Environment for Fiscal Year Ended May 2021

Business Environment<Domestic>Due to the impact of novel coronavirus infections, the number of people transported by railway
operators decreased significantly, and some of the operators postponed plans to build new
trains and replace old ones.
Transportation
Systems<Overseas>
Although the economy in China, where the impact of novel coronavirus infections has beenbrought under control ahead of other countries, is recovering, there was a temporary
suspension of new vehicle construction projects and a decrease in demand for maintenanceparts for products delivered in the past.

<Domestic>
Although capital investment in the manufacturing sector was suspended due to uncertainty
about the future, a certain recovery was seen in the latter half of the fiscal year.
Industrial
Systems<Overseas>
Restrictions on activities that involved contact with customers and the movement of people
constrained the installation and start-up of products delivered to customers.

4

1-2.

Factors for Increase and Decrease in Operating Income (YoY change)

Although operating income decreased due to lower net sales, the extent of the decrease inincome was reduced by improving gross profit and cutting expenses.

Plant profit/loss (nonconsolidated)+000 million yen

Decrease in sales(non-consolidated)-980 million yen
Decrease in subsidiary
profits, etc.
-290 million yen

Reduction in selling,
general & administrative
expenses (nonconsolidated)+220 million yen
Improvement in grossmargin (non-consolidated)+430 million yen

1,060 million yen

420 million yen<FY2019><FY2020>5

1-3.

Breakdown of Non-Operating Income/Expenses and Extraordinary
Income/Loss
Non-operating
income/expenses+330 million yen

Extraordinary
income/loss+400 million yen• Dividend income+200 million yen• Foreign exchange gain
+130 million yen• Interest expense-60 million yen• Other+60 million yen• Sales of investment
securities+400 million yen

Income taxes

1,160 million yen

970 million yen
750 million yen

420 million yen

OperatingincomeOrdinary
incomeIncome before
income taxes

Net
income6

1-4.

Segment Performance Transportation Systems

The extent of profit decline was minimized despite decreases in orders received, net sales,
and income.
◼ Net sales and segment income◼ Orders received and order backlog
300

Orders received

260.8

300

257.1

(100 million yen)Segment income

Net Sales

272.3
Net Sales

60

242.6
215.2

241.0

200

225.9

188.1

Order backlog

200

214.6

Segment income

100

100

0

0
FY2018FY2019FY2020

40

24.2

24.7
22.1

20

0
FY2018FY2019FY2020• Although orders received from JR increased, those from private railway companies, China and overseas (excluding China) declined.
• Net sales decreased due to declines in sales for private railway companies, China and overseas (excluding China) despite an increase insales for JR.
• The impact on segment income was minimized by improving profitability.
7

1-5.

Segment Performance Transportation Systems Factors for Increase
and Decrease in Income

Although net sales and subsidiary profits (in bus door closing devices, etc.) decreased,
the impact was minimized through efforts to improve gross profit and plant profit/loss.

Decrease in sales(non-consolidated)-260 million yen
Decrease in subsidiary
profits, etc.
-240 million yen

Plant profit/loss (nonconsolidated)+120 million yen
Improvement in grossmargin (non-consolidated)+140 million yen

Increase in selling,
general & administrative
expenses (nonconsolidated)-10 million yen

2,470 million yen

2,210 million yen<FY2019><FY2020>8

1-6.

Segment Performance Industrial Systems

The segment income was secured in line with the planned value despite decreases inorders received, net sales and income.
◼

◼

Orders received and order backlog

150

Net sales and segment income(100 million yen)

Net Sales

Orders received

150

128.3
111.9

Ordersreceived
123.3

Segment income

105.9

100

30

130.2
105.4

100

20

Order backlog

71.8

50

50
53.5

54.1

Segment income

10

10.0
7.1

6.5

0

0
FY2018FY2019FY20200FY2018FY2019FY2020• Orders received for testing equipment managed to remain at the same level as the previous year, but orders received for processing
equipment declined.
• Net sales decreased mainly due to a decrease in sales for testing equipment and power supplies.
• Segment income decreased mainly because of a decrease in net sales despite progress in improving profitability.

9

1-7.

Segment Performance Industrial Systems Factors for
Increase and Decrease in Income

Although income declined due to lower net sales, the planned value was secured throughefforts to improve gross profit and reduce expenses.

Decrease in sales(non-consolidated)-500 million yen
Plant profit/loss (nonconsolidated)-110 million yen
Decrease in subsidiary
profits, etc.
-10 million yen

Reduction in selling, general& administrative expenses(non-consolidated)+100 million yen
Improvement in grossmargin (non-consolidated)+230 million yen

1,000 million yen

710 million yen<FY2019><FY2020>101-8.

Segment Performance

Information Equipment Systems

Decreases in orders received, net sales and income mainly due to the impact of novel coronavirus
infections and a decline in large-scale projects as a reaction to high demand in the previous fiscal year.
◼ Net sales and segment income◼ Orders received and order backlog

Net Sales

Ordersreceived

20

Segment income

30

30

17.5

(100 million yen)

30

Net Sales

20

16.1

15.8

20

17.7
10.6

10

6.3

Order backlog

7.0

10Segment income

2.9

5.3
1.0

0
FY201810FY2019FY2020

4.6

2.6

0

0
FY2018FY2019FY2020• Orders received decreased primarily due to not only the impact of novel coronavirus infections, but also a drop in demand asa reaction to a surge prior to a revision to the consumption tax in the previous fiscal year.
• Net sales fell for the same reason as orders received.
• Segment income slipped due to lower net sales.
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1-9.

Consolidated Financial Position

100 million yen
May 31,
2020

May 31,
2021

Change

551.6

519.6

-31.9

Current assets

262.8

253.0

-9.8

Fixed assets

288.8

266.6

-22.1

Total Liabilities

309.8

279.5

-30.2

112.5

98.8

-13.7

241.8

240.0

-1.7

43.8%

46.2%

+ 2.4pt

Total Assets

Of which, net
interest-bearing debt
Net Assets
Shareholders’ equity
ratio

Remarks

Investment securities: -1,600
million yen

Unrealized holding gain/loss onavailable-for-sale securities: -900
million yen

121-10.

Trends in Consolidated Cash Flows
100 million yen

FY2016FY2017FY2018FY2019FY2020Cash flows from operating activities

15.0

-15.7

37.2

21.4

17.7

Cash flows from investing activities

-46.9

-30.8

-10.1

0.4

-1.5

Purchases of property, plant andequipment

-39.0

-34.4

-22.7

-6.4

-5.4

Cash flows from financing activities

28.6

41.4

-20.1

-11.2

-9.7

Free cash flow

-31.8

-46.5

27.0

21.8

16.2

Cash at the end of the period

20.9

15.5

22.4

32.9

39.6

Interest bearing debt

117.5

161.7

154.2

145.5

138.4

Net interest bearing debt

96.6

146.1

131.8

112.5

98.8

• In cash flows from operating activities, accounts receivable-trade and accounts payable-tradedecreased.
• In cash flows from investing activities, large-scale capital investment ran its course.
• Free cash flow has remained positive in recent years.
• Net interest-bearing debt was reduced steadily to 9,800 million yen (down 1,300 million yen year onyear).
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2. Outlook for Financial Results for
Fiscal Year Ending May 2022

2-1. Outlook for Financial Results for Fiscal Year Ending May 2022
(Consolidated)
Orders received of 34.0 billion yen, net sales of 34.0 billion yen, and operating incomeof 450 million yen.
100 million yen

FY2020 (Result)2Q

FY2021 (Forecast)

Full year

2Q

YoY
ChangeFull year

Full year

Net Sales

167.2

331.4

150.0

340.0

+8.6

Operating Income
(%)

1.7

4.2

-1.0

4.5

(1.0%)(1.3%)+0.3

Ordinary Income

3.5

7.5

Net Income[Net income per share(yen)]

0.5

7.0

-0.5

4.5

9.7

1.5

8.0

-1.7

50.49

109.38

16.78

89.48

-19.9030.0

Dividend per share (yen)Orders received(1.3%)

143.9

300.5

30.0
160.0

340.0

+39.5
15

2-2. Outlook for Financial Results (by Segment)
100 million yen
Transportation
Systems

FY2021
Forecast(Full year)

YoY Change

Industrial
Systems

Information
Equipment
Systems

Net sales

205.0

127.0

8.0

Segment
income

21.0

9.4

1.3

Ordersreceived

206.0

126.0

8.0

Net sales

-10.2

+21.6

-2.6

Segment
income

-1.2

+2.3

-1.3

Ordersreceived

+17.9

+20.1

+1.7

16

<Reference> Assumptions for Outlook for Financial Results
The business environment assumed in the outlook for the financial results for the fiscal
year ending May 2022

Business Environment

Transportation
Systems• With demand for transport decreased by the impact of novel coronavirus
infections, it is projected that the number of users of domestic railways will not
return to the pre-pandemic levels.
• In China, the number of passengers on high-speed railways has generally
recovered to the previous level, and there are expectations of recovery indemand for maintenance of high-speed railways and urban transport systems.
• Overseas projects other than those in China, such as those in Southeast Asia,
have also started to become brisk.

Industrial
Systems• Production facilities and printing machines are returning to their former levels,and inquiries from the United States, China, and South Korea are also
increasing.
• Toward the realization of a decarbonized and sustainable society, test
equipment for the electrification of automobiles and autonomous driving, anddispersed power source systems are projected to grow.
• There are also expectations of expansion and reinforcement of infrastructure
equipment, such as emergency power generators, in the effort for national
resilience.

Information
Equipment
Systems• With increasing demand for digitalization and contactless systems, there is a
growing need to be compatible with IC train tickets, including those for local
lines, whereby demand for products, such as IC car-mounted terminals, areexpected to grow.
17

3. Progress and Specific Initiatives in
Medium-Term Management Plan

3-1.

Medium-Term Management Plan Numerical Targets (consolidated)

Efforts are underway with “Revitalize2020,” the latter two years of the Medium-Term Management Plan(FY ended May 2021 through FY ending May 2022) as “a period for accumulating earning power andreturning to a growth path.”
100 million yen

FY ended May 2021

FY ending May 2022

FY ending May 2022

ResultOutlook for Financial
Results

Medium-Term
Management Plan

331.4

340.0

360.0

4.2

4.5

6.0

(1.3%)(1.3%)(1.7%)

Ordinary Income

7.5

7.0

8.0

Net Income

9.7

8.0

7.0

Investment gain on equity
method

-0.0

1.7

1.0

ROE

4.1%

3.3%

3.0%

Payout ratio

27.4%

33.5%

30.0%

Transportation Systems

215.2

205.0

220.0

Industrial Systems

105.4

127.0

130.0

Information Equipment
Systems

10.6

8.0

10.0

Net Sales
Operating Income(Operating margin ratio)<Net sales by segment>

19

3-2.

Medium-Term Management Plan

Basic Policies and Progress

Progress on the seven basic policies
1.

Expanding the overseas business◆ Transportation Systems:• Increased urban transport maintenance capacity in China.
◆ Industrial Systems:• Established a sales and service affiliate in Thailand to expand sales channels in Southeast Asia.
• A manufacturing affiliate of industrial motors in China completed the establishment of a production
system and started making shipments.

2.

Expanding our business areas using our core technologies◆ Development of a condition-based maintenance (CBM) systemthat utilizes our IoT terminals is actively under way. Predict themaintenance timing, judging from the status of usage of each part.

3.

Promoting development of technology in advance of market needs◆ Developed a high-speed motor that responds to the electrification of automobiles, and an In-TyreHouse dynamo that is compatible with automatic driving.

20

3-2.

Medium-Term Management Plan

Basic Policies and Progress

Progress on the seven basic policies
4.

Establishing a stable business earnings structure◆ Reduced fixed costs through the united efforts of administration, sales, and plants. Maintained acertain level of operating income despite declining net sales.

5.

Developing foundations for expanding production capacity◆ Improved production efficiency by strengthening process control through the use of a core system.

6.

Developing human resources to play important roles in the future◆ Efforts are underway to develop the next generation of executives and young managers, including theappointment of women.

7.

Promotion of ESG◆ Formulated sustainability policies and enhanced initiatives.
◆ Launched a new organization for business process innovation, andefforts are ongoing.
◆ Plans to comply with disclosure of the skill matrix of directors.
◆ Increased the ratio of outside directors to 1/3 or more of directors.
21

3-3.

Specific Initiatives in Medium-Term Management Plan

Financial Results of Toyo Denki’s Affiliates in China mainly in MaintenanceBeijing Jingche
Shuangyang Traction
SystemChangzhou Ruiyang
Transmission Technology
Net Sales

Operating Income

Chengdu Yonggui Toyo
Rolling Stock Equipment

400

1,000

400

1,000

400

2,000

200

500

200

500

200

0

0

0

0

0

0

4,000
(in millions of
yen)

2018

2019

Net Sales

2020

2018

2019

2020

2018

2019

2020

Operating
Income• Demand for overhauls has expandedin addition to manufacturing of drive
gear units for urban transport systems.
• Respond to demand by reinforcing
business bases.

• Extended inspection and repair ofelectrical equipment in subways in
Beijing into other companies’ products
in addition to ones made by Toyo
Denki.
• Expanded the floor space of plants
due to strong incoming orders.

• With three years having passed
since the start of operations as apantograph manufacturing base in
China, financial goals have beenreached and remained ahead of theplan.
• Demand for consumables forpantographs was also strong.

22<Reference> Trend in the Railway Business in China◆

Changes in Monthly Passenger Transportation Volume on Trunk Railway Lines (from the website of China State Railway
Group Co., Ltd.)
400(Millions ofPeople)

300
200
100
2019

2020

2021

0
January

February

March

April

May

June

July

AugustSeptember

OctoberNovember

December• Although volume was affected by novel coronavirus infections in the first half of 2020, it recovered in thesecond half.
• The number of passengers surpassed the pre-pandemic level of 2019 in May 2021.

◆ Extension and operating speed of high-speed railways• As of the end of 2020, operating distance reached 38,000 kilometers, the longest in the world. It is planned
to extend the lines to 70,000 kilometers in 2035.
• A plan is ongoing to increase the operating speed from the current 350 km/h to 400 km/h, and Toyo Denki isconsidering the ways to respond to the mass-production of a new type of 400 km/h standard vehicle.

23

3-3.

Specific Initiatives in Medium-Term Management Plan

Promote development of test equipment that contributes to the electrification andautonomous driving of automobiles.
◆

Develop In-Tyre-House dynamos.
Attached to the tire part of an actual vehicle, prototypes are in simulation of an actual running test (toreplace chassis dynamos). There is also a possibility of application to self-driving vehicle tests inside atesting room by complying with steering.

<Dynamo Main Body><Chassis Dynamo>◆✦ Tests are conducted on actual
vehicles for specific projects.

<Actual vehicle tests with In-TyreHouse dynamo>

Developed a slender version of low-inertia high-speed rotation (20,000 rpm) dynamos.
Developed a slender version (smaller diameter) of high-speed rotation dynamos for EV/HEV. The
realization of a slender version of high-speed dynamos makes it possible to use conventional testing
equipment and EV/HEV testing equipment together, thereby making it easier to cope with EV/HEV
testing equipment.

24

3-3.

Specific Initiatives in Medium-Term Management Plan

Promoted sales activities and product delivery using DX◆ Online preview showing of transportation products (December 2020)
A preview was held online for customers. Presented main electricalequipment and other products, and a condition-based maintenance(CBM) system, which is under development.
At a later date, customers were approached through online sales
activities.

Online preview showing of transportation products

Train information system

Main controller
In-vehicle guidance display system

Step device

Current collector (pantograph)

Door closing equipment

Auxiliary power supply system

High-speed circuit breaker

Main controller (VVVF inverter)
Gear device

Main electrical equipment◆ Automotive Engineering Exposition 2021 Online (May 2021)
Toyo Denki took part in the online exposition of automobile
technology and presented the new product In-Tyre-House dynamo
through video and panels.
Conducted sales activities for customers who had viewed the Toyo
Denki website.
* Exposition URL (held until July 30) https://aee.expo-info.jsae.or.jp/ja/* Video introducing In-Tyre-House dynamos https://vimeo.com/548659888

Introduce In-Tyre-House dynamos◆ Remote delivery of test systems for automotive development
A test system for automotive development was installed and put in
operation remotely from Japan for the overseas subsidiary of thecustomer. Utilize DX as a BCP during the pandemic.

25

3-3.

Specific Initiatives in Medium-Term Management Plan

Sustainability Policy (Basic way of thinking)

The Toyo Denki Group sets contribution to society in its business philosophy and holds up
an initiative to protect the global environment as the priority task in its environmental
philosophy. The Group has formulated the Sustainability Policy as the guidelines for its
efforts to realize these philosophies and contribute to the sustainable development ofsociety.

◆ Relationships between the Company’s initiatives and the realization of SDGs was
summarized from three perspectives.
• “Initiative in Products and Services”• “Initiative in Production Activities”• “Initiative in Valuing People and Communities”◆ In the future, Toyo Denki will formulate specificinitiatives as roadmaps.

26

3-3.

Specific Initiatives in Medium-Term Management Plan

Sustainability Policy (Toyo Denki’s Initiatives)

Initiative in Products and Services

Initiative in Production Activities✦ Supply of decarbonized energy, such as small hydroelectric
power generation✦ Popularization of energy-efficient transportation, such asrailroads and electric vehicles✦ Efficiency improvement of electrical equipment and the
spread of power storage systems✦ Improvement of safety through a shift to barrier-freetransportation systems
etc.

✦ Reduction of energy consumption in production✦ Study of solar power generation and decarbonization ofenergy currently used
✦ Reduction of energy consumption during transportation ofmaterials and products✦ Recycling activities at production sites and officesetc.

Initiative in Valuing People and Communities✦ Support for school education by offering university endowed lectures andaccepting school field trips in plants✦ Promotion of gender equality initiatives and appointment of female
managers✦ Protect the global environment to contribute to protection of nature
etc.

27

Thank you for your interest.

<Inquiries>
Toyo Denki Seizo K.K.
PR, IR, and CSR Department, Management Planning Division
TEL: +81-3-5202-8122
Email: contact@toyodenki.co.jp

Disclaimer• Statements concerning financial results forecasts are based ondata available as of the date of publication of this material andassumptions concerning the elements of uncertainty that willaffect future business performance as of the date of publicationof this material. Actual financial results may differ depending
on a variety of factors.
• Forward-looking statements contained in this material are thejudgments of the Toyo Denki Group based on data available atthe time of publication of this material. Such statements anddescriptions are by no means comprehensive.

29