Results of Operations for theFirst Half of the Fiscal Year Ending March 31, 2018
(FY3/18)
November 29, 2017

IWAKI CO.,LTD.

Stock code: 6237
Trade name: Iwaki Pump

０

Contents

I. Summary of 1H FY3/18 Financial Results

・・・・P 3

II. Outlook for FY3/18

・・・・P12

III. First-Second Medium-term Management Plan

・・・・P17

IV. Supplementary Information

・・・・P28

Copyright © IWAKI CO., LTD. All Rights Reserved2

I

Summary of 1H FY3/18 Financial Results3

1

Financial Summary(Millions of yen)

1H FY3/17

1H FY3/18

Amount1H FY3/18

YoY change

Forecast*

Net sales

12,394

13,435+8.4%

13,075Gross profit

4,025

4,516

+12.2%

4,395(Gross margin)(32.5%)(33.6%)(+1.1pt)(33.6%)

Operating profit

771

1,015

+31.6%

767(Operating margin)(6.2%)(7.6%)(+1.3pt)(5.9%)

Ordinary profit

1,086

1,354

+24.7%

923

779

1,016

+30.4%

647

Net income per share (Yen)104.12135.78

86.45

Exchange rate USD/JPY (Yen)(average)
EUR/JPY (Yen)

111.74124.58112.34121.66113.00120.00

Profit attributable to owners ofparentCopyright © IWAKI CO., LTD. All Rights Reserved* Announced on May 12, 2017

4

2

Sales and Earnings Highlights

1

Sales increase２

A big increase in operating profit

 Capital expenditures in the semiconductor/liquid crystal and surface treatment
equipment markets contributed to higher sales and there was significant growthin Asia Sales in China were about 40% higher than one year earlier mainly because of
growing demand in the medical equipment market
 Increasing demand in Europe in the new energy market
 Benefits of initiatives for faster deliveries are slowly emerging

 Earnings benefited from the growth in sales
 Operating margin improved due to a reexamination of expenses
 Strong sales growth of magnetic drive pumps and metering pumps, which arecore products with high profit margins

A big increase in ordinary profit

３  The foreign exchange gain declined because of the contribution of one-time
factors one year earlier, but there was a big increase in ordinary profit resulting
from the consistently strong performances of affiliated companies, mainly in Asia
Copyright © IWAKI CO., LTD. All Rights Reserved

5

3

Net Sales and Operating Profit (Quarterly)Higher sales and profits at all levels backed mainly by strength in thesemiconductor/liquid crystal and surface treatment equipment markets(Millions of yen)

(Millions of yen)

FY3/16

FY3/17

FY3/18Net sales (left)(左目盛)(右目盛)Operating profit(right)Ordinary profit(右目盛)(right)* FY3/16 1Q and 2Q figures are for reference only because there are no consolidated financial statements for these fiscal periods.
Copyright © IWAKI CO., LTD. All Rights Reserved

6

4Gross Margin and SG&A Expense Ratio (Quarterly)
Sales growth reduced the SG&A expense ratio and the gross margin remained high(Millions of yen)

FY3/16

FY3/17

FY3/18(左目盛)
SG&A expenses(left)

Gross margin(右目盛)(right)SG&A expenses
ratio
(右目盛)
(right)* FY3/16 1Q and 2Q figures are for reference only because there are no consolidated financial statements for these fiscal periods.

Copyright © IWAKI CO., LTD. All Rights Reserved

7

5

Product Category Sales

Sales of pneumatic drive pumps increased sharply following 1Q and sales of metering
pumps and rotary displacement pumps also increased.
(Millions of yen)

FY3/17

YoY change
1H sales(Millions of yen)

FY3/18Magnetic drive
pumps

4,549

+1.2%

Metering pumps

2,449+11.8%

Pneumatic drive
pumps

1,231

+38.0%

18.8%

Rotary displacement
pumps

1,248

+10.4%

9.7%

Air pumps

727

+1.4%

System products594+12.8%

Purchased
products

1,258+17.8%

Others

1,376

+0.2%

33.7%
34.1%

17.6%
8.6%

Copyright © IWAKI CO., LTD. All Rights Reserved

9.2%

9.4%

5.5%
5.0%

5.3%
3.9%

9.5%

9.3%

10.5%

10.0%

8

6

Market Category Sales

Significant sales growth in the semiconductor/liquid crystal market and higher sales inthe surface treatment equipment(Millions of yen)

FY3/17

1H salesYoY change(Millions of yen)

FY3/18

16.4%

34%

14.6%
14.6%
14.9%

8.5%

23.3%

2,086

+25.7%

Medical equipment

1,980

+1.3%

Surface treatment
equipment

1,135+13.7%

Water treatment

3,152

+7.2%

Chemicals

1,277

+4.8%

424

+24.5%

3,378

+3.0%

8.4%

23.6%

9%
9.6%

9.4%

3.4%

3.0%

25.6%

Semiconductor/
liquid crystal

6%
5%

New energy

24.7%

OthersCopyright © IWAKI CO., LTD. All Rights Reserved

9

7

Regional Sales
Sales increased in Japan, Europe and America and, as in the 1Q, sales were verystrong in Asia and China(Millions of yen)

FY3/17

FY3/18

62.4%
61.2%

Copyright © IWAKI CO., LTD. All Rights Reserved

9.4%

8.8%

12.3%

12.5%

10.2%

8.8%

3.7%
3.3%

4.0%
3.4%

1H sales(Millions of yen)

YoY change

Japan

8,304

+6.8%

Overseas
total

5,131

+11.1%

Europe

1,222

+2.8%

America

1,668

+0.9%

Asia

1,269

+27.6%

China

517+42.5%

Others

453

+8.9%
10

8 Capital Expenditures, R&D Expenses and Depreciation (Quarterly)(Millions of yen)

FY3/16

FY3/17

Copyright © IWAKI CO., LTD. All Rights Reserved

FY3/181H salesYoY change(Millions of yen)
Capitalexpenditures

190

-18

R&D expenses

282

+24

Depreciation

237

+11

11

II

Outlook for FY3/18

12

1

FY3/18 Forecast
Higher sales and earnings forecasts because of strong sales in thesemiconductor/liquid crystal and surface treatment equipment markets

FY3/18

FY3/18 (forecast)
FY3/17(Millions of yen)

YoY change

Progressratio for 1H

Previous
forecast

Net sales

25,146

26,838

+6.7%

50.1%

26,517

Operating profit

1,465

1,786

+21.9%

56.8%

1,672

(Operating margin)(5.8%)(6.7%)(+0.8pt)-(6.3%)

Ordinary profit

2,136

2,290

+7.2%

59.2%

1,969

Profit attributable to ownersof parent

1,690

1,735

+2.6%

58.6%

1,450

Net income per share (Yen)

225.93231.90+2.6%-

193.82

USD/JPY
Exchange(Yen)rate (average) EUR/JPY(Yen)
Copyright © IWAKI CO., LTD. All Rights Reserved

108.81107.00 (estimates)

120.30128.00 (estimates)

113.00120.0013

2

FY3/18 Forecast –Factors Affecting Profitability(Millions of yen)

+82

-28

-566
+833

1,786
1,465

FY3/17
Operating profit

Increase/decrease insales, change in costof sales ratio

Copyright © IWAKI CO., LTD. All Rights Reserved

Gross profit
SG&A expenses
Foreign exchange Foreign exchange
impactimpactSG&A expenses
Higher R&D and othercosts

FY3/18Operating profit(forecast)14

3Market Assumptions
Market environment assumptions
Japan

Overseas

Water treatment
market• Solid demand for water quality
management for hot bathing facilities
and for agriculture using hydroponics
and soil• Slow sales of equipment for water
treatment plants• Steady growth in the sterilization andliquid chemical supply sectors• Increasing investments in environment
protection related water treatment
equipment, mainly in Asia

Semiconductor/liquid
crystal market• Steady demand at manufacturers of
production equipment• Investments in Asia will remain firm fornow

Medical equipment
market• Steady growth in dialysis equipment,
clinical testing equipment andendoscope sterilization equipment• Steady growth in biological andimmunology analyzers used in China

New energy market• No change in sales of household fuelcells

• Strong capital investment in rechargeable
battery• Increasing demand in Europe for wind
power generation

Chemicals market• Steady demand related todevelopment of value-added products
and investments by pharmaceuticalcompanies• Increasing expenditures in the Chinese
semiconductor industry for equipment forpure chemicals• Steady growth in chemicals for the
automobile industry

Surface treatment
equipment market• More demand for value-added
electronic components• Steady growth due to increasing
production of hybrid and electricautomobiles

Copyright © IWAKI CO., LTD. All Rights Reserved*Bold indicates priority markets targeted for growth.

15

4Return to Shareholders

Basic policy・Dividend payout ratio: more than 30%
・Consistent distribution of dividends
Dividend per share(Yen)

Dividend payout ratio (consolidated)(%)(¥78.8)Commemorative
dividend: ¥11(¥68.0)(¥70.0)FY3/16

FY3/17

FY3/18 (forecast)

Copyright © IWAKI CO., LTD. All Rights Reserved

16

III

First-Second Medium-termManagement Plan

17

1Overview of the 10-Year Vision
FY3/16

FY3/17

FY3/18-FY3/20
First-Second Medium-term Management Plan

FY3/25

Consolidated sales
Numerical targets

FY3/16 Results

FY3/17 Results

FY3/18 Forecast¥24.8 billion¥25.1 billion¥26.8 billion¥40.0 billion
Overseas

Japan

6.1%

5.8%

6.7% (forecasts)

Operating profit on
sales

10.0%

Qualitative
targets

To supply the world’s best products as All Iwaki– We will work together to supply the world’s best products, quality, value, and services –“Change & Challenge” is our stance for accomplishing this goal
- We will firmly establish a corporate culture of never being afraid of change and new challenges Copyright © IWAKI CO., LTD. All Rights Reserved18

2

Goals of the First-Second Medium-term Management Plan
This plan is for the periods of planting seeds and business development and growth
to build a base for achieving the 10-year vision

Rebuild the profit structure – Reinforce
 Build a base to reach the numerical targets of the 10-year vision – Reinforce
 Align all vectors for reaching the qualitative targets of the 10-year vision andfoster a “Change & Challenge” corporate culture – Firmly establish
 Manage operations with the goal of consistently increasing corporate value●Steps for achieving the 10-year vision
First
Planting
seeds
FY3/17First-Second Medium-term Management Plan

Planting seeds-Business development and growth
FY3/18

FY3/19Copyright © IWAKI CO., LTD. All Rights Reserved

FY3/20

Second Medium-termManagement Plan

Business development
and growth
FY3/21

FY3/22

Third Medium-term Management Plan

Reaping benefits
FY3/23

FY3/24

FY3/2519

3

Accomplishments of the First Medium-term Management Plan

Japan
Overseas Key market sectors(and new businesses)
Investments

Major progress

Level

Upcoming actions

Share competitive SWOT analysis with all associated departments
and replace○

Continue and strengthen these activities

To firmly establish the solutions business, increase system sales anddifferentiate IWAKI by using cooperation with maintenanceproviders△Target the IoT sector by deepening ties
among associated departments and upgradeand expand simulation testing facilities

Take actions to meet customer demands for faster deliveries○

Speed up deliveries in more productcategories

America

Expand presence in the water treatment market(drinking water, food industry) and in the aquatic(water tank system for small fish) business△

Build stronger sales channels for controllers(Asia, emerging countries)

EuropeExpand presence in the chemical/chemical
manufacturing equipment plant market and target
demand for cooling equipment△

Use the IWAKI Europe sales strategy
throughout Europe

ASEAN

Start using a single model for the entire ASEAN region,
establish a business control headquarters, andbuild/develop locations to control logistics within
ASEAN

×

Advance to the development/operations
phase while continuing to build a stronger
presence in the ASEAN region

China

Target opportunities in the medical equipment market△

Stabilize performance in the new energy andwater treatment markets

Make investments in production facilities at IWAKI Europe; in China,
increase outsourced manufacturing companies and expand
procurement channels for parts△

Continue IWAKI Europe capital expenditures;in China, add more outsourced production
companies and procurement channels

Establish alliances and seek M&A opportunities in sectors
peripheral to the pump business△Continue to examine opportunities foralliances and M&A

Copyright © IWAKI CO., LTD. All Rights Reserved

Progress level ○: 70%+△: 20% to 69%

×: Under 20%

20

First-Second Medium-term Management Plan (FY3/18-FY3/20)
P/L

4●Consolidated Statement of Income
FY3/18 (forecast)AmountShare(%)

YoY change(%)(Millions of yen)

FY3/19 (plan)
AmountFY3/20 (plan)

Share
(%)

YoY change(%)

AmountShare(%)

YoY change(%)

Net sales

26,838

100.0

106.7

28,124

100.0

104.8

29,860

100.0

106.2

Gross profit

9,091

33.9

111.2

9,744

34.6

107.2

10,678

35.8

109.6

Operating profit

1,786

6.7

122.0

2,261

8.0

126.6

3,075

10.3

136.0

Ordinary profit

2,290

8.5

107.2

2,689

9.6

117.5

3,501

11.7

130.2

Profit attributable toowners of parent

1,735

6.5

102.6

1,996

7.1

115.0

2,548

8.5

127.6

1
2

Planning on steady consolidated sales growth based on the outlook for strong nonconsolidated sales growth along with solid sales growth at subsidiaries
Forecast a steady improvement in the operating margin resulting from sales growth and theoutlook for strong sales growth in 2019 and 2020 at subsidiaries with high gross margins

Copyright © IWAKI CO., LTD. All Rights Reserved21

First-Second Medium-term Management Plan (FY3/18-FY3/20)
5 (Differences Between the Initial and Current Plan)(Millions of yen)

Initial plan

FY3/18 (forecast)AmountchangeInitial plan

FY3/19 (plan)

AmountFY3/20 (plan)changeNet sales

26,724

26,838114

28,51928,124(394)

29,860Gross profit

8,880

9,091

211

9,518

9,744

225

10,678Operating profit

2,113

1,786

(326)

2,561

2,261

(300)

3,075

Ordinary profit

2,552

2,290

(262)

3,014

2,689

(324)

3,501

Profit attributable toowners of parent

1,779

1,735

(44)

2,105

1,996

(109)

2,548

1

The FY3/18 sales forecast is higher because of strong sales in the semiconductor/liquid crystal
market. But the sales forecasts are lower afterward due to the uncertain outlook.

2

The FY3/18 gross profit forecast is higher due to new subsidiary TechnoECHO, which has ahigh gross margin; but the operating profit forecast is lower to reflect up-front investments inthe aquatic business and for overseas production facilities as well as an increase in the R&D
workforce (up-front investments to seeding plants).
The FY3/18 forecast for non-operating income from affiliated companies in Asia is higher
due to the outlook for continued strength in the semiconductor/liquid crystal market

3

Copyright © IWAKI CO., LTD. All Rights Reserved22

6 Basic Policy of the First-Second Medium-term Management Plan

1. Concentrate resources on markets targeted for reinforcement(medical equipment, new energy, water treatment) -Measure thebenefits Develop products more efficiently

2. Improve ability to serve customers; operate a solutions business- Continue taking these actions
3. Build a business model for new activities - Reinforce
4. Establish and execute sales strategies matching the characteristics
of markets in the US and ASEAN region while continuing to growin Europe; become more price competitive and improve theability to serve customers
Copyright © IWAKI CO., LTD. All Rights Reserved23

7

Major Initiatives of the First-Second Medium-termManagement PlanJapan Target demand for the replacement of products of competitors
 Establish and strengthen the solutions business Meet customers’ demands involving products,
parts, delivery, etc.
 Focus on IoT products and solutions for customers

Key market sectors (and new businesses) in each overseas region
 America: Water treatment, medical equipment (Aquatic business, chemical/chemical manufacturing
equipment plants)
 Europe: Water treatment, chemicals/chemical manufacturing equipment, cooling equipment(Aquatic business)
 ASEAN: Water treatment, surface treatment equipment, chemicals, medical equipment(Aquatic business)
 China:
Medical equipment, new energy, water treatment
 Korea/Taiwan: Water treatment, new energy

Investments
 Make more investments in production facilities in Europe, use more outsourced manufacturing
companies in China, strengthen logistics
 Consider alliances and M&A for the expansion of business operations
Copyright © IWAKI CO., LTD. All Rights Reserved24

8

Synergies with the Residual Chlorine Meter Business

Cross-selling at TechnoECHO centered on residual chlorine meters
Global operations
 Growth of water/sewer systems in Asia

More demand for residual chlorine meters

 TechnoECHO is using IWAKI’s overseas network for sales activities and other support

Accomplishments of new markets to benefit from synergies
 Compact residual chlorine meter

More demand in the public welfare market(nursing care bathtubs)
Higher demand in the medical equipment market(equipment with meters) Combine IWAKI’s pump quality and sales network with the distinctive technologies inTechnoECHO’s residual chlorine meters

Grow in current markets
 Hotel construction boom for Tokyo Olympics

More demand for residual chlorine meters at
hot bathing facilities

 Increase sales by using IWAKI’s network in Japan for sales activities and other support
Copyright © IWAKI CO., LTD. All Rights Reserved25

9Strategy for China
Procurement of parts

 Further expand
procurement channels
for parts in China
 Cut the cost of
manufacturing while
maintaining the samehigh level of quality as
in parts made in Japan

Outsourced manufacturing
 Plan to start using outsourced
production in 2018

 Use outsourcing
to increase
production
where products
are sold

Faster deliveries by simplifying distribution channels

Copyright © IWAKI CO., LTD. All Rights Reserved26

10 Aquatic Business
Global operations
 Marketing activities that target opportunities worldwide

 Growing interest in the US market and more achievement made
 Establishment of a global model

Division of roles and cooperation
 Design, production, sales and service operations that match thecharacteristics and requirements of individual countries
 Sharing of parts and materials that can be used

Growth in Japan
 Provide products and services in the medical and pharmaceuticals sectors
 US technology feedback
Differentiate products from those of Japanese and foreign competitors
Copyright © IWAKI CO., LTD. All Rights Reserved

27

IV

Supplementary Information28

1

Summary of Balance Sheet
Mar. 31, 2017
AmountShare
19,832
75.5%

Current assets
Cash and deposits

6,191

23.6%

Notes and accounts receivable-trade

8,423

32.1%

Other

5,217

19.9%

6,421

24.5%

Property, plant and equipment

3,724

14.2%

Intangible assets

223

0.9%

Investments and other assets

2,473

9.4%

26,253
7,031
4,345
651
2,034
2,315
406
1,909
9,347
16,906
26,253100.0%
26.8%
16.6%
2.5%
7.7%
8.8%
1.5%
7.3%
35.6%
64.4%
100.0%

Non-current assets

Total assets
Current liabilities
Notes and accounts payable-trade

Short-term interest-bearing debt
Other
Non-current liabilities
Long-term interest-bearing debt
Other

Total liabilities
Total net assets
Total liabilities and net assets

Copyright © IWAKI CO., LTD. All Rights Reserved

Sep. 30, 2017
AmountShare

20,978
6,541
9,029
5,407
6,499
3,760
210
2,528
27,477
7,460
4,725
740
1,994
2,331
414
1,917
9,792
17,68427,477

76.3%
23.8%
32.9%
19.7%
23.7%
13.7%
0.8%
9.2%
100.0%
27.2%
17.2%
2.7%
7.3%
8.5%
1.5%
7.0%
35.6%
64.4%
100.0%

YoY change
Amount

1,146
349
605
190
77
36
(13)
54
1,223
429
379
89
(39)
16
7
8
445
778
1,223

(Millions of yen)

Increase in accounts receivables
due to growth in sales

Increase in inventories due tobenefits of initiatives for fasterdeliveries

Increase in accounts payable
due to growth in sales

29

2

Cash Flows(Millions of yen)

1H FY3/17
AmountCash flows from operating
activities

1,020

1H FY3/18
AmountYoY change

746

(273)

Cash flows from investing
activities

896

(146)

(1,042)

Cash flows from financing
activities

(651)

(265)

386

Net increase (decrease) in cash
and cash equivalents

1,148

349

(798)

Cash and cash equivalents at
beginning of period

5,426

6,111

685

Cash and cash equivalents at
end of period

6,574

6,461

(113)

Copyright © IWAKI CO., LTD. All Rights Reserved

Major components
Increase in accounts receivables(because September 30 was abank holiday)
Prior year included substantial
proceeds from securities
redemptions
FY3/16 dividend was one time at
the year-end; FY3/17 dividend
was divided into interim and yearend distributions

30

Disclaimer and Precautions Concerning Forward-looking Statements
 This presentation was prepared by IWAKI to provide information to investors about business operations.
 Information in this presentation is based on reasonable judgments by IWAKI using generally accepted views of
economic, social and other factors as of November 29, 2017. This information may have to be revised without
prior notice in the event of a change in the business climate or some other event.
 The information in this presentation includes forward-looking statements. These statements are current
outlooks, forecasts and assumptions that include risk and incorporate uncertainties that may cause actual
performance to differ from these statements.

 Risk factors and other uncertainties include but are not limited to items related to the Japanese and global
economies, such as changes in business and market conditions and in interest rates and exchange rates.
 IWAKI has no obligation to update or revise the forward-looking statements in this presentation even if there is
new information, a significant event or some other reason for a change.
 This document has been translated from the Japanese original for reference purposes only. In the event of any
discrepancy between this translated document and the Japanese original, the original shall prevail.
 IWAKI assumes no responsibility for this translation or for direct, indirect or any other forms of damages
arising from the translation.
For more information:
E-mail: ir@iwakipumps.jp
Telephone: +81-3-3254-2931
Operating hours: 9:00 to 17:30
Copyright © IWAKI CO., LTD. All Rights Reserved31