Results of Operations for the
Fiscal Year Ended March 31, 2017 (FY3/17)
May 26, 2017

IWAKI CO.,LTD.

Stock code: 6237
Trade name: Iwaki Pump

0

Contents

I. Summary of FY3/17 Financial Results

・・・・P 3

II. Our Strategies

・・・・P12

III. Outlook for FY3/18

・・・・P19

IV. Supplementary Information

・・・・P24

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I

Summary of FY3/17 Financial Results3

1

Financial Summary(Millions of yen)

FY3/16

FY3/17
AmountFY3/17

YoY change

Forecast*

Net sales

24,83025,146+1.3%

24,871Gross profit

8,413

8,175

-2.8%

8,224

(Gross margin)(33.9%)(32.5%)(-1.4pt)(33.1%)

Operating profit

1,533

1,465

-4.4%

1,594

(Operating margin)(6.1%)(5.8%)(-0.3pt)(6.4%)

Ordinary profit

1,991

2,136

+7.3%

2,067

Profit attributable to owners ofparent

1,527

1,690

+10.7%

1,527

Net income per share (Yen)

223.99225.93+0.9%

204.04

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

121.11134.31108.81120.3098.00
108.00* Announced on November 9, 2016

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2

Sales and Earnings Highlights

1

Sales increased
Double-digit growth in sales in the medical equipment market; higher demand for pumps
used in dialysis equipment was one reason
Capital expenditures in the semiconductor/liquid crystal and surface treatment equipment
markets contributed to higher sales and there was a double-digit growth in Asia

2

Operating profit decreasedA change in the product mix negatively affected earnings

A change in the geographic mix (growth in 4Q overseas sales) negatively affected earnings
Product warranty expenses increased because of higher sales of new products in thesemiconductor/liquid crystal market

3

Higher ordinary profit resulting from growth in equity-method income• Performance benefited from strength in the semiconductor/liquid crystal and surface
treatment markets in east Asia

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3

Factors Affecting Profitability(Millions of yen)

+185

-424
+172

-2

1,533

FY3/16

Operating profit

Copyright © IWAKI CO.,LTD. All Rights Reserved

1,465

Increase/decreasein sales, change incost of sales ratio

Gross profit
Foreign exchange
impactSG&A expenses
Foreign exchange
impactSG&A expenses
Higher R&D andother costs

FY3/17

Operating profit

6

4

Product Category Sales
Higher sales of magnetic drive pumps, and a double-digit growth inpneumatic drive pumps sales
Consolidated sales

FY3/17¥25,146 million

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Sales(Millions of yen)

YoY change

8,769

+3.6%

4,537

-0.4%

1,984

+12.2%

2,342

-6.5%

1,436

-2.1%

1,092

-7.8%

2,192

-0.8%

2,791

+4.2%
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5

Market Category Sales
Higher sales in the semiconductor/liquid crystal and medical equipment markets
and a sharp drop in new energy sales
Sales(Millions of yen)

Consolidated sales

FY3/17¥25,146 million

Water treatment

6,053

+0.3%

Semiconductor/liquid crystal

3,423

+4.6%

Medical equipment

3,908+11.5%

Chemicals

2,341

-9.2%

Surface treatment equipment 2,020

+0.4%

650

-32.6%

6,748

+4.4%

New energy
OthersCopyright © IWAKI CO.,LTD. All Rights Reserved

YoY change

86

Regional Sales
Overseas sales were down in all regions except Asia

Consolidated sales

FY3/17¥25,146 million

Overseas sales ratio

36.6%

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Sales(Millions of yen)

YoY changeJapan

15,935+1.7%

Overseas total

9,210

+0.6%

America

3,273

-2.2%

Europe

2,271

-4.5%

Asia

2,095

+17.2%

China

764

-1.7%

Others

806

-7.5%
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7

Summary of Balance Sheet
Mar. 31, 2016
AmountCurrent assets

Mar. 31, 2017

Share

AmountYoY change

ShareAmount19,688

77.4%

19,832

75.5%

+0.7

Cash and deposits

5,727

22.5%

6,191

23.6%

+8.1

Notes and accounts receivable-trade

8,411

33.1%

8,423

32.1%

+0.1

Other

5,550

21.8%

5,217

19.9%

-6.0

5,749

22.6%

6,421

24.5%

+11.7

Property, plant and equipment

2,957

11.6%

3,724

14.2%

+25.9

Intangible assets

233

0.9%

223

0.9%

-4.2

Investments and other assets

2,558

10.1%

2,473

9.4%

-3.3

Total assets

25,438100.0%

26,253100.0%+3.2

Current liabilities

7,119

28.0%

7,031

26.8%

-1.2

Notes and accounts payable-trade

3,886

15.3%

4,345

16.6%

+11.8

Short-term interest-bearing debt

919

3.6%

651

2.5%

-29.1

Other

2,314

9.1%

2,034

7.7%

-12.1

2,242

8.8%

2,315

8.8%

+3.2

Long-term interest-bearing debt

436

1.7%

406

1.5%

-6.8

Other

1,806

7.1%

1,909

7.3%

+5.7

Total liabilities

9,362

36.8%

9,347

35.6%

-0.2

Total net assets

16,07563.2%

16,906

64.4%

+5.2

Total liabilities and net assets

25,438100.0%

26,253100.0%+3.2

Non-current assets

Non-current liabilities

Copyright © IWAKI CO.,LTD. All Rights Reserved(Millions of yen)

• Redemption of securities
and investment securities• Redemption of securities• Increase in construction inprogress due to the constructionof new Technical Center• Redemption of investment
securities• Increase in the amount ofpurchases• Decrease in foreign-currency
borrowings

10

8

Cash Flows(Millions of yen)
FY3/16
AmountCash flows from operating
activities
Cash flows from investing
activities
Cash flows from financing
activities
Net increase (decrease) in cash
and cash equivalents
Cash and cash equivalents at
beginning of period
Cash and cash equivalents at
end of period

FY3/17
AmountYoY change

Major components

1,413

2,001

+587

• Increase in notes and accounts
payable-trade

997

-150

-1,147• Purchase of property, plant andequipment-935-1,151-215• Short-term loans payable andcash dividends paid

1,393

685

-708

4,032

5,426

+1,393

5,426

6,111

+685

Capital expenditures

384

369

-15

R&D expenses

513

532

+19

Depreciation

472

498

+26

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II

Our Strategies

121Overview of the 10-Year Vision
FY3/17-FY3/19
First Medium-term Management Plan

- FY3/16

FY3/25

Consolidated sales
Numerical targets

FY3/16 Results

FY3/17 Results¥24.8 billion¥25.1 billion¥40.0 billion
Overseas

Japan
5.8%

6.1%

Operating profit on sales

10.0%

Strategic goal

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 –●Steps for achieving the 10-year visionFirst Medium-term Management Plan
Planting seeds

Second Medium-term Management Plan
Business development and growth

Third Medium-term Management Plan
Reaping benefits

FY3/17

FY3/20FY3/23

FY3/18

FY3/19FY3/21

FY3/22

FY3/24

FY3/25

Rebuilding the profit structure
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2

Basic Policies of the First Medium-term Management Plan

1. Concentrate resources on markets targeted for reinforcement(medical equipment, new energy, water treatment) Develop products more efficiently
2. Improve ability to serve customers; operate a solutions business
3. Build a business model for new activities
4. Establish and execute sales strategies matching the characteristics ofstrategic overseas regions; become more price competitive andimprove ability to serve customers

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3

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

Key market sectors (and new businesses) in each overseas region
 America: Water treatment, medical equipment (Aquatic business) Europe: Water treatment, medical equipment, 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

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
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3TechnoECHO Co., Ltd.
Acquired in Dec. 2016: Growth strategy 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

Enter and create new markets to benefit from synergies
 Compact residual chlorine meterEnter the public welfare market(nursing care bathtubs)
Create demand involving medical equipment(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

 Implement a sales strategy that uses IWAKI’s network in Japan for sales activities and other support
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3

Strategy for China
Procurement of parts

Outsourced manufacturing Currently seeking morepartner plants for the
procurement of parts in
China

 Companies for outsourced manufacturing
have been selected and more will be
added. Operations are to begin in about
the fall of 2017.

 Cut the cost of
manufacturing while
maintaining the samehigh level of quality as
in parts made in Japan Use outsourcing
to increase
production
where products
are sold

Faster deliveries by simplifying distribution channels

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3

Aquatic Business
Global operations

 An aquatic business project has started
The project team includes people from Japan and the US
 Marketing activities target opportunities worldwide

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
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Differentiate products from those of Japanese and foreign competitors
18

III

Outlook for FY3/18

19

1

FY3/18 Forecast(Millions of yen)

FY3/17

FY3/18 (Forecast)Medium-termManagement PlanYoY change

Initial plan

Net sales

25,146

26,517+5.5%

26,724

Operating profit

1,465

1,672

+14.1

2,113

(Operating margin)(5.8%)(6.3%)(+0.5pt)(7.9%)

Ordinary profit

2,136

1,969

-7.8%

2,552

Profit attributable to owners ofparent

1,690

1,450

-14.2%

1,779

Net income per share (Yen)

225.93193.82-14.2%

237.83

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

108.81113.00 (estimates)

98.00

120.30120.00 (estimates)

108.00

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2

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

+73

-35

-542
+711

1,672
1,465

FY3/17
Operating profit

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Increase/decreasein sales, change incost of sales ratio

Gross profit
Foreign exchange
impactSG&A expenses
Foreign exchange
impactSG&A expenses
Higher R&D andother costs

FY3/18Operating profit(forecast)21

3Market Assumptions
Market environment assumptions
Japan

Overseas

Water treatment market• Steady growth in the functional water,water/sewer/ballast, sterilization, and liquid
chemical supply sectors• Demand at hot bathing and other facilities• Steady growth in the sterilization and liquid
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 for now
but the second half outlook is uncertain

Medical equipment
market• Steady growth in dialysis equipment andclinical testing equipment• Steady growth in biological and immunology
analyzers used in China

New energy market• Slow growth will continue in the household
fuel cell sector• Solar cell/rechargeable battery production
shifting out of Japan; increasing demand inEurope for wind power generation

Chemicals market• Demand related to development of valueadded products and investments bypharmaceutical companies• Investments in chemical production using
shale gas feedstock and steady growth inchemicals for the automobile industry

Surface treatment
equipment market• Electronic circuit board production is shiftingfrom Japan to other countries• Demand for value-added electronic
components• Steady growth due to increasing productionof hybrid and electric automobiles

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4

Return to Shareholders

Basic policy
We plan to pay a consistent and steady dividend while retaining a sufficientamount of earnings for future business operations and for increasing ourfinancial soundness.
(Yen)

(%)

Commemorative
dividend: ¥11

Note: The FY3/15 dividend has been adjusted for the 10-for-1 stock split on January 2016.

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IV

Supplementary Information24

1

Our Pledge

The Iwaki Pledge
Our mission is to always be at the forefront of efforts to advance development in the
global markets, industries and communities where we operate while building trust with,and contributing to the happiness of everyone we interact with.

Our Corporate Identity

Heart・Chemical pumps… The heart of industry
・A strong commitment to contribute to industrial progress
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2

Sales GrowthNon-consolidated Sales(Billions of yen)

Consolidated sales
4-month transitional fiscal
period (Nov. 20 to Mar. 31)(Forecast)Pump department store strategy
reaches approximately the current level

First overseas
base starts
operations
Start of pumpdepartment
store strategy

Steady growth by
reducing reliance on thesemiconductor market
Semiconductor market products
drive growth Total sales become vulnerable
to ups and downs of thesemiconductor market

Completion of Miharu plant
Completion of
Saitama plant

Pump department store strategy
results in growth along withJapan’s economy

1970

1975

1980

1985

1990

1995

(Fiscal years)
Copyright © IWAKI CO.,LTD. All Rights Reserved

2000

2005

2010

2015

Note: Forecast is as of FY3/17

26

3

The Qualities and Strengths That Define Iwaki

1

A diverse lineup of products to meet our customers’
requirements

2

Strong customer support backed by a global
production, sales and support infrastructure

3Able to create solutions using fluid control functions
centered on pumps

4

The Iwaki Group encompasses upstream anddownstream operations, extending from R&D to
production, sales and maintenance

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4

A Large and Diverse Product Lineup
Pump size/
materials

More than 60 series of pump models. Offering tens of thousands of models.

Pump categories
Magnetic drive
pumps

Metering pumps

Pneumatic drive
pumps

Rotarydisplacementpumps

Air pumps

The skill to use a large and diverse product lineup
to be a one-stop source of comprehensive solutions
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5

Manufacturing Network

Annual capacity of around 800,000 units with the ability to make many models in small quantities
Japan:

Two plants with efficient small-lot production of many models and highly reliable quality
assurance systems
Overseas: Five locations manufacture pumps using main parts exported from our plants in Japan (knockdown manufacturing), resulting in efficiency for deliveries and inventories
Mainly large pumps

Germany

USA

Saitama Plant(Sayama-shi, Saitama)

China

TaiwanHigh-volume productionof small pumps

Australia
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Miharu Plant(Miharu-cho, Tamura-gun,
Fukushima)

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6

Sales and Support Infrastructure In Japan, IWAKI serves customers from its head office and branch and sales offices in 13 cities nationwide.

The use of sales distributors in all areas of Japan also contributes to the ability to provide speedy services.
 IWAKI has a worldwide sales and service network with 20 group companies in 15 countries.

Each key region will have a marketing manager with extensive knowledge of the local market.
(A marketing manager has been dispatched for Europe and managers for other regions will be appointed subsequently.)

Capable to identify and meet the needs of a broad range of customers

North America: 1

China: 6

Subsidiary: 1
Branches: 6

Europe: 6

Sales office: 7
Asia: 5Australia: 1

South America: 1
Headquarters

More than 30% of the Japan workforce is assigned tosales activities
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7

Solutions for Fluid Control Processes 1/3

The ability to combine chemical pumps and other products for the creation of fluid
control solutions
Developed a pump controller by using the know-how of a chemical pump manufacturer
Uses rotation speed feedback from a specialized
controller to maintain constant flow rate andpressure in rotary pumps.
● Reduction in running cost
● A wide range of control● Excellent response and stability
Liquidcrystalsubstrate

Manages water quality by using signals from asensor to control pump operation; remotemonitoring is possible via the Internet.
● Stable water quality
management● Fewer visits to the site
● Able to store data

Residual chlorine

Filteringequipment

Flow rate sensor

Turbidity

Controller
FP-36

FilterFlow
rate

BypassSodiumhypochlorite

Cleaning liquid
Inverter
Magnetic drive pump

Example of use in a liquid crystal production process
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Well

Example of use in a well water disinfecting process31

7Solutions for Fluid Control Processes 2/3
Fluid control equipment - 1

Fluid control equipment - 2

Blending system

Pulsation-free equipment for injecting
sodium hypochlorite

Applications: Blending different types of liquids infood production, paper production andchemical processes

Applications: Stable injection of sodium hypochlorite
used for disinfecting water at water
purification plantThis system constantly mixes various fluids inside pipes
 Easy adjustment of mixing ratio Saves space by eliminating mixing tanks
 On-demand production

This system consistently injects sodium hypochlorite, a material
that is difficult to transfer from one place to another Rotating volume structure ensures stable input with nofluctuations
 Long life of parts due to the use of highly durable materials
 Easy maintenance because of the simple structure

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7

Solutions for Fluid Control Processes 3/3 - The challenge of creating value-added products
Medical equipment testing device

Biological testing device

Laboheart NCVC
for testing the durability of auxiliary artificial
heartsLAbREEDwater tank system for small fish

Applications: Evaluation of performance and confirmationof durability for auxiliary artificial heartpumps, artificial valves and other items

This unit produces the beating of a heart for testing theperformance and durability of auxiliary artificial heart units
and other equipment.
 Adjustable major artery pressure pattern Designed for easy maintenance Almost no limitations on testing program settings
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Applications: Genetic research and toxicity tests
using small fish

This unit maintains the ideal environment for hatching andraising small fish and facilitates the reliable supervision of allprocesses.
 Designed for outstanding durability and easy maintenance Used by research institutions and universities Uses materials with a minimal risk of producing
environmental hormones

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8Chemical Pump Categories and Major Markets

Magnetic drive pumps
Leakage-free structure for the prevention of leaks

Metering pumps
Pumps for injecting precise and consistent amounts of all typesof liquid chemicals

Semiconductor/liquid crystal
marketMedical equipment market

Pneumatic drive pumps

Surface treatment
equipment market

Capable of handling liquid chemicals for semiconductor
production processes and many other applications

Chemicals market

Rotary displacement pumps
Pumps for moving viscous liquids and slurry (solids)

Air pumps
Pumps for suction, movement and other requirements for air,gas and other materials

Water treatment market
New energy market
Others (Food, paper, others)

System products
Products developed by using an enormous volume of fluid
control expertise acquired over many years
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34

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 May 26, 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 ofany 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
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35