For Institutional Investors/Analystssts

November 29, 2018
KAGA ELECTRONICS CO., LTD.

・ Review of the Medium Term Management Plan 2018

P-3〜5

・ Next Medium Term Business Plan 2021 Outline

P-6〜11・ Business Portfolio/EMS Growth Scenario

P-12〜14・ Acquisition of Shares in Fujitsu Electronics

P-15〜19


・ Summary of Financial Results for the 2nd Quarter
Ended September 30, 2018

P-21

・ Financial Highlights

P-22〜26

・ Balance Sheet/Cash Flows

P-27〜29

・ Forecast for the Fiscal Year ending March 2019P-30〜31・ Supplementary Information

P-32〜35KAGA ELECTRONICS CO., LTD.
President & Representative Director23

(2015 - 2018) :Main Results
Expansion of overseas EMS bases towards an increase in business scale

Expansion of
EMS
Business

・Sept. 2016
・Jul. 2017
・Dec. 2017
・Sep. 2018

Establishment of Mexico base (Opened Jan. 2018)
Establishment of Vietnam base (Opened Mar. 2018)
Establishment of Turkey base (Opened Oct. 2018)
Establishment of India base (Scheduled to open spring 2019)

Execution of group company reorganization and consolidation towards
improving management efficiency

Structural
Reform・Jan. 2016
・Oct. 2017
・Jan. 2018

VentureInvestment

Integration of three domestic subsidiaries engaged in the information
devices business into a single company
Transfer of a part of shares in SiC substrate development subsidiary to
external company, migrate to a joint venture
Integration of two domestic manufacturing subsidiaries into a single
companyWith the objective of building a new revenue base in the future,commencing investment activities in venture companies and start ups with abudget of 5.0 billion yen over three years
・FY2017・FY2018© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

Invested 930 million yen in 17 companies
Invested 160 million yen in four companies (as of October 2018)4

(2015-2018)

Incorporating the conversion of Fujitsu Electronics to subsidiary*, themanagement targets for sales and ROE are generally expected to beachieved.
＊ Note: Consolidation scheduled from FY2018 Q4
Current Mid-termManagement Plan
Targets (FY2018)

Net Sales

290 billion yen

FY2018
Forecast

290 billion yen

Factors
Incorporating the FujitsuElectronics Q4 sales, the target is
expected to be achieved

・The contribution to sales through conversion
to subsidiary shall be 58 billion yen

There is a risk of the target not
being achieved

Ordinary
IncomeROE

10 billion yen

8.0% or higher© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

8.0 billion yen

9.9％・Delay of contribution from newly establishedoverseas EMS factories
・The contribution to income throughconversion to subsidiary shall be limited・Reserve provision for bankruptcy of a majorclient in JapanThe target of above 8% in themedium term plan has constantly
been achieved

・10.9%/FY16➞9.5%/FY17➞10.0%/Forecast
for FY18
・Contribution of “negative goodwill” in
conjunction with the conversion to subsidiary5

6© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

7

(2019 - 2021)

Key Issues
Utilizing the Group’s DNA to see things ahead of time, we shall focus on markets andcustomers forecast to have high growth potential and profitability, and will aim to

Enhancement of
Revenue Basestrengthen the revenue base・ Strengthening initiatives for growth sectors: In-vehicle, communications, environment, industrial
equipment, medical and healthcare
・ Enhancement and expansion of EMS business and overseas business

Aiming to stabilize the management base towards early improvement of efficiency andStabilization ofManagement
Basefinancial soundness after conversion of Fujitsu Electronics to subsidiary・ Continuation of group-wide cost reduction measures
・ Promotion of improve group management efficiency through the preparation of an organizational structure
・ Enhancement of corporate governance, cultivating human resources to lead the next generation

In order to enhance resistance to changes in the external environment, we shallendeavor to create new business through the proactive use of our own resources and M&A

Creation of
New Business・ Launching of social issues (childcare, welfare, nursing care, etc.) business and materials business・ Promotion of open innovation through venture investment
・Proactive use of M&A activities© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

8

(2019-2021)

FY2018
Forecast

Management
Targets FY2021

Growth Rate
Compared to
FY2018Net Salesbillion yen○billion yen○Up%○

Operating
Incomebillion yen○billion yen○

Up

%○

%○

% or higher○

ROE

FOREX

・ Assumed Exchange Rate： US$1.00＝￥110© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

9

(2019 - 2021)
1 trillion yen

Organic
GrowthAim to become a “company that spans the globe”+
that will be victorious in global competition
Further M&A
Further
Challenges
expansion of
500 billion yen
Towards the realization of
the EMS“Japan’s No. 1 corporate group in
businessthe industry”
Kaga
ElectronicGroup+
FujitsuElectronics

Increased
Sales

Expansion of
trading company business

Increased
Profit
Ratio

Enhancement
and expansion ofoverseasbusinesswill lead to
growth of the EMS business
Quantitative
expansion of trading
company business

Qualitative improvement
through EMS businessMedium Term Management Plan 2021 (2019-2021)(Net Sales)

Medium to Long Term
Vision© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

10

We shall perform stable dividends, while securing a consolidated dividend ratio of
25 to 35%.
 We shall use funds for business investments, capital investments, and M&A, etc.
in order to contribute to future growth.
 Decisions on the acquisition of treasury shares shall be made appropriately,in consideration of capital efficiency and share price, etc.
35%Basic Policy on
Dividends ofSurplus

29.6%

28.6%
25.5%

28.2%
28.0%

25.6%
24.1%

25%
Total return trend：45.4%■ Ordinary dividend■ Commemorative
dividend■ Special dividend

Acquisition of treasury shares (JPY 1,499
million)70 yen75 yen(5 yen dividend
60 yen(10 yen dividend increase)
55 yen (5 yen dividend
increase)(15 yen dividend increase)
540yen
35 yen10
increase)(5 yen dividend(5 yen dividend
increase)
20
increase)
15

5
30

10

PeriodEnding
2014/3期
March
2014
実績
Results

PeriodEnding
2015/3期
March
2015
実績
Results

30

40

40

PeriodEnding
2016/3期
March
2016
実績
Results

PeriodEnding2017/3期
March
2017
実績
Results© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

60
PeriodEnding
2018/3期
March
2018
実績
Results

70

PeriodEnding
2019/3期
March
2019
予想
Forecast

PeriodEnding2020/3期
March
2020
イメージ
Image

PeriodEnding2021/3期
March
2021
イメージ
Image

PeriodEnding2022/3期
March
2022
イメージ
Image

11

12

In the new medium term plan, we plan to review future disclosure
segments, and to perform a reclassification into the following four categories.

ElectricalParts・Semiconductor (general purpose,
custom) sales
・General parts (capacitors, connectors,
cables, switches, etc.) sales
・LCD, LED, storage device sales

EMS

・Manufacture contracting (installationof electric circuit board - assembly offinished product) services for various
electronic devices, design anddevelopment associated with thisCSI＊

・PC and PC peripheral product sales
・Various household appliances, lighting
fixtures, photography and videorelated product sales, etc.

Sales Composition Ratio
Electrical
電子部品
Electrical

EMS

Parts
Parts

Other

2%
290 billion yen© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

10%
28%

235.9 billion yen

3%
3%
20%

41%
FY2017 Results＊Note: CSI is an abbreviation of Consumer Solution Information

Other
その他
500 billion yen

16%
29%
60%

36%
・Various CG imaging and software
production
・Sports product sales, etc.

CSI

52%
FY2018
Forecast

Final FY
Management Targets(FY2021)13

Driven by the growth of in-vehicle, air conditioning, industrial
machinery, and medical and healthcare, we shall aim for drastic growthof business size of 1.7x that of FY2017
140 billion yenx
83.8 billion yen
13％
9％
13％
18％
27%

FujitsuElectronics,
M&A％

Consumer, etc.

％

Healthcare％

OfficeEquipment％

Industrial
Machinery％

Air Conditioning%

In-vehicle%

20％
FY2017
Results© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

FY2021 Image

PointsOrganic
GrowthFujitsuElectronics

EMS Shift

Further

M&A In addition to our existing production capacity in China,
ASEAN, and Europe, we shall aim to expand businessin growth areas such as in-vehicle, air conditioning,
and industrial machinery, through full scale investment
in new bases in Vietnam, Mexico, Turkey, and India.
 We shall develop a “Key Device + EMS” approach forthe major customers of Fujitsu Electronics.
 We shall aim to further expand the size of the EMS
business, and search for new M&A opportunities insideand outside of Japan.
14

15

Scheme・ Acquire 70% of shares in Fujitsu Electronics from Fujitsu Semiconductor,
forming a subsidiary. Acquire gradually until becoming a wholly owned
subsidiary in January 2022

AcquisitionPrice・ Total 20.5 billion yen (forecast total)

Financing・ Plan to finance with self-funding and new bridging loan
・ Consider switching to the procurement of various long-term funding for thisbridging loan

Financial
Impact・ Amortization schedule of goodwill and intangible fixed assets to be released
after acquisition
・ However, Acquisition Price ≒ Net Assets, so the impact is expected to beslightSchedule of
StockTransfer

・ First Phase : January 2019 (70％)
・ Second Phase: December 2020 (15%)
・ Third Phase : December 2021 (15%)

・ The acquisition price at each phase will be adjusted based on fluctuations in the value of the consolidated net assets of FujitsuElectronics,
and the above acquisition price is the estimated amount at current prices.
・ This share acquisition is subject to approval by relevant authorities in accordance with domestic and international competition laws.
・ The impact on consolidated results for the current fiscal year (ending March 2019) will be released after confirmation.

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

16 Drastic expansion of business scale for core electronic components
business becoming the “Industry No. 1”
Fujitsu Semiconductor

Kaga Electronics Group

Fujitsu Electronics

Electronic Components
Trading Business

EMS BusinessInformation Equipment

SoftwareOther

Subsidiary
Short-term Goal ＝ Trading BusinessMedium-term Goal ＝ EMS Business

Sales UP

Profitability
UP

Expansion of the Trading BusinessLeading to Growth in EMS BusinessTrading Business

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

EMS Business

Improved Quality

17

（FY Ended March 2018 Results Base）

 The birth of an industry-leading class 500 billion yen Group.
Lead the further reorganization of the industry

Note: Simple sum base for “Kaga Electronics + Fujitsu Electronics” and Rester
SIIX figures for FY ended December 2017
© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.※Data Source: Internal study18 The Fujitsu Electronics Group aims to develop our business based on
the following strengths.

Own Engineers
peopleFujitsu Group
Fujitsu Electronics

Sales channel
Domestic：
companies

Overseas：companies

Global Support
Network
Domestic：

placesOverseas：

placespeople19

KAGA ELECTRONICS CO., LTD.
Managing Director

20Summary of Financial Results for the Second Quarter Ended September 30, 2018

FY2019/3 2Q
Results

 At ¥115.3 billion, net sales by and large maintained the same level year-on-year,
driven by EMS business.
 Operating income and net profit both declined, which had been factored in at the
beginning of the period.
* Causes of the decreases: production adjustments resulting from model switching at major
customers, upfront expenses of new overseas sites at their start-up phase, etc.

Overview of themain businesssegments

 Electronic components business: EMS business for medical equipment was slow, but thatfor automotive and air conditioning devices maintained steady performance.
Components sales business remained sluggish.
 Information equipment business: PC-related business was sluggish but sales of housingrelated home electric appliances and commercial facilities-related LED installation
business continued to show robust growth.
 Net sales ¥290 billion, ordinary income ¥8 billion, profit ¥7.3 billion, ROE 9.9%.

Forecast for
FY2019/3

 Along with the acquisition of Fujitsu Electronics, consolidation is scheduled to beeffective from the forth quarter.
 Expected to achieve net sales and ROE targets in the final fiscal year of the Mediumterm Management Plan.
 Aiming to achieve record profit in 14 years with 7.3 billion yen profit projection
including negative goodwill related to the acquisition.

Shareholder
return Commemorative dividend (dividend increase) to be paid, in celebration of the 50 th
anniversary.
 Interim dividend of ¥35 per share, consisting of ordinary dividend of ¥30 andcommemorative dividend of ¥5.

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

21

(Million Yen)FY2018/3

FY2019/3

2Q Results

2Q Results

YoY

Net sales

116,582

115,383-1,199Gross profit

16,21816,023

-195

13.9%

13.9%

-

SG&A

11,824

12,251

427

Operating income

4,394

3,772

-622

Ordinary income

4,703

4,049

-654

Profit attributableto owners of parent

3,516

2,750

-766

EPS (Yen)

128.16100.25-27.91Gross profit margin© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

22

（Net Sales/Segment Income）（Million yen）

Net Sales
116,582
6,075
1,142
23,446

115,383
9,379
1,404
21,143

Segment income

Total

Total

YoY： -1,199

OthersYoY：＋3,304

YoY： -622

4,394
198
111

SofwareYoY：+262

Others

3,772
216

1,116

143

YoY ： + 18

Software
YoY： ＋ 31

864
Information equipment

Information equipment

YoY： -2,302

85,918

YoY ： -252

83,455
Electronic component

2,893

YoY： -2,463

2018/3
2Q Results

2019/3
2Q Results

2018/3
2Q Results

2,474Electronic componetnt
YoY ： -419

2019/3
2Q Results

Note: Figures of each segment income are not inter-segment adjusted.
Total amount is inter-segment adjusted (operating income).
© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

23

（Million yen）

Net sales/Segment income

90000

85,918/Net Sales/

Segment Income

83,455YoY
5000

 Net Sales-2,463million yen 2.9％down

 Segment Income -419million yen 14.5％down
4500

4000
80000

EMS business for automotive and airconditioning devices maintained a steady
performance.

3500

70000

2,893

3000

2,474

60000

2500

Components sales business remained sluggish,notably for home electric appliances from theeffect of production adjustments at major
customers.

2000

50000

1500

40000

1000

30000

500

2018/3
2QResults© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

2019/3
2QResults24

（Million Yen）

Net sales/Segment income/

24,000/23,446YoY
 Net Sales

Nets Sales
2000

Segment Income-2,302million yen 9.8％down

 Segment Income -252million yen 22.6％down

1800

21,14322,0001600

20,0001400

Sales of housing-related home electric appliancesand commercial facilities-related LED installation
business showed robust growth.

18,000

1,116

1200

Sales of PCs and PC peripherals were slow.

16,0001000

864
14,000800

12,000600

10,000
400

8,000

200

2018/3
2Q Results© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

2019/3
2Q Results25

(Million Yen)

Net sales
116,582

YoY
 Japan

115,383

70,288Japan

4.7％down

 North America-593 million Yen 12.9％down

 Europe＋241 million Yen 13.6％up

 East Asia

73,789-3,500 million Yen＋2,653 million Yen

7.3％upJapan: PC sale , amusement machine businessand golf equipment sales were sluggish.
Overseas:East Asia and Europe also increased due to
steady growth in EMS business.

4,580
1,779

3,987
2,020

North America

Europe36,43339,0862018/3
2Q Results

2019/3
2Q Results© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

East Asia

26

(Million Yen)

Total assets
125,751

128,755

Total liabilities and net assets

130,811
126,376

125,751

59,819128,755

58,123

126,376

57,369130,81157,564
Total liabilities

Current assets

103,684

104,069

103,178

104,264

65,932

70,63169,00673,247

Non-current assets

22,067

24,68523,19826,5472017/3

2018/32017/92018/9Total net assets

2017/3

2018/32017/92018/9Note: “Partial Amendments to Accounting Standard for Tax Effect Accounting” etc. (Accounting Standards Board ofJapan (ASBJ) Statement No. 28, February 16, 2018) have been adopted from the beginning of the first quarterof the fiscal year ending March 31, 2019. Accordingly, deferred tax assets are presented under investments
27© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved. and other assets, while deferred tax liabilities are presented under non-current liabilities section.

(Million Yen)

Inventories

Accounts receivable/Accounts payable
50.0

（Day）

40.7

30,000

36.0

34.9

34.9

40.0

83.6
80,000

77.1

78.5

76.7

（Day）
80.0

Inventory turnover

A/R turnover

70,00070.0

25,00030.0
60,000

69.9

65.3

64.8

65.2

A/P turnover

60.0

20,00050,00020.0

50.0

Notes and A/R

40,00015,00040.0

10.0

30,00010,00019,325

19,45522,076
19,13630.0

52,009Inventories
0.0

20,00037,55349,841
36,39250,02435,512

Notes and A/P

48,35335,381

20.0

5,000
-10.0

10,000
10.0

0

0

0.0

-20.0

2017/3

2018/32017/92018/9© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

2017/3

2018/32017/92018/928

（Million Yen）

Cash and deposits
35,000

0.15

0.13

0.14

0.13

Cash flows

0.20

D/E ratio
30,0000.00

25,00010,746-0.20

Cash flows fromoperating activities

10,07720,000

5,875
-0.40

30,80315,00030,39330,412

Cash and deposits

26,423

1,898
▲ 258

▲ 1,345-0.60

10,000▲ 6,118▲ 4,173▲ 1,265

-0.80

5,000

9,805

8,900

9,573

9,554

0

-1.00

2017/3

2018/32017/92018/9© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

▲ 685▲ 2,811

Interest bearing debts

2017/3末

2017/3

2018/3末

2018/3▲ 4,938

2018/9期

2017/9Cash flows frominvesting activities

Cash flows fromfinancing activities

2018/9期

2018/929

（Million Yen）

2018/3Results

2019/3
Forecasts

Medium-Term
Management Plan
TargetYoY

Net sales

235,921290,000

54,079290,000

Gross profit

32,49835,500

3,002

-

13.8%

12.2%

-1.6pt-SG&A

24,37927,8003,421-

Operating income

8,119

7,700

-419

-

Ordinary income

8,740

8,000

-740

10,000

Profit attributableto pwners of parent

6,490

7,300

810

-

EPS（Yen）

236.58266.04

29.46

-

9.5

9.9

+0.4pt8.0%

Gross profit margin

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

30

（Million Yen）

2018/3

2019/3Results

Forecasts

YoY

172,248

227,200

54,95232%

Sgment income

5,312

5,200

-112

-2%

Information Net Sales
Equipment
Sgment income

47,58243,000-4,582

-10%

2,202

1,700

-502

-23%

2,568

2,800

232

9%

172

300

128

74%

13,522

17,000

3,478

26%

308

500

192

62%

235,921290,000

54,079

23%

8,119

7,700

-419

-5%

Electronic
Component

Software

OthersTotal

Net Sales

Net Sales
Sgment income
Net Sales
Sgment income
Net Sales
Sgment income

Note: Figures of each segment income are not inter-segment adjusted.
Total amount is inter-segment adjusted (operating income).
© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

31

（Net Sales）(Million Yen)

Net Sales

56,174
2,872
448
11,13260,4083,202
694
12,31461,873
57,465
2,627
399
11,2994,819
1,027
12,83659,88955,493
4,103
465
10,417

Total
YoY ：
-518
QoQ： ＋4,396

5,276
939
10,725

OthersYoY ： ＋2,073
QoQ : ＋1,173

Software
YoY ：
QoQ：

+245
+474

Information equipment

41,721

44,197

43,13943,19040,50742,948

YoY ： ▲1,588
QoQ :
+308

Electronic component
YoY ： ▲1,249
QoQ： ＋2,440

2018/3
1Q Results

2018/3
2Q Results© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

2018/3
3Q Results

2018/3
4Q Results

2019/3
1Q Results

2019/3
2Q Results32

（Segment Income）(Million Yen)

Segment Income
2,305
2,088

46
112

2,282

37

135

Total
YoY ：
QoQ :

▲23
＋792

162

152
0
358

2,219

543
757

Others

1,506
72
80

1,489

547

YoY ：
QoQ :

80

＋89
＋54

Software
YoY :
QoQ :

317

＋49
+181

543
Information equipment

1,539

1,616

1,402

1,353
1,071

2018/3
3Q Results

YoY :

＋49

QoQ：

+330

▲ 19

▲ 20
2018/3
2Q Results

▲210
＋229

Electronic component

802

2018/3
1Q Results

YoY ：
QoQ :

2018/3
4Q Results

2019/3
1Q Results

2019/3
2Q Results

Note: Figures of each segment income are not inter-segment adjusted.
Total amount is inter-segment adjusted (operating income).
© 2017 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

33

（Reference）
Effect of 1% change（Million Yen）

Forex
Assumption
for 2H(yen)FY2018/3
2Q Results

FY2019/3
2Q Results

USD

111.06110.2613514110.00

THB

3.28

3.40

108

5

3.40

RMB

16.39

17.09

70

4

17.00

HKD

14.24

14.05

84

2

14.00

（Yen）

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

（Yen）

Net sales

Ordinary
income34

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.)

Informationequipment• 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.

35

36

37

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

■ Caution on forward-looking statements
Forwarding look statements included in this document, such as performance forecasts, arebased on information that has been obtained at the current time and certain assumptions
deemed as reasonable by the company; actual performance, etc. may be significantly different
due to various factors.
■ Display method in this material
Number : Truncated less than the display unit.
Ratio: After calculation in yen units, Round down one digit of Display unit.