Progress and Outlook ofMedium-term Business Plan
(April 2016 - March 2019)
July 6, 2018

ZUKEN Inc.
Tokyo Stock Exchange, First Section
Securities code: 6947

Contents

 Remarks from COO:
“Building a Base for the Next Three Years”

 Second-year Results and Final-year Outlook of the Current
Medium-term Plan
 Product Category and Regional (Overseas) Performance1Building a Base for the Next Three-year Plan

The Manufacturing Process

Definerequirements

System design
Architecture design

Detaileddesign

ZUKEN’s current coverage

2

Assembly(Production)

Building a Base for the Next Three-year Plan

The Manufacturing Process

Definerequirements

System design
Architecture design

Detaileddesign

Scope of business over the next 3 years

3Assembly(Production)

Second-year Results and Final-year Outlookof the Current Medium-term Plan

1. Medium-term Sales and Earnings Targets and Results for FY3/18(Millions of yen)

Sales

Initial plan
26,000↓30,00025,00021,952 22,199

24,000 23,582(Millions of yen)

Operating Profit

4,000

Initial plan
2,600↓

25,500
3,000

2,500

YoY

20,000

(+6%)

1,900

2,000

15,000

1,596

2,025
YoY(+27%)

10,0001,000775

5,000
00
FY3/16(Results)

FY3/17(Results)

FY3/18FY3/18
FY3/18(Plan)(Results)

FY3/19(Plan)

FY3/16(Results)

FY3/17(Results)

FY3/18
FY3/18
FY3/18(Plan)(Results)

Foreign exchange rate assumptions for FY3/18 were 115 yen/USD and 120 yen/EUR.
Average exchange rates in FY3/18 were 111 yen/USD and 130 yen/EUR.

5

FY3/19(Plan)2. FY3/18 Sales by Product Category and Region (vs. FY3/17)(Millions of yen)

Sales by Product Category

Sales by Region(Millions of yen)
(Pct. Changes)

30,00025,00020,00015,00010,0005,000(Pct. Changes)

30,00022,199
3,699
4,497
4,701

9,300

23,582
3,772
4,947

25,00022,199(+2%)

20,000(+10%)

15,000

4,799

1,426
3,965
1,469

1,615(+13%)

4,420
1,389

(+11%)

15,33816,156(+5%)

FY3/17(Results)

FY3/18(Results)

(-5%)

(+2%)

10,00010,062

0(+8%)

5,000

0
FY3/17
FY3/18(Results)(Results)
Printed Circuit Board design solutions
Circuit design and IC solutions
IT solutions
Client services and others

Americas

Average exchange rates in FY3/17 were 108 yen/USD and 119 yen/EUR.
Average exchange rates in FY3/18 were 111 yen/USD and 130 yen/EUR.

623,582EuropeAsiaJapan3. Financial Summary (1999 - 2018)
Sales and Operating Profit

Billions of yen

Sales

Operating profit

12.0

23.5
22.0

23.0

17.0

16.0

19.8

19.1

18.8
17.0

15.2 14.6

21.2

9.5

19.7
17.0

16.1 15.7 16.7

21.9 22.1

17.9 18.2 17.8
7.0(Billions of yen)

11.0

4.5

2.1

5.0

1.00

2.0 1.9 1.9

1.3
0.1 0.2

2.3

2.8
1.4

0.8
-0.3 0.2

0.3

-1.0

7

1.0 0.7
0.6

1.5

2.0
2.00-0.5

Sales reached a new record high4. Components of Change in Sales from FY3/17 to FY3/18 (1)Billions of yen

0.45
0.210.59
0.14
Zuken

22.1
(Operating profit: 1.59)

Groupcompaniesin JapanOverseas
subsidiaries

Foreignexchange
impact(Note)(Operating profit: 2.02)

FY3/17
Average exchange rates in FY3/17 were 108 yen/USD and 119 yen/EUR.
Average exchange rates in FY3/18 were 111 yen/USD and 130 yen/EUR.
Note: Impact of foreign exchange rates on sales of overseas subsidiaries

823.5

FY3/18

5. Components of Change in Sales from FY3/17 to FY3/18 (2)FY3/17

FY3/18(Millions of yen)

(Ratio to total sales)(Ratio to total sales)

Zuken (Parent company)

8,885

9,023(40%)(38%)

Group companies in Japan

6,670

7,259(30%)(31%)

Overseas subsidiaries

6,642

7,300(30%)(31%)

Operating profit

FY3/17

FY3/18YoYchangeZuken (Parent company)

546

837+290

Group companies in Japan

492

673+181Overseas subsidiaries

484

520+35(Millions of yen)

* Excludes transactions among group companies.

9YoYchangeSales (*)+137+588+657

6. Second-year Results and Final-year Outlook of the Current
Medium-term Plan A broad recovery in Japan extending to the electronics industry ingeneral as well as automobiles and automotive electronics.
Growth in the number of projects at customers’ premises fordesign/engineering process innovation.
 The shortage of skilled engineers and increasing interest in
security are supporting strong growth of almost all businesses ofgroup companies in Japan.
 Orders in Europe and the United States from major high-techcompanies are sound and expected to remain strong; orders inAsia were relatively weak except in South Korea, where orders
are starting to recover.
106. Second-year Results and Final-year Outlook of the Current
Medium-term Plan
Fiscal 2018 Manufacturing White Paper of the Ministry of Economy, Trade and Industry
Departments Responsible for Data Collection and Use

Difficulty of Recruiting Employees
FY2017
SurveyFY2017
SurveyFY2016
SurveyFY2016
SurveyVery difficult and business operations are starting to be affected
Difficult but no effect on business operations
Difficulties are starting to appear Based on materials of Ministry ofNo significant difficulties
Economy, Trade and Industry,

Difficulty of Recruiting Employees
Source: Fiscal 2018 Manufacturing White Paper

December 2017

“Recruiting people is a big problem”

Senior executives, business strategy
Manufacturing operations
departments
Departments responsible for IT systems Other
Based on materials of Ministry of Economy,
No strategy or plan for data collection and use
Trade and Industry, December 2017

Departments responsible for strategies and plans involving the collection and use of data
Source: Fiscal 2018 Manufacturing White Paper“Data use is shifting from business unit
issues to manage issues”

Shortage of experienced workers + Interest in data-driven manufacturing
Solid demand for engineering IT and support of skilled engineers

11Product Category and Regional (Overseas)
Performance

The Zuken Group Business Domains
Networksecurity

Electronic Design Automation(EDA)
Solutions and services for
implementation and designs requiredfor developing electronic products

Embedded
SW/IP

13Enterprise PLM Solutions(PLM and other solutions)BOM, knowledge management andother enterprise IT solutions andservices for manufacturers

Solutions for Electrical/Control
Designs and Mechanical Designs(Wire harness CAD/3D CAD andother products)
Electrical and control designs for vehicles
and industrial machinery
Solutions and services for 3D mechanicaldesigns

Services andothersupport

Zuken Tec

Major Products and Group Companies in Each Product Category
Major products by product category
Product Category

Major Products

Printed Circuit Board designsolutions

CR-8000 Design Force
CR-8000 DFM Center
CR-5000 Board Designer

Circuit design solutions

CR-8000 Design Gateway
CR-8000 System Planner
E3.series
Cabling Designer
Harness Designer
ACAD-DENKI

IT solutions
Client services and others

visual BOM
Knowledge Explorer
DS-2

Zuken Tec

Zuken Tec

Maintenance services for each product

Software for electric circuit board designs Software for wire harness designs

14Zuken Tec

Product Categories Used for the Medium-term Plan Explanation
The following product categories are used in discussions of the medium-termplan in order to show more clearly the relationships between product categories
in IR materials and progress toward business performance goals.
Medium-term business plan categories
Printed Circuit Board design solutions(1) Design Automation
Circuit design solutions
IT solutions
Client services

15(2) Data Management Solutions

7. FY3/18 Sales by Product Category (vs. FY3/17)

FY3/17

FY3/18YoY change

YoYgrowthrate14,492

15,582+1,090+8%(of which WH Design)(4,432)(4,840)+408+9%

Data Management Solutions

7,707

8,000+293+4%

Total Sales

22,19923,582+1,383+6%

Product Category(Millions of yen)

Design Automation

168. Assessment of Basic Policies and Core Strategies of Medium-term
Business Plan

Basic Policies and Core Strategies of Medium-term Business Plan
Started selling new products for E/E design datamanagement
Introduced new solutions for automobiles
These actions are not yet generating earnings but are
expected to contribute to future earnings
Making progress with strengthening ties with strategiccustomers in North America
More actions needed for growth in China and otherAsian countries
Recent technological challenges in PCB designs haveincreased demand for the CR-8000
Anticipate large-scale migration of major users inEurope and U.S.
Acquired Alfatech Inc. in December 2017
Will continue to consider timely M&A opportunities

179. Product Category Sales and Initiatives (1)Design Automation
FY3/18 Overview

Sales(Design Automation Sales)(Millions of yen)

(Pct. Changes)

18,00016,00014,492

15,582(+8%)

14,000 In Japan, an increase in medium-term design reformprojects mainly at large companies.
 Upgrade of CR-8000 capabilities increased the migrationfrom the CR-5000 among major customers in Europe andthe United States.
 Strengthen CR-8000 marketing and promotional activities
for large high-tech companies in India, China and othercountries.

12,000Initiatives and Goals

10,000
8,000
6,000
4,000

4,432

4,840

FY3/17

FY3/18

2,000
018

WH
Design(+9%)

 In Japan, use accomplishments at design reform projects
for large companies that were first to use these advancesin order to receive orders from companies in otherindustries too.
 In Europe and the United States, continue measures toincrease the migration of major customers to the CR8000.
 Increase the use of proposals for using the CR-8000 toreceive orders from large high-tech companies in India,
China and other countries.

9. Product Category Sales and Initiatives (2)Data Management Solutions
FY3/18 Overview
 In Japan, there was a big increase in network security sales (atZuken NetWave) just as in FY3/17.

Sales(Data Management Solutions Sales)(Millions of yen)

(Pct. Changes)

10,000
8,000

7,707

8,000

 Focused on the DS-E3 for wire harness designs, mainly inEurope and the United States, for the DS-2 design datamanagement system.

(+4%)

Initiatives and Goals

6,000 Start sales activities for the new DS-E3 in Japan, targeting
existing large E3 users; also leverage the data management
function to increase new users of the E3.series.

4,000
2,000
0

FY3/17

FY3/18 In Europe and the United States, where there are many E3users, aim for growth in orders due to the enormous potential
market for the DS-E3.
 Anticipate strong demand in network security and PLM(Products Lifecycle Management) in association with growth ofthe IoT.

19

10. Overseas Sales and Initiatives
Overseas Business(Millions of yen)

FY3/18 Overview

6,000Americas –Sales remained strong in the automobile, aerospace andelectric power sectors; sales of all major products were up morethan 10%Europe –Business with major customers in the automobile, railway
car and electric power sectors is sound; large migration of users
from the CR-5000 to the CR-8000; also concentrated on capturing
data management ordersAsia –Strong sales in the Korean automotive sector, but there wasintense manufacturing sector competition in China and a decline incapital expenditures in India following the start of the goods andservices tax (GST)

Sales by Region(Pct. Changes)

10,000

8,000



6,860

7,424(+8%)

1,615(+13%)

4,420(+11%)

1,426

4,000

3,965
2,000

1,469

1,389

FY3/17

FY3/18(-5%)

Initiatives and Goals


Americas –Increase CR and E3 sales by using data management todifferentiate these productsEurope – Increase migration of key customers from the CR-5000 to
the CR-8000; increase data management products to both CR andE3 users

Asia –In China, focus on increasing sales to Chinese companies; inIndia, with the GST now in place, expect a recovery companies; inKorea, the focus is the migration of key customers to the CR-8000
and more data management orders

0Americas

20

EuropeAsia

10. Overseas Sales and Initiatives

Zuken’s first large-scale corporate sales event in India took place in May 201821

11. Second-year Results and Final-year Outlook of the Current
Medium-term PlanA broad recovery in Japan extending to the electronics industry ingeneral as well as automobiles and automotive electronics.
Growth in the number of projects at customers’ premises fordesign/engineering process innovation.

The shortage of skilled engineers and increasing interest in security aresupporting strong growth of almost all businesses of group companiesin Japan.

Orders in Europe and the United States from major high-techcompanies are sound and expected to remain strong; orders in Asia
were relatively weak except in South Korea, where orders are starting torecover.
We expect market conditions in Japan and overseas to remain favorable in FY3/19
Sales growth is possible, but there may also be an increase in development andinvestment projects
We are aiming for the goals of the plan’s final year and preparing to start the next
three-year plan2212. Shareholder Distributions
Policy Distributing profits to shareholders is one of the highest management priorities of the Zuken

Group. We will continue to consider suitable and highly effective methods of returning earnings
to shareholders by taking into account business performance, operating conditions and otherfactors while strengthening our business foundation and financial soundness.
株主還元策の推移
Dividends and Purchasesof Treasury Stock

Commemorative/special
記念配当・特別配当 dividends
Purchase ofOrdinary
普通配当 ■自己株式取得
treasury shares
dividend(Unit: yen)
（単位：円）

101011010510101010Results Ordinary dividend

231010101010101010

Zuken has paid an annual dividend per share of atleast ¥10 every year since its listing in 1987. The
dividend has increased several times since 2008 andthe year-end dividend for FY3/18 was raised from ¥10to ¥12. Zuken plans to pay an annual dividend of ¥24for FY3/19 and has the goal of continuing to raise thedividend.
Commemorative dividends and special dividend
FY3/95: Commemorative dividend ¥ 1
FY3/06: Commemorative dividend ¥5
FY3/12: Special dividend ¥10
FY3/16: Commemorative dividend ¥101214

1414141414

Purchase of treasury shares
Jun. 2005 – Jun. 2006
Nov. 2008 – Nov. 2009
Feb. 2011 – Mar. 2011
Total

17202022242,000,000 shares
636,500 shares
2,000,000 shares
4,636,500 shares(These shares were retired in March 2011)