Q&A at the Conference on Financial Results for Second Quarter FY2018
QuestionAnswer

Q1：

A1：

What is the root cause of the deterioration in the Rolling Stock business?

The domestic market is saturated and strong competition continues, so weneed to maintain overseas markets, especially the US market where we havebeen in business for about 40 years, to sustainably grow the Rolling Stockbusiness. Overseas projects have various risks, so we need highly sophisticatedrisk management and capability to execute contracts. However, we supposethat our risk management may have become loose as we expanded business inUS.

Q2：

A2：

What kind of matters will be actually considered in Rolling Stock BusinessWe assign experts in each field from Energy System & Plant Engineering

Restructuring Committee?

segment where we are carrying out advanced projects, and Aerospace
Systems segment where we possess high-level capabilities in design,
manufacturing, and quality assurance, to Rolling Stock Business Restructuring
Committee. With these experts, we review and find how to continue thisbusiness in this committee. If we can rebuild it by ourselves, we will continue,
but if not, we are considering all options including alliance with othercompanies and withdrawal. The criterion for that is basically whether ROIC
reaches 8% or not. First of all, we would like to seek a way how to continue ourbusiness through self-help efforts by supporting from each segment.

Q3：

A3：

What is the schedule for consideration of Rolling Stock business restructuring?

We would like to find a conclusion of restructuring this business by the end ofFY2018.

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Q&A at the Conference on Financial Results for Second Quarter FY2018
Question

AnswerQ4：

A4：

What is the future policy for new orders received in Rolling Stock business?

Now, We are aiming to acquire new projects that do not require impracticable
cost reduction. Specifically, we are aiming to receive orders for customers withwhom we have ongoing business relationship from the past or repeat orders.
That is because we often have some difficulties in new design and othermatters when we receive orders form new customers. In addition, we areworking on sales promotion so that we can receive orders for maintenance andother businesses in US where we delivered 4,500 railcars. We are shifting ourpolicy to receiving orders that we can secure profits with low risk.

Q5：

A5：

Is there any possibility that similar losses are recorded in R211 which wasBeginning with receiving orders for R62 in 1982, we have been participating inreceived recently?

various projects of New York City Transit (NYCT) and we have been executing
them relatively smoothly. We delivered over 2,100 railcars to NYCT and wehave the top share of the NYCT’s market. If all options are exercised, it follows
that our railcars account for a majority of NYCT.
We could secure appropriate levels of profit in previous projects and wesuppose that we also secure a profit in R211 because we received orders for it
in appropriate prices and conditions.

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Q&A at the Conference on Financial Results for Second Quarter FY2018
Question

Answer

Q6：

A6：

How do you think about the potential for Rolling Stock business to find a way out

We suppose that Rolling Stock business has future opportunity. In order toof these circumstances?

expand the scale of business, realignment of rolling stock industry includingsignal and system manufacturers is in progress throughout the world.
However, an economy of scale does not mean advantage in this businessbecause we manufacture railcars based on the specification of each customer.
We focus on manufacturing railcars and work together with suppliers of signal
and communication systems and other businesses in each project. As a result,
we have the top share in US, Singapore and Taiwan. Going forward, Japan’s
ODA loan projects of procuring about 2,000 railcars are expected in Asia. We
believe that we can continue to grow in US and Asia markets with our technicaland aftersales service capabilities. Therefore, we suppose that our primary
goal is restructuring this business on our own.

Q7：

A7：

In Rolling Stock and Ship & Offshore Structure segments, big signs of recovery

There are some segments that can be expected to earn profits in FY2020 andare not expected. Do you have any businesses or events that bolster theFY2021. Until then, Precision Machinery & Robot segment serves as a growth

performance for FY2019 and later?

engine and Jet Engine business and Energy System & Plant Engineering
segment will follow suit. We expect Motorcycle & Engine segment to securestable profit.

Q8：

A8：

In Motorcycle & Engine segment, operating income was -4.6 billion yen in the first

We are going to present new models for FY2019, pick up the pace of production

half and will be 21.6 billion yen in the second half. Why will the operating income

and have sales distributors purchase them in preparation for sales in the spring

increase suddenly in the second half?

of FY2019. Therefore, most of the profits are always recorded in 4Q.

3Q&A at the Conference on Financial Results for Second Quarter FY2018
Question

Answer

Q9：

A9：

How did you calculate the losses related to Trent 1000 which was recorded in 2Q?

Basically, we calculated the losses based on the figure that Rolls Royce

In addition, is there any possibility that additional losses are recorded?

announced in financial results for the first half. They recorded 554 million
pounds as temporary expenses, which is their burden charge, and we recorded
the corresponding amount as our burden charge in 2Q. We recorded huge
temporary expenses this time only and will recognize these expenses as part of
Total Care Package going forward.

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