TOP INTERVIEWREVIEW OF SEGMENT OPERATIONS/TOPICS

Top Interview

The newly formulated“Revitalize 2020” medium-term
management plan is successfully
moving ahead on track.
President Kenzo Terashima

This fiscal year we have formulated a new medium-term management
plan “Revitalize 2020,” promoting “lean” business operation. In thefollowing interview, I would like to report on business conditions forthe first half of the fiscal year, and our approach to the future.

tell us about the business conditions
Q Pleasein the first half of the fiscal year.

AOverall, we got off to a good start,
with results for the Industrial Systems
segment showing an improving trend
as the benefits of the “Ryuo integration”
began to appear.

The overall amount of orders received decreased comparedto the same period last year, due to lower amounts in theTransportation Systems and Information Equipment Systemssegments. Net sales however grew across all segments, leading
to an increase in revenue. Operating income increased comparedto the same period last year, and also exceeded our projections,due to a significant improvement in profitability for the Industrial
Systems segment. Net income attributable to owners of theparent, although falling below that of the same period last year,
returned to positive territory as we proceeded with measures
such as the disposal of investment securities.
Reviewing the situation by segment, the Transportation
Systems segment experienced an increase in domestic orders,
while orders from China decreased. Net sales grew with theincrease in domestic orders, while operating income decreased,
negatively affected by the decrease in net sales to China.
The Industrial Systems segment experienced growth in bothorders received and net sales, driven by robust sales of testingand processing equipment. Despite the incurrence of depreciation
expense for the new Shiga Ryuo Plant, operating income for the1segment returned to positive territory, with an enhanced focus on
profitability and cost control, in addition to positive effects fromthe integration at the new plant.
The Information Equipment Systems segment experienced acomparative decline in orders as a result of the large project received
in the previous fiscal year. Net sales grew due to increased sales of
the new model of in-car replenishment ticket vending machines,
and profit increased, partly due to better plant profitability.

tell us about the progress on the new
Q Please
medium-term management plan.

AWe will strive to enhance our earning
power, consolidate our foundations
and develop our businesses within
Japan and overseas.

In June 2018 we were fortunate enough to celebrate the 100th
anniversary of our founding. We took the opportunity to re-examine
our management resources, formulated and launched our new
medium-term management plan “Revitalize 2020” encompassing
the four years to fiscal 2021, with the first target set for 2020.
During the first two years of this four-year plan we are in theprocess of establishing a “leaner” business operation structure,with a focus on enhancing profitability.
As a first step towards realizing two of the Company’s priority
policies – “building a stable business earnings structure” and“restructuring the production base to expand productioncapacity” – in June 2018 we commenced operation of the Shiga

Ryuo Plant, consolidating the operations of the Industrial Systems
segment, which had been split between Yokohama and Shiga.
This “Ryuo integration” brought about a profound transformation
in attitudes within the Industrial Systems segment, and theresulting improvements in plant profitability are already apparent
in the figures for the first half of the fiscal year. Robust demand
will provide an opportunity to demonstrate the benefits of thisintegration on design and production capabilities, and we willcontinue to utilize the merits of integration to respond to production
increases in the second half of the fiscal year and beyond. We
will also engage in research and development of testing equipment
for automatic driving and electric vehicles, using the new R&Dbuilding. In the Transportation Systems segment we are engagedin expanding production capacity in the Yokohama Plant, inresponse to domestic inbound demand and special events suchas the Tokyo Olympics and Osaka Expo, as well as growing
overseas demand from China and the ASEAN region. In theInformation Equipment Systems segment we have developed anew onboard IC device: a mobile ticketing gate that can beinstalled inside trains, making the introduction of IC cards
possible without the need for facilities at stations. Local train lines
represent a promising market for this new device. As a group, wewill continue to strive to develop new products while pursuing
greater productivity.
Another of the Company’s priority policies is “expandingoverseas businesses.” Last fiscal year our Transportation Systemssegment established a joint venture in Chengdu, Sichuan Province,and increased our investment ratio in an affiliate in Changzhou,
Jiangsu Province. We are currently also considering further
expansion of the subway vehicle maintenance business alreadyin operation. In our Industrial Systems segment we have oursights on endeavors such as new product development, local
production in China and strengthening our representative office inThailand, in response to increasing orders for generators andprocessing equipment in China and the ASEAN region.

What is the outlook for the second half of thefiscal year, and the full-year results
Q current
forecast?

AWe have revised our forecasts upwards.
We will continue to strive for evengreater profitability, production efficiency
and cost competitiveness.

Based on business conditions up to the first half of the fiscalyear, we have revised our full-year results forecasts. While ourforecast for net sales remains unchanged, we have increased ourforecasts for operating income and net income attributable toowners of the parent, based on improvements in profitability.
(Please see page 1 for specific figures.)
Heading into the second half of the fiscal year, our Transportation
Systems segment will strive to improve production efficiency bystrengthening its factory management systems, while ourIndustrial Systems segment will pursue further improvements inprofitability by harnessing the benefits of our “Ryuo integration.”

What comments do you have for
Q shareholders?

AWe will strive to strengthen ESG andcorporate governance, with our sightsset on sustained growth.

Employees across the Group will work together as one, as westrive for growth to last the next 100 years. To realize continued
growth, it is vital that we respond to the needs of our external
stakeholders, while creating an environment where diverse
internal talent can flourish.
Regarding ESG, we will continue to respond to the requirementsof corporate governance. During the first half of the fiscal year we
altered our operating officer system in order to increase theflexibility of management by having the Board of Directors takeresponsibility of corporate governance, and delegating operational
authority to operating officers. We will also strive to achieve more
effective utilization of assets, through a re-evaluation of thesignificance of our policy of strategic shareholding, based onJapan’s Corporate Governance Code.
In other news this fiscal year, we received the Nikkei AdvertisingAward (an award for excellence in the Nikkei Business Daily
section) for a newspaper advertisement placed on June 20, theanniversary of our founding, to commemorate the 100th
anniversary of the Company’s founding. In December, wepublished the 100-year history of the Company in print. An
employee at our Yokohama Plant received the 2018 Award for
Outstanding Skilled Workers (Contemporary Master Craftsman)held by the Japanese Ministry of Health, Labour and Welfare,bringing the number of employees who have received thatprivilege to three. We will continue to strive to create a corporate
environment that is easy to work in, to encourage diversity, andto promote the transmission of skills and technologies.
We hope that our shareholders look forward to the continued
growth and expansion of the Company and we would like to askfor their continued support.

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