Ryosan Company, Limited
FY2017 First Half Results Meeting
Results for the six months ended September 30, 2017
FY2017 : Year ending March 31, 2018

November 14, 2017
Naoto Mimatsu
Representative Director, Executive Chairman
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1Results for FY2017 First HalfBusiness Plan for FY2017 Full Year
Implementation Status of the 9th Medium-TermBusiness Plan
NoticeBusiness forecasts and all statements related to the future contained in this presentation
are based on information currently possessed by the Company and on certain
assumptions which are judged to be rational. Actual business performance may differ
greatly depending on a variety of factors. The following is a list of major factors:
・Economic conditions in key markets (Japan and the rest of Asia), rapid changes
in consumption trends and supply-demand balance for products
・Sharp fluctuations in the dollar-yen exchange rate
・Substantial fluctuation in prices in capital markets

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2Results for FY2017First Half

Consolidated Statements of Operation

 In the first half of FY2017, in addition to the continued favorable performance of in-vehicle electricalequipment, consumer, and FA equipment segments, Ryosan recorded stronger sales of consumer andFA equipment products than initially expected, resulting in the performance of these products exceeding
the figures in the initial plan.
 Profit growth rate improved as a result of this sales increase.
FY2016 1H
Amount%

FY2017 1H
Amount%123.6(Unit: ¥Bil)

Initial Plan

Comparison
with Initial Plan

+21.3%

112.0+10.4%

ChangeNet Sales

101.8

Gross Profit

8.5

8.4%

10.4

8.5%

+22.0%

9.4+11.6%

SG&A Expenses

6.7

6.6%

7.2

5.9%

+8.1%

6.9

+5.2%

Operating Income

1.8

1.8%

3.2

2.6%

+71.8%

2.5+29.0%

Ordinary Income

2.3

2.3%

3.1

2.6%

+36.0%

2.5+27.6%Net Profit

1.7

1.7%

2.2

1.8%

+30.7%

1.8+23.7%EPS (¥)

58.13+42.2%

64.06+29.0%

Domestic Sales

61.3

60.2%

70.9

57.4%

+15.8%

Overseas Sales

40.5

39.8%

52.6

42.6%

+29.7%

82.66

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Results of Edal (transformed into a wholly owned subsidiary in March 2017) are not included.

3

Factors for Increase and Decrease in Net Sales
and Ordinary Income (Year-to-Year Comparison)

Results for FY2017First Half With the in-vehicle electrical equipment, consumer, and FA equipment businesses serving as the main
business drivers, net sales increased by ¥21.8 bil compared with the corresponding period of last year.
 As a result of Ryosan’s increase in profits on a gross profit basis, ordinary income also increased by ¥0.8
bil compared with the corresponding period of last year, although there was a drop in the foreignexchange gains and an increase in the SG&A expenses, etc.
Net Sales

Ordinary Income(Unit: ¥Bil)FA
equipment

Consumer
In-vehicle +5.0

Forex
+2.5

Others+2.8(Unit: ¥Bil)

+21.8

GM
+1.8

+3.0
Forex
impact▲0.4 SG&A▲0.3

electricalequipment

+8.5

123.6

HR
▲0.2

+0.8
Others
▲0.1

23
3.1

+16.5
2.3

101.8
FY16 1H

FY17 1HAn Electronic Systems Coordinator

FY16 1H

FY17 1H
4

Results for FY2017First Half

Segment InformationThe semiconductors business showed improved performance due to the sales expansion of overseas semiconductors as well as
FA equipment business. The electronic components business also showed improved performance coming from sales of the invehicle electrical equipment business and FA equipment business, as well as stronger sales in the consumer business. In bothbusinesses, net sales and operating income exceeded the initial plan and the results for the corresponding period of last year.
In the electronic equipment business, net sales were less than the initial plan mainly because large in-vehicle electricalequipment transactions did not reach the original target (however, the net sales exceeded the result for the corresponding periodof last year). Profit decreased due to the termination of high-profit business recorded during the corresponding period of lastyear.
(Unit: ¥Bil)

FY2016 1H
AmountSemiconductors

Electronic
Components
Electronic
Equipment

Net Sales

58.8

Operating
Income1.0

Net Sales

32.3

Operating
Income0.8

Net Sales

10.6

Operating
Income0.3

Adjustment
Total

%

FY2017 1H
Amount
72.0

1.8%

1.8

2.5%

39.5
2.5%

1.3

3.3%

12.0
3.0%

0.2

△0.3

△0.1

Net Sales

101.8

123.6

Operating
Income1.8

An Electronic Systems Coordinator

%

1.8%

3.2

2.3%

ChangeInitialPlan

Comparison
with InitialPlan+22.5%

64.5+11.7%+68.6%

1.5+21.9%+22.2%

34.0+16.3%+61.5%

0.9+39.2%+12.6%

13.5△10.8%△13.8%

0.3

△9.3%

△0.2

2.6%

+21.3%

112.0+10.4%+71.8%

2.5+29.0%
5

Results for FY2017First Half

Trend in Net Sales and Operating Margins by Quarter Net sales firmly maintained the upward trend that started in the first quarter of FY2016, thus marking the fifth
consequtive quarter of increasing sales. In the second quarter of FY2017, the Semiconductors business andthe Electronic Equipment business were mainly driven by in-vehicle electrical equipment business, while theElectronic Components business was driven by consumer business.
 Operating margin has been improving and stayed at the 2.5-3% range during the first half of FY2017.
Net Sales (Unit: ¥Bil)
Semiconduscors

70

Electronic Comonents

64

57
7

59

59

8

9

52
5

16

16
35

Operating Margin (%)
Operating Margin
5.0%

Electronic Equipment

15

15

2.7%

2.6%
2.3%

2.1%

33

34

34

1Q

2Q

3Q

31

53
48
3

6

15

16

6

57

58

58

6

6

5

18

18
2.6%

18
3.0%

4.0%

21
2.7%

2.3%

2.0%

1.3%
28

29

1Q

2Q

3.0%

33

1.8%
33

34

3Q

4Q

1Q

37
1.0%

0

0.0%
4Q

FY2015An Electronic Systems Coordinator

FY20162Q
FY2017

6

Results for FY2017First Half

Segment Trend Information

 In terms of breakdown by application, the company’s shares of consumer and FA equipment increased.
In breakdown by region, share of Asia expanded in connection with an increase in consumer and invehicle electrical equipment businesses.
By Application

By Product

4%
13%

4%

4%

Others14%

15%

FA Equipment

17%

17%

18%

Consumer

15%

14%

Information &Communication

23%

43%

FY15 1H

50%

FY16 1H

49%

In-Vehicle
Electrical
Equipment

FY17 1H

By Region
3%

4%

4%

Others

38%

36%

39%

Asia

59%

60%

57%

FY15 1H

FY16 1H

FY17 1H■ Semiconductors ■ Electronic Components■ Electronic Equipment
1%

1%

1%

Facilities Equipment

12%

9%

9%

System Equipment

3%
5%

3%
4%

Power Supplies
Display Devices

21%

24%

25%

Electromechanical
Components

3%

3%

3%

Memory

13%

13%

13%

Discrete
Semiconductors

42%

42%

42%

System LSIs

FY15 1H

FY16 1H

FY17 1H

2%
6%

Japan

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7

Consolidated Balance Sheet / Consolidated Statements of Cash Flows

Results for FY2017First Half Net assets decreased to ¥95.8 bil, due mainly to purchase of treasury shares (¥14.5 bil) and cash
dividends paid (¥1.9 bil). The ratio of net assets to total assets was 59.3%.
 The operating cash flows were in the negatives because more operating capital was used for the
expansion of the overseas semiconductor business.
(Unit: ¥Bil)

Increase andDecrease

End of Mar. 2017

End of Sep. 2017

Total Assets

161.6

161.7

+0.1

Current Assets

142.8

142.9

+0.1

Non-Current Assets

18.7

18.7

0.0

Liabilities

52.1

65.8

+13.7

Net Assets

109.5

95.8

△13.7

Net Assets to Total Assets (%)

67.8%

59.3%

△8.5%

■Consolidated Balance Sheet(Unit: ¥Bil)■Consolidated Statements ofCash FlowsFY2016 H

FY2017 1H

Increase andDecrease

Cash Flows from Operating Activities

2.4

△15.8

△18.2

Cash Flows from Investing Activities

0.0

0.6

+0.6

Cash Flows from Financing Activities

△5.4

△8.0

△2.6

Cash and Cash Equivalents at the End of the
Period

46.6

15.4

△31.2

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8Results for FY2017 First HalfBusiness Plan for FY2017 Full Year
Implementation Status of the 9th Medium-TermBusiness Plan

An Electronic Systems Coordinator9Business Plan for
Full Year FY2017

Business Objectives

 In the second half of FY2017, Ryosan expects net sales of ¥116.4 bil and operating income of ¥1.9 bil.,
figures which go beyond those initially planned, while not reaching the strength of the preceding term.
 Since the stable market circumstances will remain for the full fiscal year, Ryosan expects net sales of ¥240
bil (+4.3% from the initial plan (+10.1% compared with the preceding term)) and operating income of ¥5.8
bil (+3.6% from the initial plan (+24.5% compared with the preceding term)). As a result of the sharebuybacks for this term, EPS is expected to improve to ¥158.
FY2016
Full YearNet Sales

218.0

Gross Profit

18.3

SG&A Expenses

FY2017%

1st Half

2nd Half Full-Year
Plan
Plan

%

(Unit: ¥Bil)

Change(FY17-16)

InitialPlan

MediumTerm
Target+10.1%

230.0

270.0

123.6

116.4

240.0

8.4%

10.4

9.6

20.1

8.4%

+9.7%

19.2

23.5

13.6

6.3%

7.2

7.1

14.3

6.0%

+4.7%

13.6

14.0

Operating
Income

4.6

2.1%

3.2

2.6

5.8

2.4%

+24.5%

5.6

9.5

Ordinary Income

4.8

2.2%

3.1

2.6

5.7

2.4%

+17.9%

5.6

Net Profit

3.3

1.5%

2.2

1.9

4.1

1.7%

+21.7%

4.0

EPS (¥)

116.54

82.66

75.89

158.55+36.0%

142.36An Electronic Systems Coordinator

6.0-

Results of Edal (transformed into a wholly owned subsidiary in March 2017) are not included.

10

Business Plan for
Full Year FY2017

Overview of Business Plan by Business Segment

Based upon the strong business results posted in the first half of FY2017, both the Semiconductors business and theElectronic Components business are expected to post an increase in both sales and profits compared with the preceding
term, while the profit of the Semiconductors business is expected to be less than the initial plan.
The Electronic Components business is expected to have an increase in large in-vehicle electrical equipment transactionsin the second half of the year resulting in an increase in income for the full fiscal year, while the full fiscal year result is
expected to show a decrease in profit because of the low profitability of these transactions.

FY2016Full
Year
Semiconductors

Electronic
Components

Electronic
Equipment

Net Sales

125.3

Operating
Income

2.4

Net Sales

69.1

Operating
Income

1.9

Net Sales

23.5

Operating
Income

0.6

1st
Half

2nd Half Full-Year
Plan
Plan

72.0

66.0

138.0

1.8

1.4

3.2

39.5

36.5

76.0

1.3

1.1

2.4

12.0

14.0

26.0

0.2

0.3

0.6

△0.4

△0.1

△0.3

△0.5

Net Sales

218.0

123.6

116.4

240.0

Operating
Income

4.6

3.2

2.5

5.8

Adjustment
Total

%

2.0%

2.8%

3.0%

2.1%

An Electronic Systems Coordinator(Unit: ¥Bil)

FY2017
%

2.4%

3.2%

2.3%

Change(FY17-16)

InitialPlan

MediumTerm
Target+10.1%

131.0

150.0

+30.6%

3.3

5.1

+9.9%

69.0

70.0

+25.9%

2.0

2.0+10.5%

30.0

30.0△13.6%

0.7

1.4

△0.5

2.4%

＋10.1%

230.0

270.0

+24.5%

5.6

9.5

Project business is included in the Medium-Term Target.

11

Business Plan for
Full Year FY2017

Plan for Return to Shareholders

 Ryosan follows its plan to issue "annual dividend of ¥150 or more and acquire up to 4,500,000 treasury
shares," as stated in the "Second Round of Additional Measures to Improve Capital Efficiency"
announced last May. The total number of treasury shares acquired by the end of October is 3,320,000.
Ryosan is proceeding with its plan while keeping a close watch on the stock market.
Dividend per Share
Ordinary Dividend (yen)Special Dividend (yen)Dividend Ratio

150

150

140

50

150

140

117% 120%

100

Acquisition of Treasury Shares

50

50

PeriodNo. of Acquired
Shares(10 thousand)

FY12

100

1.9

FY13

100

1.9

FY14

45

1.8

FY15

155

4.6

FY16

137

4.4

FY17(as of Oct. 31)

332

14.5

150%

Amount(¥Bil)

50

95%

100%

79%
71%
59%
50

80
60

90

90

100

100

50%

60

0

0%
FY12

13

14

15

16

17
18
(Plan) (Plan)

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12Results for FY2017 First HalfBusiness Plan for Full Year FY2017
Implementation Status of the 9th Medium-TermBusiness Plan

An Electronic Systems Coordinator13Description of Initiatives of the 9th Medium-Term Business Plan

Implementation Statusof the 9th MediumTerm Business Plan Ryosan aims to reach its ROE target of 5% in FY2018.
 Ryosan will release the 10th Medium-Term Business Plan as originally expected (3 years
from FY2018).

Basic StancePursuing a “business model shift” which responds to changes
in our business structure and sustainable “independent growth”

Description of
Initiatives

Create New Business Models

Reestablish
Growth Path

Promote Multi-Vendor Support(Strengthen system solution capability)(Expand new suppliers and products in current business)

Strengthen Global Support to Expand Global Business(Aim to become a global distributor)

Improve
CapitalEfficiency

Proactive Investment Toward Growth
Acquire Treasury Shares
Improve the Efficiency of SG&A Expenses
Increase Leverage

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14Status of Progress Made with Main Measures (1)Core Initiatives

Create New
Business
Models

Implementation Statusof the 9th MediumTerm Business Plan

Plan

Results So Far■Make use of budgeted ¥5.0 bil (3 years)
for strategic investment■Promote alliances with outside partners■ Displayed products at the 20th Embedded
Systems Expo (ESEC 2017) in Tokyo■ Conducted demonstration tests forservices (citizenship analysis, etc.)
utilizing IoT■ Made capital subscriptions to venturebusinesses

Promote MultiVendor Support

Strengthen
Global Support
to Expand
Global Business■Concentrate business resources on
promising suppliers■Non-organic business expansion■Rigid ALM■ Increased overseas semiconductorbusiness by 60% compared with thepreceding term

■Realize business synergies with Edal,
HK.
■Expand business in Europe & the U.S.
■Strengthen business linkage with local
partners in China■ Currently promoting mutual use of lineups
with Edal■ Launched investments into the system toincrease operation efficiency■ Conducted further exploration of local
business in cooperation with the design
house in China■ Continued reviewing possibilities forcommercial rights in Europe & the U.S.

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15

Implementation Statusof the 9th MediumTerm Business Plan

Status of Progress Made with Main Measures (2)Core Initiatives
Proactive
Investment
Toward Growth

Improve Capital
Efficiency

Improve theEfficiency of
SG&A Expenses

Increase
Leverage

Qualitative
Strengthening ofManagement

Plan

Results So Far■Continue anticipatory HR investment■Make use of budgeted ¥5.0 bil (3 years) for
strategic investment■ Continued prior investment to Solution
business, Overseas semiconductor business■ Closed several investments to ventures■Extend 1 year (Till FY18)■Increase shares (4.5 mil)

■ Acquired 3,320,000 treasury shares (as of theend of October)■ Issued interim dividend of ¥75/share in
FY2017■ Canceled 3 million treasury shares as of theend of May■ Reviewed shares for reduction of strategic
shareholdings■Gross dividend of ¥150/share or more
■Cancel treasury shares (3 mil)■Continue reduction of strategic shareholdings■Further reduce SG&A expenses■ Reduced additional costs incurred due toincreased sales■Acquire treasury shares using debt
■Improve asset efficiency through factoring, etc.

■ Acquired treasury shares predominantly
through cash and deposits■ Currently examining concrete measures forfactoring■Shift to Chairman/President structure■CI review■ Continuing CI review

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Implementation Statusof the 9th MediumTerm Business Plan

Initiatives and Key Milestones
Initiatives

Actions

Highlights

New business model

Alliance with partner companies

Invested capital in venture businesses.

Multi-vendor support

Overseas semiconductors and new suppliers

Posted additional ¥6 bil in net sales in the first half of FY2017 compared with thecorresponding period of last year, as a result of expansion in commercial rights
and prior investments

Global business

China local business. Synergy with Edal

Promoted business cooperation with the design house in China.

Improve the efficiency of
SG&A expenses

Increase in efficiency of SG&A expenses

Reduced additional costs incurred due to increased sales.

Proactive investment

Budgeted ¥5.0 bil for 3 years

Currently conducting measures for capital investment to venture businesses(above).

Acquire treasury shares

Acquisition of 4.5 mil shares. Annual total
dividend of ¥150 (2 years). Cancellation oftreasury shares (3 mil).

3,320,000 shares (as of the end of October). Interim dividend of ¥75/share in
FY2017. Cancellation of 3 million treasury shares (end of May).

Increase leverage

Introduce securitization or bank loan facilities

The ratio of net assets to total assets was reduced to 59% (end of September).

FY2016
Results

FY2016
Results

FY2017
InitialPlan

FY2017
1H
ResultsOperating margin

2.1%

2.4%

2.6%

SG&A ratio

6.3%

5.9%

5.9%

Cash and deposits/Total assets

24.0%

18.0%

8.4%

3.8

3.6

3.8

Net assets to total assets

67.8%

65.0%

59.3%

Total return ratio

248.3%

280.0%-

Comments

じNet profit
margin

1.5%

Exceeded the initial plan by increasing profits
on a gross profit basis and reducing additionalcosts.

１
Total asset
turnover ratio

1.4
times

Accounts receivable turnover
periodFinancialleverage

1.4
times

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Increased the operating capital accompanying
increased sales and decreased cash throughacquisition of treasury shares.
Continuing to prepare factoring, etc.
Decreased net assets to ¥95.8 bil throughpurchase of treasury shares of ¥14.5 bil andpayment of ¥1.9 bil cash dividends.

17

Status of Progress Made with Measures to Improve Capital Efficiency

Implementation Statusof the 9th MediumTerm Business Plan The table below highlights the trends of net profit and net assets toward the ROE target of 5% in FY2018.
 Net assets decreased to ¥95.8 bil as a result of measures to improve capital efficiency (2nd round) as ofthe end of September 2017. In FY2017, Ryosan plans to achieve net profit of ¥4.1 bil and to improve ROE.

Trend in Net Profit and Net Assets(Unit: ¥Bil)
1,300

1,218

ProfitTarget

1,200

1,153

1,100

1,095

Initial Plan
1,000

958

36
32

Net Asset
900
Target41

33

ROE: 2.7%

3.1%

3.0%

FY14

FY15

FY16

800

700

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FY17 (Plan)

FY18 (Plan)

18