Ryosan Company, Limited
FY2017 Results Meeting
Fiscal year ended March 31, 2018

May 24, 2018

Results for FY2017

The 10th Medium-Term Business Plan

Business Plan for Full Year FY2018
NoticeBusiness forecasts and all statements related to the future contained in this presentation
are based on information currently possessed by Ryosan Company, Limited (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

22

Results for
FY2017

Consolidated Statements of Operation

 Both net sales and net profit increased compared to the previous term mainly from strong
sales of the in-vehicle electrical equipment, FA equipment and consumer businesses. Sales
moved past ¥250 Bil for the first time since FY07. Net profit also recorded its highest total in
the last 10 years.
 Net profit ratio is high due in large part to declines in the yen value denominated in foreign
currencies.
a

b

c

d

e

f

FY2016%

1st Half

2nd Half

Amount

123.6

130.4

254.0

Net Sales

218.0

Gross
Profit

18.3

8.4%

10.4

9.8

20.3

SG&A
Expenses

13.6

6.3%

7.2

7.4

Operating
Income

4.6

2.1%

3.2

Net Profit

3.3

1.5%

EPS (¥)

116.54hiChange(e-a)

Initial
Plan

Gap
(h-e)

FY2017(Unit: ¥Bil)

Amountg%+16.5%

240.0

+5.9%

8.0%

+11.0%

20.1

+1.2%

14.6

5.8%

+7.4%

14.3

+2.6%

2.4

5.6

2.2%

+21.6%

5.8(2.3%)

2.2

2.2

4.4

1.8%

+33.1%

4.1

+9.3%

82.66

91.32

173.98+49.3%

158.55+9.7%
33

Results for
FY2017

Segment Information

 Semiconductors sales increased to ¥145.7 Bil mainly due to the strong sales of the in-vehicle electricalequipment and FA equipment businesses. Operating income was ¥2.6 Bil mainly due to the revaluation of
inventory.
 Electronic components recorded net sales of ¥81.9 Bil and operating income of 2.8 Bil mainly due to the sales
expansion at consumer business.
 Net sales of electronic equipment increased to ¥26.3 Bil because of large volume businesses in the in-vehicle
electrical equipment business. Operating income decreased to ¥0.6 Bil mainly due to the change of productmixture.
FY2016(Unit: ¥Bil)

Semiconductors

2nd Half

Amount

72.0

73.6

145.7

1.8

0.7

2.6

39.5

42.4

81.9

1.3

1.4

2.8

12.0

14.3

26.3

0.2

0.3

0.6

(0.4)

(0.1)

(0.1)

(0.3)

218.0

123.6

130.4

254.0

3.2

2.4

5.6

AmountNet Sales

2.4

Electronic
Components

Net Sales

69.1

Operating Income

1.9Electronic
Equipment

Net Sales

23.5

Operating Income

0.6

Total

Net Sales
Operating Income

%

125.3

Operating Income

Adjustment

FY2017

4.6

2.0%

2.8%

3.0%

2.1%

1st Half%

Change+16.3%

1.8%+5.5%+18.5%

3.4%+44.5%+12.2%

2.3%(12.6%)+16.5%
2.2%+21.6%
44

Results for
FY2017

Trend in Net Sales and Operating Margins by Quarter Even though sales fell for the first time since 1Q FY2016, net sales still remained in the¥60.0 Bil range.
 Operating income ratio deteriorated in 4Q because of a price discount for the end of term
and inventory revaluation.
Net Sales (Unit: ¥Bil)
80

Semiconductors

60

40

Operating Margin

53.5
48.3
3.9

6.7

15.4

16.9
2.3%

Electronic Components

Electronic Equipments

57.4

58.7

58.9

6

6.8

5.5

3.0%

18.5

18.2

18.4
2.6%

Operating Margin

64.7

66.2

6.5

6.4

21

21.9

2.7%

2.6%

1Q

2Q

7.8
20.4

3.0%

1.2%

1.8%

20

28.9

4.0%

2.0%

1.3%
29.8

64.1

5.0%

33.1

33.3

34.9

37

37.8

35.7

3Q

4Q

1Q

2Q

3Q

4Q

0

1.0%

0.0%
FY2016FY201755

Results for
FY2017

Segment Trend Information

 There were no significant changes in segment information.
 The increase of the electronic components business (exported to Asia) in the game industry (consumer
segment) led to the increase of relevant business figures accordingly.
By Application

By Product

5%

4%

4%

Others

13%

14%

15%

Industrial Equipment■ Se m iconductors ■ Ele ctronic Components■ Ele ctronic Equipment

16%

17%

18%

Consumer

1%

14%

Information &Communication

22%

44%

FY15

14%

51%

FY16

49%

In-Vehicle
Electrical
Equipment

FY17

By Region
3%

4%

3%

38%

37%

40%

59%

59%

1%

Facilities Equipment

10%

9%

System Equipment

3%
5%

3%
4%

Power Supplies
Display Devices

21%

24%

25%

3%

3%

4%

14%

14%

13%

Discrete
Semiconductors

41%

40%

41%

System LSIs

FY15

FY16

FY17

12%
3%
5%

1%

Electromechanical
Components

Memories

Others

Asia

57%
Japan

FY15

FY16

FY17

66

Consolidated Balance Sheet / Consolidated Statements of Cash Flow

Results for
FY2017

 Net assets decreased due to the purchase of treasury shares and cash dividend paid.
 The operating cash flow (cash out) increased by ¥17.0 Bil because of 1) additional working
fund used for sales expansion, and 2) increase of inventory for overseas semiconductors
businesses. Cash and outside borrowing were used to balance the cash flow.
(Unit: ¥Bil)■Consolidated Balance Sheet

End ofMar.16End ofMar.17

End ofMar.18Gap (18-17)

Total Asset

157.0

161.6

162.8

+1.2

Current Assets

139.1

142.8

144.2

+1.3

Non-Current Assets

17.8

18.7

18.6

(0.1)

Liabilities

41.6

52.1

68.5

+16.4

Net Assets

115.3

109.5

94.3

(15.1)Net Assets to Total Assets (%)

73.5%

67.8%

57.9%

(9.9%)■Consolidated Statements ofCash Flow

FY2015FY2016FY2017GAP(FY17-FY16)

Cash Flow from Operating Activities

4.7

(1.8)

(19.2)(17.4)Cash Flow from Investing Activities

0.5

(0.8)

0.6

+1.4

Cash Flow from Financing Activities

(9.5)

(9.2)

(6.5)

+2.6

Cash and Cash Equivalents at the Endof the Period

50.7

38.6

13.4

(25.2)
77

Results for FY2017

The 10th Medium-Term Business Plan

Business Plan for Full Year FY201888Business Environment (Electronics Industry)Socialchanges・ Implementation of CASE in the automotive industry
・ Increased productivity via e-factories, etc.
・ Further advancement of IT applications
・ Technological innovation via artificial intelligence (AI)

Industrychanges・ Strong demand in the semiconductor market
・ Entry from different industries
・ Maturation of the Japanese market

Manufacturerchanges

RyosanGroup

The 10th MediumTerm Business Plan

・ Large-scale reorganization among
competitors
・ Selection of and focus on fields ofexpertise

Customerchanges・ Solution needs changing
from “selling goods” to“selling services”

99

Issues to Be Addressed
The 9th Medium-TermBusiness Plan
Reestablish
Growth Path
Promote Multi Vendor Support
Create New Business Model(Strengthen system solution capability)

Expand Global Business

Improve Capital
Efficiency
Proactive Investment
Acquire Treasury Shares
Improve Efficiency of SG&A
Increase Leverage

Issues● Delay in growth of
suppliers who will serve as
2nd and 3rd “businesspillars”● Delay in commercializationof solution business● Delay in expansion ofoverseas local
business(business w/ nonJapanese companies)● Change in businessconditions bysemiconductor suppliers● Not enough improvementwith ROE

The 10th MediumTerm Business Plan

Direction

Reconstructbusiness portfolio

Strengthen profit
and capital
structure

1010The 10th MediumTerm Business Plan

Basic Stance◆ Basic stance of the 10th Medium-Term Business Plan

Growth & Speed

Achieve sustainable growth through quick response to changes inmanagement environment and through electronics systems
coordination.
◆ Consistently applied management policy

Based on the process of “examining the essence of management,
implementing management innovation and achieving management
success,” implement “open and clean corporate management” and“highly creative management activities.”
1111

Growth Strategies

The 10th MediumTerm Business Plan

◆ Establishment of Solution Business・Commercialize solution business・Strengthen sales promotion to growth markets (in-vehicle electricalequipment, inbound, monitoring/nursing care, robotics, etc.)◆ Creation of new suppliers leading to core businesses
・Expand overseas semiconductors businesses
・Enlarge business of electric components’ core suppliers◆ Expansion of local overseas business・Expand business through alliances with strategic partners
・Acquire new overseas commercial rights (Intersil, Microchip Technology,
ON Semiconductor) through strategic investment to local overseas
trading companies
・Allocate resources to markets according to product characteristics◆ New business models
・Set up a project team led by the company president and accelerate
developing new business models.
1212The 10th MediumTerm Business Plan

Establishment of Solution Business
Customers
Provide information
Propose solutions

In-vehicle
electricalequipment market

Strength in Business Solution(business model development/
introduction of new suppliers)

Monitoring/nursing
care market

Strength in System Engineering(kit proposal, modulation, solutions
board)

Partnerships

InboundmarketMaterial
manufacturers

OEM
Companies

ODM
Companies

SIers• Establish new business models by providing services through proactive solution proposals leading to the sale of peripheral
goods (hardware and software)• Use outside consultants, etc. to search for advanced technology and close outstanding items• Strengthen alliances with partner corporations such as system integrators
13
13

Examples of Solution Business①

The 10th MediumTerm Business Plan

8 optical I / O cores are installed to 800
Gbps transmission / reception PCIe card

AIO Core Co., Ltd
Established in April 2017 to commercialize the world's smallest class ultracompact optical module "Optical I / O Core" commissioned by NEDO anddeveloped by PETRA.
NEDO: New Energy and Industrial Technology Development Organization
PETRA: Photonics Electronics Technology Research Association

This result was obtained as a result of
NEDO’s commissioned work
"development of ultra-low power
optoelectronic mounting system"

PETRA, AIO Core logo are registered trademarks or trademarks in Japan and other countries.

14
14

The 10th MediumTerm Business Plan

Examples of Solution Business ②
Automatic driving technology
Examination in Europe highway / city area

sensorcameraradar
lidar

Recognition

Judgment

Operation

Automatic position
estimation

15
15

The 10th MediumTerm Business Plan

Examples of Solution Business ③
SystemSystemConfiguration
Structure

Browsing nationality and mobility
analysis data

Display of real time data to digital signage etc

Real time
judgment

Detailed
analysisAnalysis / judgment server
Direct connection to equipment
Browsing judgment result

Upload received data to the cloud

Installation location
Establishment at counters of each tenant

touristInstallation equipment

sensorConnect toapplication

16
16

The 10th MediumTerm Business Plan

Creation of New Suppliers Handling Core Business◆ Expansion of business portfolio
The size of the circle (●) represents the scale of sales.

Image of sales volume in each business

FY2020

Unit: ¥Bil

26

86

Approx.
100%

Approx.
105%

Electronic Equipment

Electronic Components

188

Approx.
130%

FY2017
Semiconductors

Create new businessApprox. ¥10 Bil• Enlarge businesses with key suppliers exceeding ¥10 Bil , which come to the second, third pillars after the Renesas
Electronics business.
• Promote organic growth through completions of outstanding business cases and through design-in activities, in addition to
non-organic growth through strategic investments

17
17

The 10th MediumTerm Business Plan

Business Portfolio Positions

ExpandCore

Protect

Semiconductors
business (Renesas)

Electronicequipment business

Solution business
Semiconductors
business (overseas)

Electronic
components business
Implement strategic investment
Innovate business models

Increase efficiency ofbusiness process

Stabilize businessprofitability

18
18

The 10th MediumTerm Business Plan

Expansion of Local Overseas Business◆ Global strategy and network

ActiveSales

Greater China
Focus Areas

Changchun

China

・Expand sales through its subsidiary Edal Electronics (HK) andits business partner Quigdao Sanyuan Taike Electronics
Technology(China).
Seoul
・Expand business through sales of semiconductors andShanghaielectronic components to the in-vehicle electrical equipment,
South Korea /FA equipment, and home electronics appliance markets.

Beijing
Tsingtao
GurgaonChengduIndia

DalianTaiwanShenzhenHong KongTaipei

Bangkok

ASEAN
PenangKuala Lumpur
Singapore

EuropeKorea
・Expand business through sales of semiconductors andelectronic components in the in-vehicle electrical equipment
and FA equipment markets.

ASEAN
・Mainly in India, expand business through increased sales ofsemiconductors and electronic components in the in-vehicle
electrical equipment market.
Europe・Expand business through alliances with strategic
partners.
Dusseldorf
Munich*Review feasibility of overseas expansion of the electronic equipment business19
19

Business Strategies

Semiconductors

The 10th MediumTerm Business Plan

・ In the Renesas Electronics business, continue expanding sales by
locating salesforces close to the customers and protect current market
share. In addition, expand business by bringing up business opportunities
in the new market and/or acquiring commercial rights of Intersil products
in China.
・ In the overseas semiconductors business, accelerate concentration andselection; differentiate marketing approaches depending uponcustomers/suppliers to improve profitability.

Electronic
components

・ Mainly targeting growth markets such as the in-vehicle electricalequipment and industrial equipment, achieve even further growth of theelectronic components business through “expansion of business via coresuppliers,” “improvement from current rather passive marketing
approach,” and “reconstruction of overseas businesses with local
companies.”

20
20

Business Strategies

Electronicequipment

The 10th MediumTerm Business Plan

・ Stabilize the business profitability and prepare for further future growth byassuring long term sales of large-scale projects, by increasing profitability
by proposing added value, and by developing new products/customers,
etc.
・ Discover products which have the potential for overseas expansion andreview sales structure focusing on overseas expansion.

Solution

Technology

・ Create a new business model through introduction of advanced
technology for the growth market and through executing cutting-edgebusiness strategy using external consultants.

・ In order to establish its own technology capabilities, and to maximize its
added value through its continuous improvement, ‘bring up technology
knowhow for the growth market and expand its system platforms globally’and ‘provide unique technical support to customers/suppliers.’

21
21

The 10th MediumTerm Business Plan

Business Portfolio Shift (1)•••Solution business, which currently recorded a low income, will contribute to consolidated
profits. The profit ratio is expected to show higher performance compared to current businesssegments.
Income from the overseas semiconductor business is expected to expand due to theoperation restructuring and the business expansion.
Both the domestic semiconductor business and electronic components business remain
stable.
Size of bubbles show size of Operating Profit
FY20

Operating Income
Ratio

FY20

FY20

FY20
FY20
FY17

FY17

FY17
Domestic Semiconductor

Overseas Semiconductor

Electronic Components

Electronic Equipment

Solution

FY17
FY17

Net Sales22
22

The 10th MediumTerm Business Plan

Business Portfolio Shift (2)••Solution business contributes 20% of sales
expansion toward FY20. 60% of that is fromnew key suppliers. Sales from new local
business is not included.
The sales combination does not show
drastic changes toward FY20, while profits
of both Solution and Overseas
semiconductor will increase almost thesame as electronic equipment.

【Contribution to Sales Growth (Image)】
4000

Overseas
Local

Trend of Sales Mix[Actual & Plan]
100%
80%
60%
40%
20%
0%
FY17

FY18

FY19

FY20

Domestic Semiconductor

Overseas Semiconductor

Electronic Components

Electronic Equipment

Solution

Edal[Trend of Profit Mix (Actual & Plan)]
100%
80%

3000

GrowthStrategy

60%

Overseas
Semiconductor

2000

1000

Solution
0
FY17

FY20

Current
Customer

40%
20%
0%
FY17

FY18

FY19

FY20

Domestic Semiconductor

Overseas Semiconductor

Electronic Components

Electronic Equipment

Solution

Edal

23
23

The 10th MediumTerm Business Plan

Improve Capital Efficiency◆ Measures for improving ROE
Improve profitability
 Active allocation of humanresources to growth area
 Business growth throughstrategic investment
 Decrease of expense ratio

Expansion of local overseas business: ¥10.0 Bil
Establishment of Solution Business &Creation of new business models:¥2.5 Bil
Creation of core business suppliers:¥2.5 Bil

Strategic investment(¥15 Bil)

Ideal Status
Improve asset efficiency

ROE
8.0%

 Fluidization of accounts
receivables
 Reduction of strategic
shareholdings
Achieve optimal equity ratio Dividends with a payout ratio ofat least 50%
 Acquisition of treasury shares

ROE
2.7%

FY14

ROE
4.4%

FY17

ROE
5.0%

FY19
24
24

The 10th MediumTerm Business Plan

Improve Capital Efficiency(Unit: ¥Bil)

6.0

ROE
5.0%
4.5

4.5

Profitability
target

4.0

100
3.0

Net assets
target

94

0

FY17

FY18
(Plan)

FY19(Plan)

FY20(Plan)

0.0

25
25

Infrastructure Strategies

The 10th MediumTerm Business Plan

◆ Qualitative enhancement of corporate governance• Revisit and review Ryosan Spirit and its corporate vision− Cultivate human resources through the round-up system− Reconstruct its corporate vision• ESG* (Environment, Social, Governance) initiatives• Strengthen group internal controls◆ Strengthening of management infrastructure• Construct a next information system and rationalize its business process• Reorganize its sales forces from region-base structure to market-basestructure• Reform human resource management framework− Revise compensation system that enhances employees’ motivation− Develop working environment where employees can work efficiently(support for diverse working styles)• Increase efficiency of indirect business functions

26
26

The 10th MediumTerm Business Plan

Business Objectives• Gross profit ratio show small changes after the expansion of the solution
business.
• SG&A ratio will improve as the result of business process reengineering throughsystem investment.
FY2017
Results

FY2018% of Net
Sales

Plan

FY2020% of Net
Sales

258.0

Target(Unit: ¥Bil)% of NetSales

Net Sales

254.0

300.0

Gross
Profit

20.3

8.0%

21.5

8.3%

24.5

8.2%

SG&A
Expenses

14.6

5.8%

15.5

6.0%

16.0

5.3%

Operating
Income

5.6

2.2%

6.0

2.3%

8.5

2.8%

Net Profit

4.4

1.8%

4.0

1.6%

5.5

1.8%
27
27

The 10th MediumTerm Business Plan

Business Objects by Segments(Unit: ¥Bil)

FY2017

FY2020Net Sales

Net Sales

Growth(%)

Semiconductors

145.7

188.0

129%

Electronic Components

81.9

86.0

105%

Electronic Equipment

26.3

26.0

99%

Total

254.0

300.0

118%

*The sale of the solution business is included in relevant business segments. The business target of the solution
business is ¥13 Bil sales in FY2020.

28
28

Results for FY2017

The 10th Medium-Term Business Plan

Business Plan for Full Year FY2018

29
29

Business Plan for
FY2018Business Objectives

 Edal Electronics is consolidated from FY2018.
 While sales of the in-vehicle electrical equipment and FA equipment business are expected
to stay firm, the growth of the market as a whole levels off due to the drastic expansion ofprevious terms, and net sales is projected to increase by 1.5% to ¥258 Bil.
 Net profit is projected to decrease to ¥4.0 Bil since no foreign currency profit is planned inthis term.
FY2017(Unit: ¥Bil)

Full Year

FY2018%

1st Half

2nd Half

Full Year

127.5

130.5

258.0

%

Change(FY18-17)

Net Sales

254.0

+1.5%

Gross Profit

20.3

8.0%

10.5

11.0

21.5

8.3%

+5.7%

SG&A Expenses

14.6

5.8%

7.8

7.7

15.5

6.0%

+5.6%

Operating Income

5.6

2.2%

2.7

3.3

6.0

2.3%

+5.9%

Net Profit

4.4

1.8%

1.8

2.2

4.0

1.6%

(10.7%)EPS (¥)

173.98

73.51

89.85

163.36(6.1%)

30
30

Business Plan for
FY2018Overview of Business Plan by Business SegmentNet sales and operating income at semiconductors are expected to record ¥154.5 Bil (+6.0% compared to FY17) and¥3.4 Bil (+31.0%) because of robust sales in the in-vehicle electrical equipment business and consolidation of Edal
Electronics.
Sales of electronic components is expected to show a small decrease to ¥79.5 Bil (-3.0%) and ¥2.7 Bil (-4.0%) becauseof discontinuation of ad hoc income recorded in the previous fiscal year, even if it still records robust sales in in-vehicle
electrical equipment & FA equipment business.
Electronic equipment is expected to record ¥24.0 Bil sales (-9.0%) and ¥0.3 Bil operating income (-42%)(Unit: ¥Bil)

FY2017Full Year
Semiconductors

Electronic
Components
Electronic
Equipment

Net Sales

145.7

Operating
Income

2.6

Net Sales

81.9

Operating
Income2.8

Net Sales

26.3

Operating
Income0.6

Net Sales

(0.3)
254.0

Operating
Income

5.6

Adjustment
Total

FY2018
%

1.8%
3.4%
2.3%

2.2%

1st Half

2nd Half

Full-Year
Plan

76.4

78.1

154.5

1.5

1.9

3.4

39.0

40.5

79.5

1.3

1.4

2.7

12.1

11.9

24.0

0.1

0.2

0.3

(0.2)
127.5

(0.2)
130.5

(0.5)
258.0

2.7

3.3

6.0

%

Change(FY17-16)

+6.0%
2.2%

+31.4%(3.0%)

3.4%(4.0%)(9.0%)

1.5%(42.3%)
+1.5%

2.3%

+5.9%
31
31

Business Plan for
FY2018Plan for Return to Shareholders
The Company plans to pay ordinary dividends ¥100 p.s. and special dividend ¥50 p.s. (Total ¥150 p.s.)
The Company acquired 36.1 Bil shares (¥15.9 Bil) in FY17.
The Company plans to continue treasury share acquisition for this fiscal term.

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

79%

50

86%

150%

50

91%

100%

71%
59%
50

80
60

90

90

100

100

50%

PeriodNo. of Aquired Shares（ 10Thousand）

Amount（\Bil）

FY12

100

1.9

FY13

100

1.9

FY14

45

1.8

FY15

155

4.6

FY16

137

4.4

FY17

361

15.9

60

0

0%
FY12

13

14

15

16

17

18
(Plan)

32
32