TOP INTERVIEWREVIEW OF SEGMENT OPERATIONSTop Interview

We will steadily promote reformof our earnings structure andproduction system towards
future astounding progress.
We have begun the first year of our medium-term management plan,“NEXT 100: Beyond 100 years, Ver. 2.” This two-year period will be an
important time for us to achieve future drastic growth. I will hereby reporton the business conditions during the first half of the current fiscal year
and explain our initiatives for the future.
President Kenzo Terashimatell us about the business
Q Pleaseconditions for the first half of thecurrent fiscal year.

With regard to our overall results, although we achieved anincrease in orders received compared with the corresponding
period of the previous fiscal year, net sales and profit fell below
those of the corresponding period of the previous fiscal year
mainly due to the declining profitability of the Industrial
Systems segment in the first quarter. However, ordinary
income largely reached the target figure as the yen has
weakened more than we assumed. Under thesecircumstances, in our overseas business, which is an area ofour focus, the ratio of overseas net sales reached 27.4%.
In the Transportation Systems segment, although overseas
there was a delay in orders for electrical equipment for thehigh-speed railroads in China at the beginning of the current
fiscal year, thanks to strong growth in demand from private
railway companies in Japan, net sales remained the samelevel with the corresponding period of the previous fiscal year
and segment profit was the same as the corresponding periodof the previous fiscal year.
In the Industrial Systems segment, more man-hours wererequired than anticipated in order to realize high performance1of testing equipment for automobile development and tointroduce a new testing equipment for automobilecomponents, thereby resulting in deterioration of profitability
during the first quarter of the current fiscal year. As a result,net sales and profits inevitably posted a significant decrease,
despite increased orders both for printing presses thanks todemand ahead of the Olympic Games and for processing
machinery in Southeast Asia.
In the Information Equipment Systems segment, orders
received increased significantly due mainly to orders for 50
commuter pass vending machines from the Transportation
Bureau of the City of Yokohama. This machine is a composite
ticket vending machine capable of issuing a variety of tickets.
Furthermore, net sales in the first half of the fiscal year greatly
exceeded our target figures, partly owing to orders received in
the previous fiscal year and maintenance.

are the initiatives based on theQ How
medium-term management plan
progressing?

We have extended the medium-term management plan“NEXT 100” by one year and as Ver. 2 of the plan covering

the two-year period from fiscal 2016 to fiscal 2017, areworking on reforms with an emphasis on “building a stablebusiness earnings structure” and “restructuring productionsystems.”
One of the pillars of the reforms is the integration ofproduction in the Industrial Systems segment with theconstruction of a new factory in Ryuoh, Shiga Prefecture.
Implementation of the launch plan is progressing, and weare moving forward with the plan to start operations inspring 2018. We will not only integrate and reinforce theproduction functions of the Industrial Systems segment thatare currently located separately in Yokohama and Shiga but
will also create a new production system by enhancing thefunctions of the factory as an advanced environmental
model factory that installs an automated warehouse systemlinked to production plans, highly efficient air conditioning
using high-insulation materials and LED lighting equipment.
Furthermore, as the basis for companywide reforms, weare progressing with the introduction of a new core systemthat will integrate our information management system fromsales to production, and plan to start full-scale operations
from June 2017. As a result, we will improve businessefficiency, reduce costs and accelerate management
decision-making, which will lead to increase ourorganizational capabilities.

Conceptual image of the exterior of the new factory at Ryuoh, Shiga Prefecturetell us about your response toQ Pleaseleading-edge technologies, such asIoT.

We have developed data acquisition and analysis systems
for fuel cell lift trucks in cooperation with TOYOTAINDUSTRIES CORPORATION with a view to expanding ourbusiness leveraging automotive IoT/M2M solutions. With

this system, fuel cell operation data is collected, stored incloud servers using mobile phone communication systems,and analyzed. The system is used to optimize maintenanceservices and improve merchantability, and is also useful inmonitoring and verifying the amount of hydrogen used by
the fuel cell lift trucks and the effect of CO2 reduction.
Going forward, we will continue research with a view toincorporating the functions of IoT/M2M solutions in ourproducts and applying them to maintenance and otherservices. We also plan to utilize IoT/M2M solutions
specifically to ensure safety, which is one of the missions of
the Transportation Systems segment.

tell us about the outlook for theQ Pleasesecond half of the current fiscal year,
as well as any comments you would
like to make to the shareholders.

Following the weak business results in the Industrial
Systems segment during the first half, we are currently
experiencing an improvement as we move forward with acompanywide response spurred by a sense of crisis. Undera favorable order environment, the order backlog at the endof the second quarter of the current fiscal year has
surpassed the figure of ¥31,100 million at the end of theprevious fiscal year to reach ¥33,400 million. Based onthese circumstances, we aim to achieve a recovery in thesecond half and reach our initial full-year forecasts bysteadily proceeding with initiatives in line with our mediumterm management plan.
With regards to our current management structure,corporate governance is strengthened effectively by adding
two Outside Directors. As a result, the Board of Directors
has revitalized, and opportunities for discussion have beenbroadened to incorporate opinions from outside theCompany. We will continue in our efforts to establish a solidmanagement foundation as a global manufacturer andenhance our corporate value.
We hope that our shareholders will watch for the growthand expansion of the Company’s business from a long-term
perspective, and we would like to ask for their continued
support.

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