DAIHATSU DIESEL MFG. CO., LTD.

Fiscal Year Ended March 31, 2017

Financial Results Briefing
May 2017

Sales Breakdown

Business

Internal combustion engines

96％

OtherSection

Marine-use

85％

Land-use

Application

Auxiliary power generators approx. 80％

approx.

2Main
propulsion systems

4％

15％

approx.

approx.

20％

DAIHATSU DIESEL MFG. CO., LTD.

Market Share (Auxiliary Engines for Large Ocean-going Vessels)
Share in Japan

Overseas market share

DAIHATSUDIESELDAIHATSUDIESEL

44%

23%

Major competitors

Japan: companyY
Overseas: company M (Denmark), companyY(Japan), companyH(South Korea), companyW (Finland)

3

DAIHATSU DIESEL MFG. CO., LTD.

Market Trends for Newbuild Vessels
Volume of orders received, by country
180,000

Volume of work in hand, by country
400,000

Other countries total

160,000

European countries total
China

140,000

South Korea
Japan

120,000

Other countries total
350,000
300,000
250,000

European countries total
China
South Korea
Japan

100,000
200,000
80,000150,000

60,000100,000

40,00050,00020,00000
19971998199920002001200220032004200520062007200820092010201120122013201420152016

19971998199920002001200220032004200520062007200820092010201120122013201420152016

Source: The Shipbuilders Association of Japan

Global ocean cargo volumes, by product12,00010,000Orders received showed an uneven increase overtime, with a spike in 2006 to 2007, just before the2008 financial crisis, but decreased significantly
due to the downturn in the marine cargo market in2016

OtherPetroleum products
Crude oilContainers

8,000

Grain
Coal

6,000

Iron ore

Volume of work in hand showed recovery
following a major slump after the 2008 financial
crisis, but is decreasing at present, showing thesame trend as the volume of orders received

4,000

2,000

Ocean cargo volumes show steady rise over time

019961997199819992000200120022003200420052006200720082009201020112012201320142015

4

DAIHATSU DIESEL MFG. CO., LTD.

Remarks on Earnings

POINT

1

Ability to develop products rapidly enables tailoredresponse to market needs.
▶ Stabilize business by mitigating impact of marine cargo restrictions and market state

POINT

2 Stable capture of earnings over life-cycle (30 years)▶ Post-voyage maintenance services are key.
▶ Cumulative total of engine units (number of ships carrying our engines) is decisive.

5DAIHATSU DIESEL MFG. CO., LTD.

Sales by Horsepower(10,000 hp)

180
160
153

140146

142

120

128

100
80

154

123

125

121
109

108

82

60

78

79

77

145

81

40
200March March March March March March March March March March March March March March March March
20022003

2004

2005

2006

20072008

2009

2010

2011

2012

2013

2014

2015

2016

2017

*Does not include technological partners in China

6DAIHATSU DIESEL MFG. CO., LTD.

Strengthening Business in the After-sales-service Market

10 years ago

Holding the lineSales

Business focus was selling engines to builders of newvessels.
Sales for the after-sales-service did not really exist.

approx.

¥15.0 billion

Major increase

NowShifting to the offensive
Sales

Creation of sales teams specializing in parts
Launch of strategic sales targeting ship-owners
and ship-managers in the after-sales-service market

approx.

¥26.0 billion

Issues for the future
Genuine parts usage ratio is approx. 50%. Scope exists for increasing this rate.
▶ Gradually expand sales to mid-sized ship-owners as well.

7DAIHATSU DIESEL MFG. CO., LTD.

Overseas Strategy (Licensing)

Anqing CSSC Diesel Engine Co., Ltd.

SHAANXI DIESEL ENGINE HEAVY INDUSTRYCO., LTD.

Anqing Diesel

Shaanxi Diesel

Anhui Province, China(Yangtze River Basin, 600 km from Shanghai)

Shaanxi Province, China(50 km from Xi an)

Contract partner since 1982
Granting of rights for Manufacture and marketing of certainclasses of internal combustion engine
Expand market share of DAIHATSU brand

8

DAIHATSU DIESEL MFG. CO., LTD.

Fiscal Year Ended March 31, 2017
Summary of Earnings

DAIHATSU DIESEL MFG. CO., LTD.

Summary(Unit: Million yen)

YoY difference
March 2015
Results

March 2016
Results

March 2017
Results

Increase/decrease(%)

Net sales

62,30457,01958,934

1,914

3.4%

Operatingincome

4,689

5,493

3,498

(1,995)(36.3)%

Ordinary
income

4,736

5,438

3,441(1,997)(36.7)%Net income

3,004

3,596

2,319

(1,277)(35.5)%

Basic earnings
per share

94.37

112.9872.87(40.11)(35.5)%

Total assets

72,07175,06078,981

3,921

5.2%

Equity ratio

43.8%

45.6%

46.1%

0.5%

POINT−

Sales expanded due to increased ship size
Worsening profitability on engine sales, sluggish performance by
maintenance operations and yen appreciation had a major negative
impact on earnings
10DAIHATSU DIESEL MFG. CO., LTD.

Trend of Sales and Earnings
Operating income(Unit: Million yen)

7,000

6,000

Ordinary income

Net sales

62,30458,93457,56657,01954,528

5,438
4,973
4,929

4,000

60,00045,000
3,596

2,826
2,780

65,00050,000

4,736
4,689

3,000

(Unit: Million yen)

55,000

5,493

5,000

2,000

Net income

3,004

3,498
3,441

40,00035,0002,7442,319

2,271

30,0001,000

25,0000

20,000
13/3

14/3

15/3

1116/3

17/3
DAIHATSU DIESEL MFG. CO., LTD.

Analysis of Increase/Decrease in Earnings
SalesExpenses(Unit: Million yen)

Operating income for previous term: ¥5,493 million
YoY change-1,995

Other+255

Maintenancerelated(1,009)

Foreignexchangedifference*1(866)

Valuation
Cost
reservereduction,for inventory*2
etc.
(699)
+426

Manufacturing
fixed costs+326

Enginerelated(376)

Other(51)

Operating income for the current term: ¥3,498 million*1 Exchange rate: ¥119.41 for the previous term; ¥108.35 for the current term
*2 Valuation reserves, etc. for the inventory, associated with foreign exchange fluctuations

12DAIHATSU DIESEL MFG. CO., LTD.

Net Sales and Earnings for the Internal Combustion Engine Section
Net sales(Unit: Million yen)

70,000Internal combustion engine section earnings

Marine-use (Japan)

Marine-use (Overseas)

Land-use (Japan)

Land-use (Overseas)

60,04660,0009,000

610

54,60555,408

7,132

571

594

9,904

8,420

25,85828,74250,000(Unit: Million yen)

7,995
7,500

7,046
5,648

6,000

40,0004,500

34,84430,000

3,000
20,00010,00018,271

17,4591,500
17,65100
FY2015POINT

FY 2016

FY2015FY 2017

FY2016FY2017

Net sales increase due to rise in sales proportion of larger diesel engines
for marine-use
Reduced earnings due to the weaker profitability for sales of diesel engine
units, stagnant maintenance-related sales and yen appreciation
13

DAIHATSU DIESEL MFG. CO., LTD.

Unit Sales and Maintenance-related Net Sales
Units sold
(Unit: Units)

1200

Marine-use (Japan)

Marine-use (Overseas)

Land-use (Japan)

Land-use (Overseas)

1,000
1000

Maintenance-related net sales

77889
107

800

(Unit: Million yen)

30,00026,46925,000849
92

20,000264

15,00023,92324,715

379
250

600
400

10,000
543

532

200

493

5,000

00
FY2015FY2016FY2017FY2015FY2016FY2017

Total units sold decreased

POINT

Decreased maintenance-related sales due to sluggish market
environment
14

DAIHATSU DIESEL MFG. CO., LTD.

Earnings Forecasts(Unit: Million yen)March 2018

March 2017
Results

Forecast

Increase/decrease (%)

Net sales

58,93463,000+6.9

Operating income

3,498

2,500(28.5)

Ordinary income

3,441

2,400(30.3)

Net income

2,319

1,500(35.3)

Basic earnings pershare

72.87

47.09

(35.3)*Exchange rates: March 2017 (Results): ¥108.35, March 2018 (Estimate): ¥105.00

Sales increase from higher sales composition of marine-use large-scalediesel engines

Forecast

Profitability deteriorating for main engine units
Earnings decrease due to yen appreciation

15

DAIHATSU DIESEL MFG. CO., LTD.

These materials contain statements relating to future earnings and businessstrategy, etc. Inherent in these statements are risk and uncertainty; they
form no guarantee of future performance.
Please be aware that actual results may differ significantly from forecasts,
due to changes in the business environment, etc.
Furthermore, information relating to companies other than the Company or
the Company group, etc., contained here has been taken from publicly
available information, etc. No verification of any kind has been undertakenby the Company, and no guarantee is offered regarding the accuracy orappropriateness of such information.
The information contained in these materials is intended only for purposes ofprovision of information, and not for solicitation to purchase securities.

Daihatsu Diesel Mfg. Co., Ltd.