DAIHATSU DIESEL MFG. CO., LTD.

First Half of the Fiscal Year Ending March 31, 2018

Financial Results Briefing
November 2017

Sales Breakdown/Market Share
Sales Breakdown
Business

Internal combustion engines

SectionMarine-use

Application

Auxiliary power
approx.
generators

approx.

96％

80％80％

4％

Other

20％

Land-useapprox.

Main
propulsion systems

approx.

20％

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

DAIHATSUDIESEL

44%〈Overseas market share〉

Major competitors
 Japan: company Y

DAIHATSUDIESEL Overseas: company M(Denmark),23company Y(Japan),company H(South Korea),
company W (Finland)%

2

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

140,000

European countries total

350,000

China
South Korea

120,000

Other countries total
European countries total
China
300,000Japan
250,000

South Korea
Japan

100,000
200,000
80,000150,000
60,000100,000

40,00050,00020,00000
19971998199920002001200220032004200520062007200820092010201120122013201420152016

19971998199920002001200220032004200520062007200820092010201120122013201420152016

Source: The Shipbuildersʼ Association of Japan Orders received showed an uneven increase overtime, with a spike in 2006 to 2007, justbefore the 2008 financial crisis, but decreased significantly due to the downturn in themarine cargo market in 2016
 Volume of work in hand showed recovery following a major slump after the 2008 financial
crisis, but is decreasing at present, showing the same trend as the volume of orders received

3DAIHATSU DIESEL MFG. CO., LTD.

Market Trend for Marine Cargo
Global ocean cargo volumes, by product

Global shipping capacity
600,000

12,000

OtherPetroleum products
10,000500,000

Crude oilTankers

Containers
8,000

400,000

Grain

Bulk carriers
Other (cargoCoal
6,000

300,000

vessels, etc.)

Iron ore

4,000

200,000

2,000

100,000

001996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

(Estimate)

Source: The Shipbuilders’ Association of Japan

Increasing trend in shipping capacity in line with increase in ocean cargo volume→ stable increase in maintenance demand expected

4DAIHATSU DIESELDIESEL MFG.
MFG. CO.,CO., LTD.
LTD.
DAIHATSU

Trends for Ocean Freight Rates and Ship Prices*(Unit: $/day)

Ocean freight rates (tanker)

75,000

VLCC(Unit: Million dollars)

Ship prices (tanker)

125

Suezmax

100

Aframax

50,000

Average prices from January to August 2017

VLCC
Suezmax
Aframax

75
50

25,00025002014(Unit: $/day)

2015

2016

Ocean freight rates (bulk carrier)Capesize

30,000

2014

2017

2015

2016

Ship prices (bulk carrier)(Unit: Million dollars)

Capesize75

Panamax

Panamax
20,00010,00025002015

2016

Handymax

50

Handymax2014

2017

2014

2017

2015

2016

2017

Source: The Shipbuilders’ Association of Japan

5DAIHATSUDAIHATSU DIESELDIESEL MFG.
MFG. CO.,CO., LTD.
LTD.

Trend for BDI（Baltic Dry Index)
Baltic Dry Index (January 2012 to March 2017)*Index base 1985 = 1,000

 The BDI, which is a global
indicator of ocean freightrates, has recovered to close
to 1,000 points, thereference level at 1985

Source: Japan Maritime Center

6

DAIHATSU DIESELDIESEL MFG.
MFG. CO.,CO., LTD.
LTD.
DAIHATSU

Remarks on Earnings

Stable capture of earnings overlife-cycle (30 years)▶Post-voyage maintenance services are key.

POINT

▶Cumulative total of engine units (number ofships carrying our engines) is decisive.
Sales by Horsepower(10,000 hp)
200
150

Level of sales
increased remarkably
153
128

100
500

154
123

108
78

79

77

125

146

142
121

145
109

81March March March March March March March March March March March March March March March
2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

*Does not include technological partners in China

7DAIHATSU DIESEL MFG. CO., LTD.

Strengthening Business in the After-sales-service
Market/Overseas Strategy (Licensing)10 years ago Sales approx. ¥15.0 billion

Holding the line Business focus was selling engines
to builders of new vessels.
 Sales for the after-sales-service did
not really exist.

Issuesfor thefuture

Now

Major
increase

Sales approx. ¥26.0 billion

Shifting to the offensive
 Creation of sales teams specializing inparts
 Launch of strategic sales targeting shipowners and ship-managers in the aftersales-service market

Genuine parts usage ratio is approx. 50%.
Scope exists for increasing this rate.

▶ Gradually expand sales to mid-sized ship-owners as well.

Licensing (in China)

Anqing CSSC Diesel Engine Co., Ltd.

Anqing Diesel

 Contract partner since 1982

Anhui Province, China(Yangtze River Basin, 600 km from Shanghai) Granting of rights for Manufacture
and marketing of certain classes ofinternal combustion engine

SHAANXI DIESEL ENGINE HEAVY
INDUSTRY CO., LTD.

Shaanxi Diesel

 Expand market share of DAIHATSU
brand

Shaanxi Province, China(50 km from Xiʼan)

8

DAIHATSU DIESEL MFG. CO., LTD.

Recent Major Initiatives in Line withMid-term Management Plan

DAIHATSU
MFG.CO.,
CO.,LTD.
LTD.
DAIHATSU DIESELDIESEL MFG.

10

DAIHATSUDAIHATSU DIESELDIESEL MFG.
MFG. CO.,CO., LTD.
LTD.

Shipping ceremony (October 11)

Crisis Management and Disaster Prevention
Center gas turbine power generation facility

11

DAIHATSUDAIHATSU DIESELDIESEL MFG.
MFG. CO.,CO., LTD.
LTD.

最新に更新(Image of completed factory)

12

DAIHATSUDAIHATSU DIESELDIESEL MFG.
MFG. CO.,CO., LTD.
LTD.

First Half of the Fiscal Year Ending March 31,2018

Summary of Earnings

DAIHATSU DIESEL MFG. CO., LTD.

Summary(Unit: Million yen)

September
2015
Results

September2016
Results

September
2017
Results

Net sales

26,44728,13929,557

Operatingincome

1,884

1,097

Ordinary
income1,833

Net
incomeYoY difference

March 2018(%)

Forecast*

Progress
(%)

1,417

5.0%

60,000

49.3%

1,454

356

32.4%

3,500

41.5％

997

1,540

542

54.4%

3,500

44.0％

1,227

706

1,069

362

51.2%

2,400

44.5％

Basic
earnings
per share

38.55

22.20

33.58

11.38

51.2％

75.35

44.5％

Total
assets71,93475,65278,339

2,686

3.6％

－－

Equity
ratio

45.1%

45.3%

47.3%

2.0％

－－－

Increase/decrease*revised on October 16, 2017POINT

 Sales expanded due to increased ship size and increased sales ofland-use engines
 Stagnant maintenance-related sales
 Yen depreciation had a significant effect on sales and earnings
14

DAIHATSU DIESEL MFG. CO., LTD.

Trend of Sales and Earnings(Unit: Million yen)

Operating income

7,000

6,000

Ordinary income

Net income

Net sales

62,30457,56657,01958,93460,000(Unit: Million yen)

65,00060,00055,000

5,493

5,000

5,438

4,973

4,000

4,929

50,000

4,736
4,689

45,0003,500 3,5003,596

3,000

40,000

3,498
3,441

3,004

2,400

2,744

2,000

35,0002,319

30,000
1,540
1,454

1,000

1,069

0

25,00020,000

14/3

15/3

16/3

15

17/3

18/3 (Est.)

DAIHATSU DIESEL MFG. CO., LTD.

Analysis of Increase/Decrease in Earnings
Sales

Expenses(Unit: Million yen)

Operating income for the current term: ¥1,454 million

Operating income for previous term: ¥1,097 million

Other＋236

YoY change+357
Maintenancerelated(243)Foreign exchange
difference*１+300

Cost
reduction,etc.
+32
Manufacturing
fixed costs(14)

Engine-related(680)

Valuation reservefor inventory*2+748

Other(22)*1 Exchange rate: ¥104.35 for the previous term; ¥110.65 for the current term
*2 Valuation reserves, etc. for the inventory, associated with foreign exchange fluctuations

16

DAIHATSU DIESELDIESEL MFG.
MFG. CO.,CO., LTD.
LTD.
DAIHATSUNet Sales and Earnings for the Internal
Combustion Engine Section
Net sales(Unit: Million yen)

35,00030,000Marine-use (Japan)
Land-use (Japan)

25,312280

25,0002,580Internal combustion engine section earnings
Marine-use (Overseas)
Land-use (Overseas)

26,427294

2,127(Unit: Million yen)

3,500

27,743

3,000

387
3,459

3,114
2,636

2,500

2,113

2,000

20,00013,48415,00014,127

13,903

1,500
1,000

10,000
5,000

8,968

9,878

500

9,994

00
1H FY2016

POINT

1H FY2017

1H FY2016

1H FY2018

1H FY2017

1H FY2018



Proportion of larger diesel engines for marine-use increased, but total units sold decreasedProfitability picture remains bleak for sales of diesel engine units

Maintenance-related sales are stagnantYen depreciation had a significant effect on sales and earnings

17DAIHATSU DIESEL MFG. CO., LTD.

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

500
450
400
350300

Maintenance-related net sales

Marine-use (Japan)

Marine-use (Overseas)

Land-use (Japan)

Land-use (Overseas)

446

417

135
136

250

14,00012,0001625(Unit: Million yen)351

10,000

110

8,000

18100

11,51011,165

1H FY2017

1H FY2018

6,000

200
150

12,442

4,000

295

256

221

2,000

5000
1H FY2016

POINT

1H FY2017

1H FY2018

1H FY2016

 Total units sold decreased owing to deferral of delivery dates Decreased maintenance-related sales due to sluggish market
environment
18

DAIHATSU DIESEL MFG. CO., LTD.

Earnings Forecasts(Unit: Million yen)March 2018

March 2017
Results

Forecast (revisedon October 16)

Increase/decrease(%)

Net sales

58,93460,000＋1.8

Operatingincome

3,498

3,500＋0.1

Ordinary income

3,441

3,500＋1.7

Net income

2,319

2,400＋3.5

Basic earnings
per share

72.87

75.35

＋3.5

*Exchange rates: March 2017 (Results)￥108.35, March 2018 (Estimate)￥110.00

Forecast

Proportion of larger diesel engines for marine-use to increase, but total unit sales to decrease

Profitability deteriorating for main engine units

Stagnant maintenance-related salesYen depreciation to have a significant effect on sales and earnings

19

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.