DAIHATSU DIESEL MFG. CO., LTD.

Fiscal Year Ended March 31, 2016

Financial Results Briefing
May 2016

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: YANMAR
Overseas: MAN Diesel (Denmark), YANMAR (Japan), HIMSEN (South Korea), Wartsila (Finland)

3

DAIHATSU DIESEL MFG. CO., LTD.

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

Volume of work in hand, by country

180,000

400,000

Other countries total

160,000

350,000

European countries total

140,000

China

120,000

South Korea

100,000

Japan

Other countries total
European countries total

300,000

China

250,000

South Korea

200,000

Japan

80,000150,000

60,000100,000

40,00050,00020,00000
19961997199819992000200120022003200420052006200720082009201020112012201320142015

19961997199819992000200120022003200420052006200720082009201020112012201320142015

Source: The Shipbuilders Association of Japan

Global ocean cargo volumes, by product12,00010,000

OtherOrders received show an uneven increase overtime, with a spike in 2006 to 2007, just before the2008 financial crisis

Petroleum products
Crude oilContainers

8,000

6,000

Grain
Coal
Iron ore

Volume of work in hand continues to show
recovery, following a major slump after the 2008
financial crisis

4,000

2,000

Ocean cargo volumes show steady rise over time019961997199819992000200120022003200420052006200720082009201020112012201320142015
Est.

4DAIHATSU DIESEL MFG. CO., LTD.

Acting Promptly on Environmental Initiatives
Impact of toughened environmental rules: Exhaust gas regulation
20

Primary regulation

NOx regulation values (g/kWh)18(2000)

16
14

Secondary
regulation

1210(2011)

86

Tertiary
regulation

42(2016)

00200

400

600

800

1000

1200

1400

1600

1800

2000

2200

Approx. 20% cut
comparedwith primary
regulation
Approx. 80% cut
compared withprimary
regulation

Source: Ministry of Land, Infrastructure, Transport and Tourism

Engine rotation speed (rpm)Launch of tertiary regulation in 2016
NOx volumes will have to fall 80% versus primary regulation
Our engine combined with the selective catalytic reduction (SCR*) system has alreadyWorld first: won formal approval from 8 major ship classification societies around the world, ahead of rival
companies*SCR: Emissions control technology system that neutralizes NOx in exhaust gas through a special catalyst

5DAIHATSU 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 statePOINT

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.

6DAIHATSU DIESEL MFG. CO., LTD.

Sales by Horsepower(10,000 hp)

180
160
153

140

146

142

120

128

100

123

125

121
109

108

80
60

154

82

78

79

77

81

65

40
200March March March March March March March March March March March March March March March March
200120022003200420052006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

*Does not include technological partners in China

7DAIHATSU DIESEL MFG. CO., LTD.

Strengthening Business in the After-sales-service Market

10 years ago

Holding the line

Sales

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

Now

Shifting 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.

¥23.0 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.

8

DAIHATSU 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

9DAIHATSU DIESEL MFG. CO., LTD.

Fiscal Year Ended March 31, 2016
Summary of Earnings

DAIHATSU DIESEL MFG. CO., LTD.

Summary(Unit: Million yen)March 2014
Results

March 2015
Results

March 2016
Results

YoY difference
Increase/decrease(%)

Net sales

57,56662,30457,019(5,285)(8.5)%

Operatingincome

4,973

4,689

5,493

804

17.1%

Ordinary income

4,929

4,736

5,438

701

14.8%

Net income

2,744

3,004

3,596

578

19.7%

Basic earnings
per share

86.22

94.37112.98

18.61

16.5%

Total assets

73,65772,07175,060

2,988

4.0%

Equity ratio

39.1%

43.8%

45.6%

1.8%

POINT

-Sales reduction due to decreased ship size
Solid earnings due to weaker yen, strong performance by maintenance operations
Reserve to cover costs of delays to deliveries for overseas offshore projects

11

DAIHATSU DIESEL MFG. CO., LTD.

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

7,000

6,000

Ordinary income

Net income

Net sales

62,30457,72857,56657,01954,52860,00050,0004,000

45,0005,493

3,0001,000

65,00055,000

5,000

2,000

(Unit: Million yen)

5,438
4,973
4,929

4,680
4,600

2,387

35,000

4,736
4,689
3,596

2,826
2,780
2,271

2,744

40,00030,0003,004

25,0000

20,000
12/3

13/3

14/3

12

15/3

16/3
DAIHATSU DIESEL MFG. CO., LTD.

Analysis of Increase/Decrease in Earnings
Sales
Foreign exchange
Other
difference*1+33+718

Expenses
Valuation reservefor inventory*2(843)(Unit: Million yen)

Loss onoperational
capacity
Research(210)expenses(489)

Maintenancerelated+1,706

Operating income
for the current term: ¥5,493 million

Shortfall incostreduction(293)

Other＋226

Enginerelated(44)Operating income
for the previous term: ¥4,689 million

YoY change+804*1 Exchange rate: ¥107.42 for the previous term; ¥119.41 for the current term
*2 Valuation reserve for inventory in connection with costs of delays to deliveries for overseas offshore projects

13

DAIHATSU DIESEL MFG. CO., LTD.

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

70,00060,000Marine-use (Japan)
Land-use (Japan)

55,17150,000620

Internal combustion engine section earnings
Marine-use (Overseas)
Land-use (Overseas)

60,046
610

7,132

8,814

(Unit: Million yen)

9,000

54,605

7,500

571

7,123

7,046

FY2014FY2015

9,904
6,000

40,00030,0007,995

28,37534,84425,8584,500

20,0003,000
10,00017,361

17,45918,2711,500

0FY2014POINT

FY2015FY2016FY2016

Profitability picture remains bleak for sales of diesel engine units
Net sales decline due to rise in sales proportion of smaller diesel engines formarine-use
Maintenance-related sales are favorable
Reduced earnings due to reserve for delayed deliveries for overseas offshore
projects

14

DAIHATSU DIESEL MFG. CO., LTD.

Unit Sales and Maintenance-related Net Sales
Maintenance-related net sales

Units sold(Unit: Units)

1,250

Marine-use (Japan)

Marine-use (Overseas)

Land-use (Japan)

Land-use (Overseas)

1,000

775

1,000
177

89

30,000

889
0250

452

20,000379
250

15,000543532FY2015FY2016

10,0000FY2014

POINT

23,923
21,664232

500

26,46925,0001072750(Unit: Million yen)

5,000
FY2014FY2015FY2016

Total units sold down year-on-year
Increased earnings on back of weaker yen and solid maintenance-related sales

15DAIHATSU DIESEL MFG. CO., LTD.

Earnings Forecasts(Unit: Million yen)March 2017
March 2016
Results

Forecast

Increase/decrease(%)

Net sales

57,01963,000+10.5

Operating income

5,493

5,000(9.0)

Ordinary income

5,438

5,000(8.1)

Net income

3,596

3,500(2.7)

Basic earnings pershare

112.98109.89(2.7)*Exchange rates: March 2016 (Results) ¥119.41, March 2017 (Estimate) ¥110.00

Forecast

Sales increase from higher sales composition of marine-use large-scalediesel engines
Profitability picture to remain bleak for main engine units
Maintenance-related sales and earnings to be flat

16DAIHATSU 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.