DAIHATSU DIESEL MFG. CO., LTD. First Half of the Fiscal ... · 2 DAIHATSU DIESEL MFG. CO., LTD. Sales Breakdown/Market Share Internal combustion engines 94％ Marine-use 89％ Auxiliary

First Half of the Fiscal Year Ending March 31, 2019

Financial Results Briefing

DAIHATSU DIESEL MFG. CO., LTD.

November 2018

DAIHATSU DIESEL MFG. CO., LTD.2

Sales Breakdown/Market Share

Internal combustion engines 94％

Marine-use 89％

Auxiliary powergenerators approx.80％

Other 6％

Land-use 11％

Mainpropulsion systems approx.20％

Business

Section

Application

Sales Breakdown

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

DAIHATSUDIESEL

23%

DAIHATSUDIESEL

47%

〈Share in Japan〉〈Overseas market share〉


Market Trends for Newbuild Vessels

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

Other countries total

European countries total

China

South Korea

Japan

Volume of orders received, by country

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

Other countries total

European countries total

China

South Korea

Japan

Volume of work in hand, by country

Orders received showed an uneven increase overall, with a spike in 2006 to 2007 just before the 2008 financial crisis. The marine cargo market is now on a recovery trend despite the downturn in the marine cargo market in 2016Volume of work in hand showed recovery following a major slump after the 2008 financial crisis, but is decreasing at present

Source: The Shipbuilders’ Association of Japan

2016 2017 2018（Jan-June)

Japan 　２，５２０（１３％）　２，８３０（　７％）　５，８２０（２２％）

Korea 　５，７８０（３１％）１８，５００（４３％）１０，９１０（４１％）

China 　６，５５０（３５％）１５，２００（３５％）　７，８９０（２９％）

World total １８，８００　　　　４３，２００　　　　２６，８２０　　　　

2017 2018（Jan)

Japan 　３４,９００（２３％）　２８,２００（２０％）

Korea 　３５,４００（２３％）　３８,０００（２７％）

China 　６１,３００（４１％）　５６,２００（４０％）

World total １５１,１００　　　１４０,３００

(Unit: Thousand tons)

(Unit: Thousand tons)


0

2,000

4,000

6,000

8,000

10,000

12,000

Other

Petroleum products

Crude oil

Containers

Grain

Coal

Iron ore

Global shipping capacity

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1996199719981999200020012002200320042005200620072008200920102011201220132014201520162017

Bulk carriers

Tankers

Other（cargo vessels, etc.）

Global ocean cargo volumes, by product

The average increase rate of + 3.6% / year

Compared to 2000

112% increase

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

(Estimate) Source: The Shipbuilders’ Association of Japan

Market Trend for Marine Cargo

(Unit: Million tons) (Unit: Thousand tons)


POINT

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.

*Does not include technological partners in China

Remarks on Earnings

March

2003

March

2004

March

2005

March

2006

March

2007

March

2008

March

2009

March

2010

March

2011

March

2012

March

2013

March

2014

March

2015

March

2016

March

2017

March

2018


Strengthening Business in the After-sales-service Market/Overseas Strategy (Licensing)

Holding the line

10 years ago

Shifting to the offensiveNow

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

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

Issues for the future

Sales approx. ¥15.0 billion Sales approx. ¥26.0 billion

Major increase

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

▶ Strategic deployment of CMAXS system.

Anqing CSSC Diesel Engine Co., Ltd.

Anqing DieselAnhui Province, China

(Yangtze River Basin, 600 km from Shanghai)

Licensing (in China)Contract partner since 1982

Granting of rights for Manufacture and marketing of certain classes of internal combustion engine

Expand market share of DAIHATSU brand

SHAANXI DIESEL ENGINE HEAVY INDUSTRY CO., LTD.Shaanxi Diesel

Shaanxi Province, China(50 km from Xi’an)


Recent Major Initiatives in Line with Mid-term Management Plan



Business EnvironmentTighter environmental regulations: Exhaust gas regulations (NOx, SOx, CO2, etc.), and diversification of fuels

・ The Baltic Sea, the North Sea, 200 nautical miles offshore USA and Canada, and USA Caribbean Sea area: 0.1％

・ Other marine areas: 0.5%

SOx regulations* (2020-) * Regulations on sulfur concentration in fuel oil under MARPOL Annex VI

2016 2017 2018 2019 2020 2021 2022 2023

Emissions standard: (80)％

Emissions standard: (80)％

NOx Tier III regulations: North America /Caribbean Sea

NOx Tier III regulations: North Sea /Baltic Sea

Operating data reporting systemCO2: Europe

Operating data reporting systemCO2: IMO

Fuel economy standard: (20)％CO2: EEDI regulations

Sulfur in fuel oil 0.1％SOx: Baltic Sea /North Sea /offshore USA and Canada /Caribbean Sea

Sulfur in fuel oil 0.5％SOx: Other marine areas currently 3.5% ->

Examples of exhaust gas regulations for vessels・NOx: Nitrogen oxide・SOx: Sulfur oxide

ＳＣＲ（a selective catalytic reduction device）

dual fuel engines


Larger engines: Aggressive capital investment by domestic shipyards, energy conservation

Utilization of IoT: Supporting autonomous ship operation and seafarer shortage

Maxim

um loading

quantity of container vessels

Business Environment

5,000

10,000

15,000

20,000

25,000

2003 2006 2012 2013 2015 2016 2017

（Twenty-foot Equivalent Unit (TEU): capacity of container ships）

38,425

10,0843,008 2,256

63,208 56,100

30,70828,060

1980 1990 2004 2010

Foreign-goingDomesticN

um

ber o

f se

afa

rers in

Ja

pan

(Unit: person)

10

Update on Recent Major Progress (1) (New Himeji Factory)

Efficient assembly linesTransport using wheeliftProduction information monitor* Status of production (plan vs. result)* Status of production lines are indicated

Andon (electric light board)

Improved efficiency of manufacturing and shipping operations

*Finished products will be shipped from the adjacent public berth

In-house logistics and visual aids such as andon (electric light board) and abnormality display device, etc.

Introduce lead-time shortening methods

11

Update on Recent Major Progress (1) (New Himeji Factory)

Completion Ceremony First Shipment Ceremony

Many guests and relevant parties attended the Completion Ceremony, including the Ministry of Land, Infrastructure, Transport and Tourism and the mayor of Himeji CityMany relevant parties, including shipbuilding companies, attended the First Engine Shipment Ceremony

A new straight and flat styled cutting-edge factory manufacturing high quality engines set sail as a “next-generation factory that meets market needs and leads to a prosperous future”Aim to manufacture 20 to 30 units in the first fiscal year, centered on large-scale engines, and up to 200 to 250 units annually in the future

12

Develop sales promotion of environmentally-conscious dual fuel engines that enable optimum selection of fuels according to the operating status of vessels

Cylinder pressure sensor

Diesel fuel injection valve (water-cooling

nozzle)

Pilot fuel injection valveMechanism of a dual fuel

engine

Within restricted area:

operate with gas

Outside restricted area:

operate with liquid fuel

(Use examples)

Update on Recent Major Progress (2) (Environment-related Products)

13

Dual fuel gas turbine that uses both liquid fuel and city gas as fuel

Gas turbine power generation facility forCrisis Management and Disaster Prevention Center

First dual fuel engine for JAXA(continuous/emergency power generation)


14

Tier III standards require an 80% reduction in the emission rate of NOx in exhaust gas emissions compared with Tier I standards

It can generate a highly pure urea solution that serves as an SCR reductant

Onboard trial on Hanoi Bridge ofKawasaki Kisen Kaisha, Ltd.


Aqueous urea solution generator


Update on Recent Major Progress (4) (Peripheral Business Domains)


First Half of the Fiscal Year Ending March 31,2019Summary of Earnings


POINT

Summary(Unit: Million yen)

September2016

Results

September2017

Results

September 2018

Results

YoY difference March 2019

Increase/decrease

(%) Forecast* Progress

(%)

Net sales 28,139 29,557 26,729 (2,827) (9.6)% 57,000 46.9%

Operating income 1,097 1,454 625 (828) (57.0)% 3,000 20.9％

Ordinaryincome 997 1,540 752 (788) (51.2)% 3,000 25.1％

Netincome 706 1,069 483 (585) (54.8)% 2,000 24.2％

Basic earnings per share

22.20 33.58 15.18 (18.40) (54.8)% 62.79 24.2％

Total assets 75,652 78,339 79,578 1,238 1.6％－－

Equity ratio 45.3% 47.3% 47.8％ 0.5％－－－

Despite increased sales of engines, sales decreased due to smaller size of engines soldContinued profitability deterioration for engines had an impact on earningsMaintenance-related sales showed signs of recovery


Trend of Sales and Earnings

4,689

5,493

3,498

3,044

3,000

4,736

5,438

3,441 3,104

3,000

3,004

3,596

2,319 2,095

2,000

62,304

57,019

58,934 60,166

57,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

55,000

60,000

65,000

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

15/3 16/3 17/3 18/3 19/3

Operating income Ordinary income Net income Net sales

(Est.)

(Unit: Million yen) (Unit: Million yen)

625 752483


YoY change

- 829

Maintenance-related+280

Engine-related(265)

Other(32)

Valuation reservefor inventory

(217) Costreduction,

etc.(226)

Manufacturingfixed costs

+137

Other(257)

Foreignexchange

difference*１

(39)

SG&A(210)

Analysis of Increase/Decrease in EarningsSales Expenses

(Unit: Million yen)

*1 Exchange rate: ¥110.65 for the previous term; ¥109.40 for the current term

Operating income for previous term: ¥1,454 million

Operating income for the current term: ¥625 million


Net sales Internal combustion engine section earnings

POINT

Net Sales and Earnings for the Internal Combustion Engine Section

(Unit: Million yen)(Unit: Million yen)

9,878 9,994 10,255

14,127 13,903 12,131

2,127 3,459 2,059

294 387

683

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

1H FY2017 1H FY2018 1H FY2019

Marine-use (Japan) Marine-use (Over seas)Land-use (Japan) Land-use (Over seas)

27,74326,427 25,1292,113

2,636

1,725

0

500

1,000

1,500

2,000

2,500

3,000

1H FY2017 1H FY2018 1H FY2019

Sales decreased due to lower proportion of larger engines for marine-use

Profitability deterioration for sales of diesel engine units continued

Maintenance-related sales showed signs of recovery


POINT

Units sold Maintenance-related net sales

Unit Sales and Maintenance-related Net Sales

(Unit: Units) (Unit: Million yen)

295

221245

135

110

141

16

18

5

0

50

100

150

200

250

300

350

400

450

500

1H FY2017 1H FY2018 1H FY2019

Marine-use (Japan) Marine-use (Over seas)

Land-use (Japan) Land-use (Overseas)

446

351

392 11,510 11,165 11,838

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

1H FY2017 1H FY2018 1H FY2019

Total units sold increased

Maintenance-related sales showed signs of improvement


Unit sales of diesel engines for marine-use to increase, but higher proportion of smaller engines to cause sales to decrease

Profitability deterioration for main engine units to continue

Maintenance-related sales estimated to increase slightly

Forecast

Earnings Forecasts

*Exchange rates: March 2018 (Results): ¥110.53, March 2019 (Estimate): ¥105.00

(Unit: Million yen)

March 2018Results

March 2019

Forecast (revised on October 18)

Increase/decrease(%)

Net sales 60,166 57,000 (5.3)

Operating income 3,044 3,000 (1.5)

Ordinary income 3,104 3,000 (3.4)

Net income 2,095 2,000 (4.6)

Basic earnings per share 65.83 62.79 (4.6)

Daihatsu Diesel Mfg. Co., Ltd.

These materials contain statements relating to future earnings and business strategy, 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 undertaken by the Company, and no guarantee is offered regarding the accuracy or appropriateness of such information.

The information contained in these materials is intended only for purposes of provision of information, and not for solicitation to purchase securities.

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DAIHATSU DIESEL MFG. CO., LTD. First Half of the Fiscal ... · 2 DAIHATSU DIESEL MFG. CO., LTD. Sales Breakdown/Market Share Internal combustion engines 94％ Marine-use 89％ Auxiliary