Investment and BS Structure Masahiko Mori ,Dr.Eng

Machine Tool Manufacture

－ Investment and BS Structure －

Masahiko Mori ,Dr.Eng.

September 12, 2012

September 12th, 2012 TRAM 2012 at IMTS 1/17

－ Contents －

1. Mid-Long Term Growth Potential2. Industrial Structure3. Investment & BS Structure by Business Design4. Cash Management in the Manufacturing Industry5. Features in the Machine Tool Industry6. Mori Seiki Case

－ Summary & Conclusion －

September 12th, 2012 2/17TRAM 2012 at IMTS

Macro Economy : GDP

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

World China Japan US$ billion

Source : IMF

Left: Japan % to World GDP

Left: China % to World GDP

Right: World GDP


GDP by Country & Machine Tool Consumption

0.32

0.55

0.88

0.56

0.96 0.98

-0.10.20.30.40.50.60.70.80.91.0

Japan N. America S. America Europe Asia China

Correlation : GDP & machine tools consumption・ Higher correlation in emerging markets・ Supportable in Americas and Europe･ Limited in Japan

Source: IMF, GARDNER

Americas

Europe

Asia

China

0

5,000

10,000

15,000

20,000

25,000

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

BillUSD


Machine Tool Consumption

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

USD Mill

Source : GARDNER


Machine Tool Consumption by Country

China

22.6%

USA

12.8%

Germany

12.1%Japan

10.8%

Italy

6.8%S. Korea

5.9%

Taiwan

3.6%

France

3.0%

Brazil

2.4%

Canada

2.3%

U.K. 2.0%

India 1.8%

Switzerland

1.8%

Spain

1.7%

Turkey

1.3%

Others

9.1%

China

45.1%

Japan

8.9%

Germany

8.2%

USA

7.8%

S. Korea

6.0%

Italy

3.5%

India

2.8%

Brazil 2.3%

Taiwan 2.1%

Mexico 1.6%

Russia 1.5%

Turkey 1.5%

Switzerland

1.5%

France

1.4% Canada 1.3%

Others 4.5%

CY1991-CY2010 CY2011

Cumulative: US$846 billion CY2011: US$85 billionSource : GARDNER


Machine Tool Production by Country

Japan

25.3%

Germany

18.3%

China

13.6%USA

7.7%

Italy

7.3%

Switzerland

5.6%

Taiwan 5.4%

S. Korea 4.6%

U.K. 1.9%

Spain 1.8%

France 1.6%Brazil 1.5%

Canada 0.9% Czech

0.9% Austria 0.8%

Others 2.9%

Cumulative: US$689 billion

CY1991-CY2010

Source : GARDNER

China

28.4%

Japan

24.3%Germany

14.8%

Taiwan

5.9%

S. Korea

5.8%

Italy

4.5%

USA

4.5%

Switzerland

4.3%

Brazil

1.1%

Spain

1.0%

France

0.8%

Austria

0.8%

India

0.7%

U.K.

0.7% Canada

0.6%

Others

1.7%

CY2011: US$67 billion

CY2011


Pattern of BS by Company (1)

Cash rich, Little loan, High Equity Well managed inventory & Tangible

Payable 1% Cash 10% Payble 7%

Loans 6% Receivable 20%

Cash 61% Others 13% Loans 38%

Inventory 11%

Tangible 20%

Net Others 30%

Receivable 7% Worth 80% Others 39%

Tangible 13%

Others 18% Net

Worth 26%

(Ended Dec. 2011) (Ended Dec. 2011)

Total: 72,574 Mil USD Total: 309,116 Mil USD

IT Industry

Google

Auto Industry

VW


Pattern of BS by Company (2)

Cash 12% Payable 18% Cash 14% Payable 11%

Receivable 23% Receivable 8% Loans 15%

Loans 23% Inventory 40% Others 70%

Inventory 15%

Others 13%

Tangible 21%

Net Tangible 12%

Others 29% Worth 45% Others 26%

Net Worth 5%

Total: 29,501 Mil USD Total: 79,986 Mil USD

(Exchange Rate : 80/1US$)

(Ended Dec. 2011)(Ended March 2012)

Boing

JMTBA (Conbined 37 Companies) Heavy Industry

Well balanced B/S (Little longer Rec.) Long lead-time to cause large Inventory


B/S structure by company


Asset structure by business design


Cash cycle in the manufacturing industry=


JIMTBA Historical Financial Statement

Sales

Net Profit

Net Worth

Unit: Billion JPY

・Deep cyclical sales・Net profit and loss repeated・Net Worth Ratio remained at 40-50%

September 12th, 2012 13/17

-150

-100

-50

0

50

100

150

FY1990 FY1995 FY2000 FY2005 FY2010

TRAM 2012 at IMTS

All parties doing well !!

Mori Seiki : Continuing Aggressive Investment

PayableReceivable Y10.9bn

Y24.3bnSapre Parts Quick Maintenance Debt with Interest

Inventory Y60.7bnY43.1bn

Iga New Planｔ Efficient Production Tangible Asset OthersUSA New Planｔ Close to Customers Y56.7bn（China New Plant) Close to CustomersMagne Scale Pricision Technology Net Worth

Y 100 bn

Gildemeister Strong Sales Network Stock InvestmentFull Line Products Y36.4bn

MG Finance Financial SupportOthers

Meeting withCustomer’s

Requirement

Creating Customer'sBusiness Value

Net Worth Target60%～70%

Aggressive Investment


Strong R&D, Vertical Integration System

MAPPS

Scale

Features of Mori Seiki R&D Vertical Integration SystemSpindle

Direct drive motorScale

Ball Screw

Cuppling


Summary & Conclusion

# A shorter cash management cycle is preferable

# But, the cash cycle differs by industry and business design・IT industry; very short ⇒ cash rich and high equity ratio・Auto industry; middle ⇒ well managed inventory, debt and equity・Traditional & Heavy industry; long ⇒ tend to increase in inventory

＃Features of the machine tool industry ;・Very volatile demand （deep cyclical)・Long life cycle and long maintenance service requirement・As a result, desirable in the higher equity ratio

# Mori Seiki ; ・Aggressive investment to strengthen customer satisfaction・Aggressive investment to adopt to changes in the market・Necessity capital investment to enrich the quality of B/S


End

Thank you very muchfor your kind attention


Documents

Investment and BS Structure Masahiko Mori ,Dr.Eng