financial results for fy2017 financial summary...financial results for fy2017 financial summary...

Financial results for FY2017

Financial Summary

February 23, 2018

NIKKISO CO., LTD.

Securities code: 6376

Disclaimer

This material contains forward-looking statements about future business performance. These statements by definition involve risks and uncertainties and are not intended to guarantee future performance. Actual results in the future may differ from the

estimates presented in the material herein due to changes in the business environment and other factors.

Copyright © 2018 NIKKISO CO., LTD. All rights reserved.

Application of International Financial Reporting Standard (IFRS)

2

The business operations of the Group are expanding into the global market. Meanwhile, the Company started adopting IFRS instead of Japanese accounting standards, JGAAP, in this consolidated financial year (from January 1, 2017 to December 31, 2017) in order to improve the international comparability of financial information in capital markets as well as the accuracy of business management by integrating the financial report standards of the Group.

The transfer to IFRS was implemented in January 1, 2016. The figures for the previous consolidated financial period (from January 1, 2016 to December 31, 2016) were also indicated in accordance with IFRS.

Copyright © 2018 NIKKISO CO., LTD. All rights reserved. 3


Consolidated Performance

Millions of JPY

FY2016January 2016 -December 2016

- IFRS -

Performanceforecast

Announced in November 14, 2017

- IFRS -


- IFRS -

YoY comparisonComparison with forecast

Change Change rate Change rate

Orders 129,209 142,000 140,412 + 11,202 + 8.7% - 1.1%

Net sales 130,045 140,000 140,912 + 10,867 + 8.4% + 0.7%

Operating income 8,117 6,800 8,718 + 600 + 7.4% + 28.2%

Ratio to net sales 6.2% 4.9% 6.2%

Profit before tax 6,801 - 8,310 + 1,508 + 22.2% -

Ratio to net sales 5.2% 5.9%

Net incomeattributable to owners of parent

4,883 5,300 5,182 + 299 + 6.1% - 2.2%

Ratio to net sales 3.8% 3.8% 3.7%

Average foreign exchange rateAgainst the US dollar (Yen) 108.78 112.00 112.16 + 3.38 - -

Against the euro (Yen) 120.26 132.00 126.70 + 6.44 - -



Breakdown of Profit/Loss


- IFRS -


- IFRS -Change Remarks

Gross profit 44,855 48,608 + 3,753

- Selling, general and administrative expenses

- 37,374 - 42,218 - 4,843

- Other income 939 2,554 + 1,615Proceeds from sales of NIKKISO No. 2 building, receipt of fire insurance proceeds, influence from the shift to the defined contribution pension plan

- Other expenses - 302 - 227 + 74

Operating income 8,117 8,718 + 600

- Finance income 412 493 + 81

- Finance costs - 1,903 - 1,112 + 790 Decrease in foreign exchange loss due to depreciation of yen

- Profit and loss from investment accounted for using equity method

174 210 + 36

Profit before tax 6,801 8,310 + 1,508

Exchange rate for the conversion of the performance of overseas subsidiaries

- Against the US dollar (Yen) 108.78 112.16 + 3.38

- Against the euro (Yen) 120.26 126.70 + 6.44

Millions of JPY



Performance by Business Segment


- IFRS -

Performance forecast

Announced in November 14, 2017

- IFRS -


- IFRS -

YoY comparison

Comparison with

forecast

ChangeChange

rateChange

rate

Industrial Business

Orders 75,183 87,000 85,406 + 10,222 + 13.6% - 1.8%

Net sales 75,593 86,000 85,228 + 9,634 + 12.7% - 0.9%

Operating income of segment 5,932 - 7,539 + 1,607 + 27.1% -


Medical Business

Orders 54,025 55,000 55,005 + 980 + 1.8% + 0.0%

Net sales 54,451 54,000 55,684 + 1,233 + 2.3% + 3.1%

Operating income of segment 5,209 - 3,950 - 1,259 - 24.2% -


Corporate expenses, etc.

Operating income of segment - 3,024 - - 2,771 + 252 - -

Millions of JPY


45%

8%

12%

7%

4%

6%

8%

9%

6


Industrial and Precision Equipment Division

FY2017


- IFRS -


- IFRS -

YoY comparison

Change Change rate

Orders 59,694 69,559(10,731)

+ 9,864 + 16.5%

Net sales 59,893 69,559(9,843)

+ 9,665 + 16.1%

1. Overview

2. Consolidated performance 3. Net Sales Composition ratio by Product

✓ While there are few upstream projects, LEWA has been focusing on the expansion of downstream projects and after-sales service business. Through the continuous reduction of expenses, profitability is maintained and business performance is somewhat improving.

✓ The cryogenics pump business has been receiving many inquiries. Costs for the quality-related issues were allocated. However, the technical issue has almost been resolved. The measures to reinforce the quality control system are underway.

✓ The business of Cryogenic Industries Group (“CI Group”) has been sluggish due to the stagnant LNG market. The global development system shall be arranged with the expansion of business domains such as LNG and hydrogen as well as regional complementarity.

✓ In the precision equipment business, sales are growing due to the sound market for smartphones and in-car devices.

Reciprocating pump

Canned motor pump

Cryogenics pump

Precision equipment

Geveke

Water conditioning system

CI Group

Others

Note: Figures in parentheses indicate those for the precision equipment business(Since part of the industrial business was separated and integrated into the precision equipment business in October 2016, year-over-year data is not listed)

Millions of JPY


Performance trend of LEWA

135 134 136 132

195 194 204

220

236 232

51

105

151

200 211

118

145

127 129

148

189

217 217 224 219

49

107

170

236

217

20 2514 13 17

27 30 31 2821

4 918

2817

47 42

59 50

98 103 91 95

107 120 122 119

101

84

-200

-150

-100

-50

0

50

100

150

0

50

100

150

200

250

300

350

07 08 09 10 11 12 13 14 15 16 Q1 Q2 Q3 Q4 2018Plan

Orders (Left axis) Net sales (Left axis) EBITDA (Left axis) Balance of orders (Right axis)

2017 YTD

Millions of €


Transport Consumption

Gas stationGas fuel

vehicle/LNG train

Tanker

LNG fuel shipBunkering

Small liquefaction

plant

Regasification plant

Adding core technologies of the CI Group contributes to covering a wide range of the LNG value chain. Building cryogenic product lines, including the industrial gas field.

PlantHomesPower plant

Offshore gas field

Gas field

Liquefaction plant

Floating offshore natural gas

liquefaction facility

LNG conveyance

Floating LNG storage

regasification facility

LNG receiving base

C C

N Nikkiso C CI group

Peak shaving

N N C N C

Production

C

Production Liquefaction Conveyance Receipt Storage/Distribution

Power source usage

Nikkiso Group’s area of coverage

CI Group’s area of coverage

Fuel supply device for LNG fuel ship

LNG peak shaving plant

✓ Highly efficient and stable fluid control technology for ultra-low temperatures

✓ Heat exchange process in gasification and liquefaction✓ Highly efficient small and medium-scale process/plant

technology

CI Group’s core technologies

Electricityusage

Heat source usage

Group Synergies in the Cryogenic Business

Expanding Product Lines


LNG projects are on a recovery trend. Aiming to achieve growth by pursuing new product development for growth markets, such as fuel supply devices for LNG ships, and using the channels of the Nikkiso Group.

✓Providing fuel supply devices for LNG fuel ships

✓Providing pumps that deliver high-pressure natural gas at power plants

✓Providing peak shaving equipment and plants for pipeline natural gas

✓Providing hydrogen filling pumps and vaporizers

✓The Nikkiso Group network, including LEWA, Geveke, and NCI

✓Growth of LNG exports mainly by the U.S.

✓Growth of LNG thermal power generation worldwide

✓Increase in LNG fuel ships as a result of tightening regulations on fuel oil for vessels

✓Increased activity in research and development and infrastructure development in advanced nations toward building a hydrogen-based society

Market Environment

Strengths

Group Synergies in the Cryogenic Business

Market Environment and Strengths of the Nikkiso Group


49%

17%

24%

8%

2%

10

Cascade

Wing parts

Others

Jet engine parts

Nacelle parts


Aerospace Division

FY2017

1. Overview



- IFRS -


- IFRS -

YoY comparison

Change Change rate

Orders 15,382 15,712 + 329 + 2.1%

Net sales 15,596 15,550 - 45 - 0.3%

✓ Despite severe environment with the price revision of some aircraft parts and reduced shipments due to production adjustment, the shipment of cascade gradually recovered in the latter half of the year up to the level of those in the last period.

✓ The business aims to take advantage of strong demand for aircraft by starting production at and shipment from the Miyazaki factory in 2018, full-scale production of the Higashimurayama factory, and expansion of the production site in Hanoi, Vietnam.

Millions of JPY


15%

12%

31%

3%

12%

9%

18%

(Japan) Dialysis machines

(Overseas) Dialysis machines

(Japan) Disposable

(Overseas) Disposable

Maintenance

CRRT

Others


Medical Division

FY2017


1. Overview


- IFRS -


- IFRS -

YoY comparison

Change Change rate

Orders 54,025 55,005 + 980 + 1.8%

Net sales 54,451 55,684 + 1,233 + 2.3%

✓ As for the hemodialysis business, the sales of consumables such as blood tubing lines and powder-type dialysate increased and supported the growth in domestic market. In the overseas market, sales in China and Europe grew. On the other hand, the development cost of new models increased, and profit decreased.

✓ As for the CRRT business, due to the rebuilding of the sales system and the reinforcement of sales and service functions in the main market, the Chinese market, the sales of equipment grew significantly. However, the business struggled in other markets such as in Europe. It could not compensate for the increase in expenses, and the performance deteriorated.

✓ The business aims to create a future revenue base through the development of new products such as Acrosurg, a microwave surgical energy device, which was launched last year.

Millions of JPY


FY2017Actual record

FY2018Performance forecast

YoY comparison

- IFRS - - IFRS - Change Change rate

Orders 140,412 162,000 + 21,587 + 15.4%

Net sales 140,912 162,000 + 21,087 + 15.0%

Operating income 8,718 10,000 + 1,281 + 14.7%


Profit before tax 8,310 9,000 + 689 + 8.3%


Attributable to owners of parent

Net income 5,182 5,900 + 717 + 13.8%


Average exchange rate/Assumed rate for financial result forecast

Against the US dollar (Yen)Against the euro (Yen)

112.00132.00

108.00132.00

- 4.16+ 5.30

Forex sensitivity for FY2018 (When yen was depreciated by 1 yen)

US dollar (Yen) Net sales +460 million yen Operating income +80 million yen

Euro (Yen) Net sales +390 million yen Operating income +50 million yen

Financial forecast for FY2018

Consolidated Performance

12

Millions of JPY


FY2017Actual record

FY2018Performance forecast

YoY comparison

- IFRS - - IFRS - Change Change rate

Industrial Business

Orders 85,406 101,900 + 16,493 + 19.3%

Net sales 85,228 101,800 + 16,571 + 19.4%

Operating income of segment 7,539 7,900 + 360 + 4.8%


Industrial and Precision Equipment Division

Orders 69,559 83,400 + 13,840 + 19.9%

Net sales 69,559 83,300 + 13,740 + 19.8%

Aerospace DivisionOrders 15,712 17,000 + 1,287 + 8.2%

Net sales 15,550 17,000 + 1,449 + 9.3%

Medical business

Orders 55,005 60,100 + 5,094 + 9.3%

Net sales 55,684 60,200 + 4,515 + 8.1%

Operating income of segment 3,950 5,800 + 1,849 + 46.8%


Corporate expenses, etc.

Operating income of segment - 2,771 - 3,700 - 928 + 33.5%

Financial forecast for FY2018

Performance by Business Segment

13

Millions of JPY

Appendix


Analysis (vs FY2016)

Medical Aerospace

15

Orders

Industrial and Precision Equipment

0

5,000

10,000

15,000

20,000

25,000

Year-over-year comparison B3, D3 B4, E4 B5, F5 B6, G6 B7, H7 FY2017Q2

+ 7,759

Simple increase

FY2017(January 2017 -December 2017)

Orders- IFRS -

140,412Impact of FX

Simple increase

Impact of FX

✓ Increase in cryogenics pumps

✓ Joining of CI Group

✓ Increase in the shipmentof cascade, etc.

✓ Growth ofoverseas hemodialysis business

✓ Growth ofdomestic consumable business


Orders- IFRS -

129,209

+ 2,133 + 86 + 243 + 521 + 459Impact of FX

Simple increase

Millions of JPY


MedicalAerospace

16

Analysis (vs FY2016)

Industrial and Precision Equipment

0

5,000

10,000

15,000

20,000

25,000

30,000

+ 2,253Simple

increase

Impact of FX


Net sales- IFRS -

140,912


Net sales- IFRS -

130,045

Simple decrease

Impact of FX

-380 + 334

Simple increase

Impact of FX

+ 467+ 765

Net sales

+ 7,426✓ Growth of overseas

hemodialysis business✓ Growth of domestic

consumable business

✓ Influence from production adjustment of aircraft manufacturers, etc.


Millions of JPY


MedicalAerospace Industrial and Precision Equipment

17

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

Analysis (vs FY2016)Operating

income


Operating income- IFRS -

8,117

Increase in corporate expenses,

etc.


Operating income- IFRS -

8,718

+183

✓ Recovery of LEWA’s performance


✓ Launch of factories in Higashimurayama and Miyazaki

✓ Worsened performance ofthe CRRT business

✓ Expense to acquire CI Group, etc.

+1,307+205 -13

-1,106

-157-1,509

+1,690

Increase in other

income

✓ Sales of NIKKISO No. 2 building, etc.

Simple increase

Impact of FX

Simple decrease

Impact of FX

Simple decrease

Impact of FX

Millions of JPY


As of end of December 2016 As of end of December 2017

AmountComposition

ratio AmountComposition

ratio Change

Total assets 177,717 100.0% 244,692 100.0% + 66,974

Current assets 97,591 54.9% 119,103 48.7% + 21,512

Cash and cash equivalents 25,919 14.6% 34,095 13.9% + 8,175

Trade and other receivables 41,498 23.4% 50,434 20.6% + 8,935

Inventories 27,181 15.3% 30,363 12.4% + 3,181

Non-current assets 80,126 45.1% 125,588 51.3% + 45,462

Property, plant and equipment 35,679 20.1% 38,454 15.7% + 2,775

Intangible assets and goodwill 28,098 15.8% 67,792 27.7% + 39,694

Total assets 110,053 61.9% 167,905 68.6% + 57,851

Trade and other payables 21,606 12.2% 22,624 9.2% + 1,017

Corporate bond and non-current borrowings

69,884 39.3% 122,528 50.1% + 52,644

Total assets 67,664 38.1% 76,787 31.4% + 9,123

Consolidated Statement of Financial Position

Millions of JPY


FY2016 FY2017 Change

Cash flows from (used in) operating activities 13,400 4,915 - 8,484

Profit before tax 6,801 8,310 + 1,508

Depreciation expense 4,766 5,246 + 480

Increase (decrease) in working capital (trade receivables/payables and inventories) 670 - 5,202 - 5,873

Cash flows from investing activities - 7,993 - 48,058 - 40,065

Payment from purchase of property, plant and equipment - 6,719 - 5,604 + 1,114

Balance of the transfer/acquisition of business - - -

Free cash flow 5,407 - 43,142 - 48,550

Cash flows from financing activities - 6,251 51,015 + 57,267

Increase (decrease) in borrowings 73 52,310 + 52,237

Cash dividends paid - 1,210 - 1,138 + 71

Cash and cash equivalents at end of period 25,919 34,095 + 8,175

Consolidated Statement of Cash Flows

Millions of JPY


Japan

39%

Asia24%

North America

15%

Europe20%

Other2%

MedicalAerospaceIndustrial and Precision

Equipment

22%

31%15%

28%

4% JPN

Asia

North America

Europe

Others

12%

5%

81%

2%

71%

13%

1% 12%

3%

20

20%

30%

40%

50%

60%

70%

0

20,000

40,000

60,000

80,000

100,000

08/3 09/3 10/3 11/3 12/3 13/3 14/3 15/3 15/12 16/12 17/12

Asia North America

Europe Other

Overseas net sales ratio (right axis)

FY2017

NIKKISO Group total Net sales trend by overseas resion

FY2017 FY2017

FY2017

Overseas ratio

61%

(9 months)

Net Sales Composition Ratio by Region

Millions of JPY


FY2016- IFRS -

FY2017- IFRS -

Basic earnings per share 66.08 yen 71.82 yen

Return on equity (ROE) 7.2% 7.3%

Return on asset (ROA) 3.8% 3.9%

Revenue operating margin 6.2% 6.2%

Equity ratio 37.4% 30.7%

DE ratio 1.05 times 1.63 times

FY2016- IFRS -

FY20172017

- IFRS -

Capital investments 7,635 7,508

Research and development expenses 1,679 2,435

Depreciation expenses 4,766 5,246

Financial data IFRS

21

Millions of JPY

financial results for fy2017 financial summary...financial results for fy2017 financial summary...

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