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〉
DAIHATSU DIESEL MFG. CO., LTD.3
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)
DAIHATSU DIESEL MFG. CO., LTD.4
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)
DAIHATSU DIESEL MFG. CO., LTD.5
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
DAIHATSU DIESEL MFG. CO., LTD.6
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)
DAIHATSU DIESEL MFG. CO., LTD.
Recent Major Initiatives in Line with Mid-term Management Plan
DAIHATSU DIESEL MFG. CO., LTD.
DAIHATSU DIESEL MFG. CO., LTD.8
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
DAIHATSU DIESEL MFG. CO., LTD.9
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)
Update on Recent Major Progress (2) (Environment-related Products)
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.
Update on Recent Major Progress (3) (Environment-related Products)
Aqueous urea solution generator
DAIHATSU DIESEL MFG. CO., LTD.15
Update on Recent Major Progress (4) (Peripheral Business Domains)
DAIHATSU DIESEL MFG. CO., LTD.
First Half of the Fiscal Year Ending March 31,2019Summary of Earnings
DAIHATSU DIESEL MFG. CO., LTD.17
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
DAIHATSU DIESEL MFG. CO., LTD.18
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
DAIHATSU DIESEL MFG. CO., LTD.19
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
DAIHATSU DIESEL MFG. CO., LTD.20
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
DAIHATSU DIESEL MFG. CO., LTD.21
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
DAIHATSU DIESEL MFG. CO., LTD.22
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.
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