medium-term management plan · 4) ebitda and business indicators 11 fy2010 fy2011 fy2012 fy2013...

May 11, 2018

Iwatani Corporation

Medium-Term Management Plan

“PLAN20” (2018～2020)

Copyright © Iwatani Corporation. All rights reserved.

“PLAN18” in Review

New Medium-Term Management Plan

“PLAN20”

Contents

１

２

1


“PLAN18” in Review

2

Copyright © Iwatani Corporation. All rights reserved. 3

Targets achieved for all indicators

PLAN18 target

FY2017 results

Target achieved?

Ordinary Income ¥24.0B ¥29.4B ○

ROA 5.5% or higher

6.6％ ○

ROE 10.0% or higher

12.2％ ○

1) Management Targets


2) Segment Results

PLAN18 FY2017 results

Difference vs.

PLAN18

FY2015 results

Difference vs.

FY2015

Energy 2,780 3,174 +394 2,894 +280

Industrial Gases & Machinery

1,760 1,791 +31 1,644 +146

Materials 1,400 1,351 △48 1,259 +92

Agri-Bio & Foods 350 303 △46 285 +18

Others, Eliminations 80 86 +6 78 +8

Total 6,370 6,707 +337 6,162 +545

(100 million yen) [Net Sales]


2) Segment Results

PLAN18 FY2017 results

Difference vs.

PLAN18

FY2015 results

Difference vs.

FY2015

Energy 128 135 +7 90 +44

Industrial Gases & Machinery 78 99 +21 76 +23

Materials 39 43 +4 38 +5

Agri-Bio & Foods 14 13 △0 12 +0

Others, Eliminations

△29 △19 +9 △12 △7

Operating income (total)

230 271 +41 204 +66

Ordinary income 240 294 +54 215 +78

Profit attributable to owners of parent 142 175 +33 123 +52

(100 million yen) [Income]


3) Review - ① Energy

6

2,894 2,721

3,174

2,780

FY2015 FY2016 FY2017 PLAN18FY2016 FY2017

90

159 135 128 132 134 130

FY2015 FY2016 FY2017 PLAN18

“±0” market factors assumed

(100 million yen)

(100 million yen)

① Expansion of the number of consumer households through active M&A

(Number of LPG direct sale customers) FY2015: 860K ⇒ FY2017: 900K

② Creation of business opportunities in response to deregulation of the electricity and city gas retail market

- Entry into the electricity retailing business in the Kanto metropolitan area

Number of customers acquired in FY2017: 15K FY2017 sales: ¥1,200M - Entry into the city gas business in the Kinki and

Chubu regions [safety assurance, equipment sales] Number of city gas customers in FY2017:400K FY2017 sales: ¥500M (on gas equipment sales)

③ Promotion of total energy and living services business through enhancement of the B-to-C product offerings

- New product launches Smokeless grill Yakimaru: 239K units (FY2017) - Sales expansion of portable gas cooking stoves and

cassette gas canisters (Share in Japan) FY2015 ⇒ FY2017 Gas cooking stoves 65％ ⇒ 75％ Gas canisters 40％ ⇒ 45%

Operating Income

Net Sales

Excluding market factors


3) Review - ② Industrial Gases & Machinery

7

1,644 1,663 1,791 1,760

FY2015 FY2016 FY2017 PLAN18

76 67

99

78

FY2015 FY2016 FY2017 PLAN18

(100 million yen)

(100 million yen)

① Expansion of the hydrogen business centered on LH2, for which Iwatani has a 100% market share in Japan

- Ramp-up of LH2 production capacity Increase capacity from 80M ｍ3/year ⇒ 100Mｍ3/year - Increase of LH2 sales through new customer

acquisition FY2015: 45M ｍ3 ⇒ FY2017: 59M ｍ3 - Completed construction of 23 hydrogen refueling

stations

② Market share expansion and strengthening of direct sales utilizing Iwatani’s helium supply capacity, which accounts for 8% of worldwide production

- Continuation of stable supply even when diplomatic relations with Qatar were cut off

- Expansion of direct sales overseas Increase of overseas helium sales volume by2.2times

in FY2017 vs. FY2015.

③ Strengthening of the retail business, centered on the domestic cylinder business

(Air separation gas sales volumes) FY2015: 1.3B ｍ3 ⇒ FY2017: 1.5B ｍ3

Net Sales

Operating Income


3) Review - ③ Materials

8

1,259 1,152

1,351 1,400

FY2015 FY2016 FY2017 PLAN18

38 31

43 39

FY2015 FY2016 FY2017 PLAN18

(100 million yen)

(100 million yen)

① Advancement of the resources business from a medium- and long-term perspective

- Start of operations at the new mining site of the West Australia mineral primary material business

in June 2017

② Expansion of sales of high value-added products such as smartphone-related materials

- Expansion of functional film (impact-absorbing materials) sales

(Sales) FY2015: ¥900M ⇒ FY2017: ¥1,800M

③ Increase in sales of environmental products such as biofuels and bio based PET resin

- Expansion of PKS sales (Volume) FY2015: 30K tons ⇒ FY2017: 110K tons (Sales) FY2015: ¥500M ⇒ FY2017: ¥1,200M - Expansion of bio based PET resin sales to leading

beverage manufacturers (Sales) FY2015: ¥70M ⇒ FY2017: ¥500M

Net Sales

Operating Income


285 268 303

350

FY2015 FY2016 FY2017 PLAN18

12 12 13 14

FY2015 FY2016 FY2017 PLAN18

(100 million yen)

(100 million yen)

① Development of new businesses, such as an upstream agri-business to utilize Iwatani’s unique freezing technology

- Expansion of frozen food sales (Volume) FY2015: 34K tons ⇒ FY2017: 38K tons - Sales expansion of frozen vegetables that meet labor-

saving needs (Sales) FY2015: ¥6,300M ⇒ FY2017: ¥6,900M

② Market share expansion through strengthening of the pig breeding business, in which Iwatani has a 10% domestic market share

- Share expansion through increased sales in the pig breeding business

(Share in Japan) FY2015: 10% ⇒ FY2017: 12％

③ Expansion of the domestically produced luxury foodstuffs and health foods businesses in Japan and overseas

- Commencement of export of “made-in-Japan” luxury foodstuffs and health foods

3) Review - ④ Agri-Bio & Foods

Net Sales

Operating Income


4) EBITDA and Business Indicators

10

FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017

Direct sales customers (10K accounts)

76 78 80 81 83 86 88 90

Energy (excluding Cartridge Gas Business)


EBITDA（Operating income＋Depreciation）

Direct sales customers(10K accounts)

Operating Income:Excluding market factors

[EBITDA and number of direct sales customers]




portable gas cooking stoves and cassette gas canisters total sales volume


11


Portable gas cooking stoves / cassette gas canisters total sales volume (million)

101 119 111 131 131 129 148 170

The volume for portable gas cooking stoves has been converted by multiplying it by 20.

[EBITDA and portable gas cooking stoves and cassette gas canisters sales volume]

Cartridge Gas Business


Industrial Gases & Machinery (excluding the Hydrogen Business)

12


Air separation gas sales volume (million m3)

1,223 1,270 1,214 1,265 1,336 1,356 1,449 1,562




Air separation gas sales volume

[EBITDA and air separation gas sales volume]



LH2 sales volume (million m3) 34 39 34 40 42 45 52 59

Hydrogen Business




LH2 sales volume

[EBITDA and LH2 sales volume]


New Medium-Term Management Plan

“PLAN20”

14


[Japan] Economy expanding in a “golden cycle”

[Overseas] Both developed and emerging countries growing strongly

- Technological innovation: AI, IoT, and robotics - Tokyo Olympic and Paralympic Games - Aging population and low birth rate - Consumption tax hike

- US: Corporate tax cut, infrastructure investment, and protectionism

- China: Expanding domestic demand and financial risks - India and Southeast Asia: Expanding domestic demand - North Korea and the Middle East: Geopolitical risks

1) Business Environment


•As OPEC’s production cutback and the US’s increased shale oil production offset

each other, crude oil prices are expected to be weighed down.

•Partly because LPG demands are expanding in China, Southeast Asia, and India,

LPG prices are expected to increase from FY2017 to 510 dollars (110

yen/dollar).

•Deregulation of electricity and city gas retailing markets is intensifying

competition and accelerating industry reorganization.

LPG

•Hydrogen and renewable energy businesses are growing rapidly on the back of a

growing global drive to reduce greenhouse effect gases since the Paris

Agreement went into effect.

•Initiatives to create a hydrogen society are being accelerated by leading players

in the energy, transportation, and manufacturing sectors, including the

establishment of a global Hydrogen Council and the Japan H2 Mobility.

Hydrogen

energy

•Mineral resource demands are on the rise as the global economy expands.

•Demands for EV-related resources in particular are developing as EVs spread.

•Now that the prolonged sluggish prices overall for mineral materials are in the

past, a recovery trend is expected going forward.

Mineral

resources

1) Business Environment


2) Key Themes and Basic Policies

Basic Policies

“Implement strategies for growth” and

“Expand our business foundation”

Key Themes

“Evolution” and “Creation” Further evolution of the energy business

and creation of customer value


3) Basic Strategies

Basic Strategies

1. Evolution of the energy business - Energy distribution reform - Promotion of a hydrogen society - Expansion of the renewable energy business

2. Creation of new businesses both in Japan and overseas

- Inroads made overseas through synergies between the Industrial Gases & Machinery and Materials businesses

- Development of new products/services in growth areas - Expansion of the cartridge gas business overseas

3. Promotion of ESG initiatives - Reduction of environmental impact - Promotion of business that reliably and safely support

industrial/regional infrastructures - Tightening of governance (ensuring compliance)



19

FY2017 results

PLAN20 target

Ordinary Income ¥29.4B ¥33.0B

ROE 12.2％ 10.0％ or higher

Net D/E Ratio 0.73 times 0.7 times

[Management Indicators]



20

FY2017 results

PLAN20 target

LPG direct sales customers

900K households

1,000K households

Portable gas cooking stove / cassette gas

canister sales volume (global)

Gas cooking stoves:

3,333K units Gas canisters:

103M units

Gas cooking stoves:

4,400K units Gas canisters:

137M units

Air separation gas sales volume

1.5B ｍ3 1.7B ｍ3

LH2 sales volume 59M ｍ3 90M ｍ3

[Key Business Indicators]


5) Segment Plans

FY2017 results

PLAN20 Difference

Energy 3,174 3,730 +555


1,791 2,100 +308

Materials 1,351 1,790 +438

Agri-Bio & Foods 303 380 +76

Others, Eliminations 86 80 △6

Total 6,707 8,080 +1,372

（100 million yen） [Net Sales]


FY2017 results

PLAN20 Difference

Energy 135 159 +23


99 107 +7

Materials 43 52 +8

Agri-Bio & Foods 13 16 +2

Others, Eliminations △19 △19 +0

Operating income (total) 271 315 +43

Ordinary income 294 330 +35

Profit attributable to owners of parent 175 200 +24

[Income]

5) Segment Plans

（100 million yen）


3,174 3,380 3,730

FY2017 FY2018

forecast

PLAN20

135 144

159

130

FY2017 FY2018

forecast

PLAN20

“±0” market factors assumed

(100 million yen)

(100 million yen)

6) Business Strategies: ① Energy

Key Strategies

① Expansion of direct sales customer base through M&A

(Number of LPG direct sales customers) FY2017: 900K ⇒ FY2020: 1,000K

② Sales expansion of gas machinery, consumer products (services), etc.

(Sales) FY2017: ¥74B ⇒ FY2020: ¥90B

③ Expansion of the cartridge gas business through new product development and new demand creation

（Volume in Japan） (portable gas cooking stoves, cassette gas canisters) FY2017: 1,998K units, 65M units ⇒ FY2020: 2,500K units, 86M units （Volume overseas） (portable gas cooking stoves, cassette gas canisters) FY2017: 1,335K units, 38M units ⇒ FY2020: 1,900K units, 51M units

Excluding market factors

Net Sales

Operating Income


<City gas safety service customers*>

FY2017: 400K households

⇒ FY2020: 800K households

Further expand business

LPG direct sales customers City gas / electricity customers

24

① Expansion of direct sales customer base through Ｍ&Ａ ② Sales expansion of gas machinery, consumer products

(services), etc.

*Including services and electric power

①

Per-customer sales

Number of customers

Utilizing nation-wide platforms

Gas machinery, consumer products*

LPG City gas

Sales network

Distribution network

Safety network

FY2017: 900K households

⇒ FY2020: 1,000K households

■ ■

Existing

New

900K households 1,000K

households

② ②


*City gas safety service customers are based on electronic power companies’ city gas customers and their plans.


③ Expansion of the cartridge gas business through new product development and new demand creation

Winter Winter

1. Development of new products and creation of outdoor/indoor demand for spring/summer

Japan

Months

Sales of portable gas cooking stoves and cassette gas canisters (image)

Need to stimulate demand in spring/summer, when sales decline

Spring/Summer

① Introduce “made-in-Japan” products

② Expansion of demand by new products

1. Product/sales strategies in the China market “Enhancing product competitiveness” to meet the needs of the expanding China market

- Increase outdoor demand by enriching product lines other than portable gas cooking stoves

- Develop new products that meet customer needs

Portable gas cooking stoves Korean BBQ grills ⇒ Demand other

than those for one-pot meals

BBQ grills ⇒ Outdoor demand

Examples of products creating spring/summer demand

2. Entry into the aerosol business through cooperation with NKK (Group company)

③ Enhancement of the production infrastructure

④ Development of new channels by leveraging overseas subsidiaries’ sales networks

- Construction of the second plant in Zhuhai ⇒ Address the growth market

- Enhance brand value by introducing high value-added products


2. Expanding into Southeast Asia

Overseas

Sales promotion of portable gas cooking stoves in developing regions

Secure Safe Easy to use


1,791 1,950

2,100

FY2017 FY2018

forecast

PLAN20

99 100 107

FY2017 FY2018

forecast

PLAN20

(100 million yen)

(100 million yen)

6) Business Strategies: ② Industrial Gases & Machinery

Key Strategies

① Expansion of the hydrogen business - Promotion of initiatives designed to create a

hydrogen society (LH2 sales volume) FY2017: 59M ｍ3 ⇒ FY2020: 90M ｍ3

② Sales expansion of air separation gases and expansion of the machinery business

(Air separation gas sales volume) FY2017: 1.5B ｍ3 ⇒ FY2020: 1.7B ｍ3

③ Strengthening helium business profitability

- Strengthening of direct sales in Japan and overseas (Increase helium direct sales volume to 1.2 times vs.

FY2017） - Strengthening of stable supply capability through

investment in containers - Enhancement of customer services and reduction of

costs through container management system utilization

④ Expansion of the overseas business - Expansion of business scale through proactive

investments in growth industries - Entry into E.U & the U.S. market

Net Sales

Operating Income

27


① Expansion of the hydrogen business


Hydrogen sources Hydrogen import terminal Hydrogen use Acquire large amounts of inexpensive, CO2-free hydrogen sources

Initiative Create hydrogen energy demands

CO2-free LH2

New New

New Energy conversion at industrial complexes LH2 terminals

Caustic soda

Jap

an

O

vers

eas

Lignite + CCS

Oil + CCS

Solar

Renewable energy

LH2 production in Japan

Produce hydrogen to adjust surplus energy

R&D

Power plants (co-firing）

Industrial energy

Hydrogen reduction / Desulfurization

Industrial applications

Hydrogen refueling stations

Who? Goals

Iwatani R&D Center Technology & Engineering Division Outside partner companies

Increase efficiency in hydrogen production/storage/transportation, develop its applications, enhance security-related technologies, and increase energy efficiency

Shift from production to import/storage functions

Initiative

Initiative Initiative

Provided by Kawasaki Heavy Industries,Ltd.

Provided by JAXA

Provided by Kawasaki Heavy Industries,Ltd.

Electrolysis using surplus power

Reforming / Modification

Refinement of by-product gases

Jap

an



Sponsorship

of the Hydrogen

Energy Forum

Participation in the Hydrogen Council

Participation in Japan H2 Mobility (JHyM)




Study of partnerships in the Middle East Technology Development Project to Enable a Hydrogen Society

(Fukushima Hydrogen Project)

Front page of The Yomiuri Shimbun (Osaka Edition), Feb. 3, 2018

Page 7 of The Nikkei, Feb. 4, 2018

Page 4 of The Yomiuri Shimbun, Feb. 4, 2018


【Provided by TOSHIBA ENERGY SYSTEMS & SOLUTIONS CORPORATION】


1,200 1,450

FY2017 FY2020

31

② Sales expansion of the air separation gases and machinery business

Industrial Gases

Machinery

Energy Materials

Agri-Bio & Foods

Creating synergies

Cooperation

Cooperation Cooperation

Addressing needs

Growth markets, major customers

Tightening relationships

<Air separation gases and machinery business sales Plan>

Gas & Robot Strategy


（100 million yen）

- Sales expansion of air separation gases, industrial robots, and automation equipment for growth markets (electronic components, auto parts, optical fibers, etc.)

- Expansion of business with major customers through cooperation with relevant divisions - Acquisition of new customers when Japanese companies go overseas


FY2015 FY2016 FY2017 FY2020

32

③ Strengthening helium business profitability - Strengthening direct sales both in Japan and overseas through expansion of production sites - Strengthening stable supply capability through investment in containers - Enhancement of customer services and reduction of costs through container management

system utilization

New production sites Existing production sites

Japan Two sites in Tsukuba and Yokosuka to be consolidated in 2019 to establish Tokyo New Helium Center

→ Capacity to be increased by 1.3times Helium direct sales volume (global)


New center to be

established in Xian in 2019

Expansion of sales throughout SEA

Overseas


④ Expansion of the overseas business


Expand business scale by proactively investing in growth industries in CHINA and Southeast ASIA

China Expand air separation gas and CO2 businesses for automobile and electronic component markets

Philippines Expand ASU on-site Business for electronic components market

Indonesia Expand air separation gas and CO2 businesses

India Expand helium sales to optical fiber market

Entire ASEAN region Expand SPE sales

China, Taiwan, South Korea Expand ClF3 sales to semiconductor market

Acquisition of European and American industrial gas dealers, Promotion of business development through collaboration with partners


1,351 1,600

1,790

FY2017 FY2018

forecast

PLAN20

43 46 52

FY2017 FY2018

forecast

PLAN20

(100 million yen)

(100 million yen)

6) Business Strategies: ③ Materials

Key Strategies

① Expansion of new businesses - Biomass business（PKS） (Volume) FY2017: 110K tons ⇒ FY2020: 500K tons (Sales) FY2017: ¥1,200M ⇒ FY2020: ¥6,400M - PET resin with low environmental impact (Sales) FY2017: ¥1,100M ⇒ FY2020: ¥10,000M - EV-related battery materials (Sales) FY2017: ¥6,500M ⇒ FY2020: ¥14,000M - Nano-nickel Capital and business alliance with Microwave

Chemical Co., Ltd.

② Development of the overseas

business - Expansion of the Southeast Asia metal processing

business (Sales) FY2020: ¥5,000M

Net Sales

Operating Income


1.8 11

100

FY2016 FY2017 ・・・・・・ FY2020

6 12

64

FY2016 FY2017 ・・・・・・ FY2020

Biomass business（PKS）

Aluminum catalyst PET resin/Bio based PET resin － Eco-friendly PET -

Aluminum catalyst PET resin/ Bio based PET resin sales (100 million yen)

EV-related battery materials

FY2020 Sales: ¥14,000M

Nano-nickel Capital and business alliance with Microwave Chemical ⇒ To create uniform nano-materials for cutting-edge ceramic capacitors by using “microwave” technology

FY2020 Volume: 500K tons Sales: ¥6,400M

FY2020 Sales: ¥10,000M

35

① Expansion of new businesses

Biomass (PKS) sales (100 million yen)

13

65

140

FY2016 FY2017 ・・・・・・ FY2020

EV-related battery materials sales (100 million yen)

Toward the next growth stage...



② Development of the overseas business

FY2020 Sales: ¥5,000 million

Expansion of the Southeast Asia metal processing business [Manufacturing base]

＋

A/C, refrigerator, dishwasher, and water heater markets

Automobile/motorbike parts market

Existing markets

Expand target markets

(Example products)

Fan guards Dishwasher baskets Heat exchanger parts

Seat frames Hood parts

×


Expand manufacturing function

Existing functions

- Wire processing - Surface coating

New functions

- Automation through introduction of more robots

- Pipes, welding, 3D bending etc.

×


303 350 380

FY2017 FY2018

forecast

PLAN20

13 14 16

FY2017 FY2018

forecast

PLAN20

(100 million yen)

(100 million yen)

6) Business Strategies: ④ Agri-Bio & Foods

Key Strategies

① Expansion of global frozen foods sales

(Volume) FY2017: 38K tons ⇒ FY2020: 55K tons - Utilization of original freezing technology - Development of products through partnerships

② Expansion of the pig breeding

market share (Share in Japan) FY2017: 12％ ⇒ FY2020: 20％ - Expansion of sales to major customers - Expansion of farm production management

support service for customers

Net Sales

Operating Income


②Expansion of the pig breeding market share

①Expansion of global frozen foods sales

- Utilization of original freezing technology - Development of products through partnerships

- Diversify procurement sources

- Strengthen overseas sales

Frozen foods sales volume

38K tons ⇒ 55K tons

- Expansion of sales to major customers - Expansion of farm production management

support service for customers

Pig breeding market

share in Japan

12％

⇒ 20％

6) Business Strategies: ④ Agri-Bio & Foods


271

315

FY2017 ＰＬＡＮ20

Energy


Materials

Others

(100 million yen)

+23 +7 +8

+2 +0

Agri-Bio & Foods

6) Business Strategies: Operating Income Growth by Segment


Business management contributing to achievement of Sustainable Development Goals (SDGs)

40

7) Promotion of ESG Initiatives

Environment

Society

Corporate

governance

Hydrogen Biomass

PET resin with low environmental impact

CO2 reduction

Energy and Industrial Gases &

Machinery

Strengthening of labor management,

compliance, and safety

Clean

energy

Development

of

communities

that are

comfortable

to live in

Climate

change

Technological

innovation

Growth and

employment

Reliable and safe support for industrial/regional

infrastructures

Good health and

well-being


Some of the data set forth in this presentation contain forward-looking statements, which do not represent guarantees or assurance of future performance. As such, actual results may differ materially from these assumptions. The reader is cautioned to bear these warnings in mind when using this material.

IR, Corporate Planning & Coordination Department, Iwatani Corporation

TEL: +81-6-7637-3470 FAX: +81-6-7637-3333 URL: http://www.iwatani.co.jp

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