KOITO MANUFACTURING : Consolidated Earnings Report for the Second Quarter of Fiscal 2019

Consolidated Earnings Report for the Second Quarter of Fiscal 2019

[Japanese GAAP]

October 26, 2018

Company Name:
Stock Listing:
Code Number:
URL:
Representative Director:	Hiroshi Mihara, President
Inquiries:	Hideharu Konagaya, Senior Managing Director
Tel:	[phone]
Filing of Quarterly Securities Report:	November 1, 2018
Scheduled Payment of Dividends:	December 5, 2018
Supplementary explanatory materials prepared:	Yes
Explanatory meeting:	Yes

KOITO MANUFACTURING CO., LTD.

First Section, Tokyo Stock Exchange 7276

http://www.koito.co.jp

(¥ millions are rounded down)

1. Consolidated Results for the Second Quarter of Fiscal 2019 (April 1, 2018 to September 30, 2018)

(1) Consolidated Operating Results

(¥millions; percentage figures represent year-on-year changes)

Second Quarter	Net sales	Operating income	Recurring profit	Profit attributable to owners of parent
Fiscal 2019	392,601 △11.9%	46,503 △6.4%	48,858 △6.6%	33,155 13.7%
Fiscal 2018	445,671 16.1%	49,688 25.0%	52,312 31.9%	29,156 27.2%

Note: Comprehensive income or loss:

September 30, 2018: ¥40,012 million (△3.8%), September 30, 2017: ¥41,594 million (402.1%)

Second Quarter	Net income per share (¥)	Net income per share (diluted) (¥)
Fiscal 2019	206.28	206.21
Fiscal 2018	181.42	181.35

(2) Consolidated Financial Position

(¥ millions)

Total assets	Net assets	Equity ratio (%)	Net assets per share (¥)
September 30, 2018	705,910	474,581	61.9	2,717.41
March 31, 2018	672,055	444,808	61.0	2,551.48

Note: Equity: September 30, 2018: ¥ 436,772 million, March 31, 2018: ¥ 410,102 million

2.

Dividends

Dividend per share (¥)
First Quarter	Second Quarter	Third Quarter	Year End	Full Year
Fiscal 2018	－	36.00	－	60.00	96.00
Fiscal 2019	－	40.00
Fiscal 2019 (forecast)	－	－	－

Notes: 1. Revisions to recent dividend forecasts: Yes

• 2. The dividend record date is March 31, as prescribed by KOITO's Articles of Incorporation; the dividend forecast for the March 31, 2019 is currently undecided.

• 3. Breakdown of fiscal 2018 year-end dividend: Ordinary dividend: ¥40.00; Extraordinary dividend: ¥20.00

3.

Forecast of Consolidated Results for Fiscal 2019 (April 1, 2018 to March 31, 2019)

(¥ millions; percentage figures represent year-on-year changes)

Net sales	Operating income	Recurring profit	Profit attributable to owners of parent	Net income per share (¥)
Full year	809,000 △4.7%	98,000 △5.6%	101,000 △6.4%	69,000 △17.3%	429.29

Note: Revisions to recent consolidated business forecasts: Yes

*Notes

• (1) Changes to important subsidiaries during the second quarter (changes in specified subsidiaries resulting in revised scope of consolidation): None

• (2) Application of special accounting methods in the preparation of quarterly consolidated financial statements: None

• (3) Changes in accounting principles, accounting estimates and restatements

  ① Changes in accounting policies in conjunction with revisions to accounting standards: None ②Other changes: None

  ③Changes in accounting estimates: None ④Restatements: None

(4) Number of shares issued (common stock) ① Number of shares issued (including treasury stock): ②Number of treasury stock:

③Average number of stock during the second quarter:

Fiscal 2019, 2Q 160,789,436	Fiscal 2018 160,789,436
Fiscal 2019, 2Q 58,220	Fiscal 2018 58,106
Fiscal 2019, 2Q 160,731,292	Fiscal 2018, 2Q 160,712,556

*This quarterly financial report is not subject to the quarterly audit procedure to be conducted by certified public accountants or auditing firms.

*Explanations concerning proper use of business forecasts and other noteworthy matters (Notes on future assumptions)

The above forecasts are based on information available, and certain assumptions that are judged to be reasonable, at the time of the release of this report. KOITO is not promising that the Company will achieve these forecasts. Actual results could differ from forecasts due to a variety of factors.

(Supplementary materials for financial results)

KOITO is scheduled to have an earnings release conference for securities analysts and institutional investors on November 7, 2018. Supplementary materials will be available on our website after the conference.

《 For Reference Only 》

Forecast of Non-consolidated Result for Fiscal 2019 (April 1, 2018 to March 31, 2019)

(¥ millions; percentage figures represent year-on-year changes)

Net sales	Operating income	Recurring profit	Net income	Net income per share (¥)
Full year	361,000 6.2%	38,000 1.1%	55,000 △1.4%	42,000 △32.5%	261.31

Note: Revisions to recent non-consolidated business forecasts: Yes

Table of Contents of Supplementary Materials

1. Qualitative Information Concerning Quarterly Financial Statements and Other Matters ……………………………… . 2

(1) Explanation Regarding Consolidated Operating Results …………………………………………………………… 22

(2) Explanation Regarding Consolidated Financial Position….. …………………………………………………… ..… 22

(3) Explanation Regarding Forecast of Consolidated Results for Fiscal 2019 and Other Future Projections ……………… 3

2. Quarterly Consolidated Financial Statements and Notes …………………………………………………………………

4

(1) Quarterly Consolidated Balance Sheets ……………………………………………………………………………… 45

(2) Quarterly Consolidated Statements of Income and Comprehensive Income …………………………………………… 6

Second quarter, for the six months ended September 30 ……………………………………………………………… 6

(3) Quarterly Consolidated Statements of Cash Flows ……………………………………………………………………… 8

(4) Notes on Quarterly Consolidated Financial Statements ……………………………………………………………… 10

(Going Concern Assumption) ………………………………………………………………………………………	10
(Note Regarding Significant Changes in Shareholders' Equity) ……………………………………………………	10
(Additional Information) …………………………………………………………………………………………	10
(Segment Information) ………………………………………………………………………………………………	10
1

1. Qualitative Information Concerning Quarterly Financial Statements and Other Matters

(1) Explanation Regarding Consolidated Operating Results

During the first half of fiscal 2019, the period under review, the Japanese economy showed a trend of moderate recovery due to an increase in capital investment supported by strong corporate performances, and the continued recovery of personal consumption. In spite of intensifying trade war caused by protectionary trading policies by the U.S., strong U.S. Dollars and currency depreciation in emerging countries, increasing crude oil price, and geopolitical risks, the global economy continued to be robust as a whole. This was due primarily to firm economies in the U.S., Europe, China, and Asia.

In the Japanese auto industry, despite mini vehicles enjoyed brisk sale, the production volume decreased year on year due to the completion of current round of new vehicle stage effect. The global automobile production volume increased year on year due mainly to the increased demand in China, Asia and Europe.

In this climate, despite an increase in new orders in the mainstay automotive lighting equipment segment and a shift in automobile lamps to LED, the KOITO Group's net sales for the first half decreased 11.9% year on year to ¥392.6 billion. This is attributable to the status change of Shanghai Koito Automotive Lamp Co., Ltd. ("Shanghai Koito") from a consolidated company to a company accounted for by the equity-method in the end of September 2017, and non-consolidation of Shanghai Koito in the end of March 2018.

Results by geographical segment are outlined as follows.

〔Japan〕

While domestic automobile production volume decreased, sales in Japan increased 3.2% year on year to ¥175.9 billion due to an increase in new orders and a shift in automobile lamps to LED.

〔North America〕

While NAFTA negotiations remained uncertain, sales in North America increased 5.8% year on year to ¥95.6 billion. The increase was due primarily to a shift in automobile lamps to LED, although the automobile production volume remained flat.

〔China〕

Despite the increase in automobile production and expansion in new orders, sales in China decreased 58.9% year on year to ¥48.3 billion. This decrease was caused by the effect of non-consolidation of Shanghai Koito.

〔Asia〕

Sales in Asia increased 16.5% year on year to ¥53.1 billion. Sales growth was mainly driven by an increase in automobile production volume, an increase in new orders in Thailand and India, and a shift in motorcycle lamps to LED.

〔Europe〕

Although automobile production volume increased, sales in Europe decreased 11.5% year on year to ¥18.9 billion. This was mainly attributable to the completion of current round of new vehicle stage effects or the end of production of some of our ordered products portfolio in this region.

〔Other regions〕

KOITO's subsidiary, NAL Brasil commenced operations in May 2018. Sales in the region was ¥0.4 billion.

On the earnings front, although KOITO implemented rationalization in Japan and overseas, operating income decreased 6.4% year on year to ¥46.5 billion, and recurring profit decreased 6.6% year on year to ¥48.8 billion. This was attributable to the effect of non-consolidation of Shanghai Koito and increased R&D expenses. On the other hand, as KOITO recorded a loss related to the Act on Prohibition to Private Monopolization and Maintenance of Fair Trade in the previous fiscal year, profit attributable to owners of parent increased 13.7% year on year to ¥33.1 billion.

(2) Explanation Regarding Consolidated Financial Position

-1. Analysis of assets, liabilities and net assets

Although trade notes and accounts receivable and other assets decreased, total assets as of September 30, 2018 increased ¥33.8 billion to ¥705.9 billion. This was mainly due to an increase in cash and time deposits, and assets on property, plant and equipment led by an increase in capital investment.

Total liabilities as of September 30, 2018 increased ¥4.0 billion to ¥231.3 billion due mainly to an increase in account payable for capital investment.

Net assets as of September 30, 2018 increased ¥29.7 billion to ¥474.5billion. This increase was due mainly to an increasein retained earnings.

2