TADANO : Explanatory Materials for FY2016 Consolidated Financial Results

Explanatory Materials for FY2016 Consolidated Financial Results

Note on forecasts:

• This document (including business plans) is based on information available at the time of its preparation. Nevertheless, actual results may differ substantially from projections due to various risks and uncertainties.

May 2017 TADANO Ltd.

Corporate Profile

[Corporate name] TADANO Ltd. (established August 24, 1948); founder: Masuo Tadano Developed Japan's first hydraulic Truck Crane in 1955

[Representative] Koichi Tadano, President and C.E.O., Representative Director [Head office] Ko-34 Shinden-cho, Takamatsu, Kagawa, Japan

[Major lines of business] Production and distribution of Mobile Cranes, Truck Loader Cranes, and Aerial Work Platforms [Sites] Tokyo Office [Sumida-ku], Takamatsu Plant [Takamatsu], Shido Plant [Sanuki],

Tadotsu Plant [Tadotsu], Chiba Plant [Chiba]

[Other facilities] Japan: 10 branch offices, 23 sales offices;

Outside Japan: Beijing Office [China], Middle East Office [UAE]

[Paid-in capital] ¥13,021 million [Stock shares] Shares issued: 129 million

Number of shareholders: 8,294 (as of March 31, 2017)

[Net sales] ¥179,676 million (FY 2016)

[Number of employees] Consolidated: 3,346; non-consolidated: 1,433 (as of March 31, 2017)

[Major subsidiaries] 12 subsidiaries:

TADANO IMES Ltd. TADANO ILEC Ltd. TADANO S-TEC Ltd.

TADANO ENGINEERING K.K. TADANO TECHNO EAST Co., Ltd. TADANO TECHNO WEST Co., Ltd. TAIHEIKIKOU K.K.

NITTSU JUKI SERVICE K.K. TADANO KYOSHU CENTER K.K. TADANO BUTSURYU K.K. TADANO SYSTEMS Inc.

TADANO BUSINESS SUPPORT K.K.

18 subsidiaries and two affiliates outside Japan: TADANO FAUN GmbH, TADANO FAUN Stahlbau GmbH [Germany] TADANO UK Ltd [U.K.]

TADANO France SAS [France]

TADANO America Holdings, Inc., TADANO America Corp., TADANO MANTIS Corp., [U.S.A.] TADANO Panama S.A. [Panama]

TADANO Brasil Equipamentos de Elevacao Ltda. [Brazil]

JC-TADANO (Beijing) Hydraulic Co., Ltd., TADANO (Beijing) Ltd. [China] TADANO Korea Co., Ltd. [South Korea]

TADANO (Thailand) Co., Ltd., TADANO Thai Parts and Service Co., Ltd. [Thailand] TADANO Asia Pte. Ltd. [Singapore]

TADANO India Pvt. Ltd. [India]

TADANO Oceania Pty Ltd, AML Equipment Pty Ltd [Australia]

BQ-TADANO (Beijing) Crane Co., Ltd. [China] Taiwan TADANO Ltd. [Taiwan]

1

Key PPooiinnttss of FY 2016

FFiinnaanncciiaall

RReessuullttss

FY 2015		FY 2016		Percent change
Amount	Percentage	Am ount	Percentage
Net sales	209,426	100.0%	179,676	100.0%	-14.2%
Operating income	31,062	14.8%	18,484	10.3%	-40.5%
Ordinary income	30,680	14.6%	18,490	10.3%	-39.7%
Net income attributable to Tadano Ltd.	19,621	9.4%	11,881	6.6%	-39.4%

(Unit: millions of yen)

Dividends per share	Mid-year Year-end	¥13.00 ¥13.00	Mid-year Year-end	¥13.00 ¥13.00
	Full-year	¥26.00	Full-year	¥26.00

FY 2015	FY 2016
Capital investment	¥4,572 million	¥6,030 million
Depreciation	¥2,793 million	¥3,113 million
Exchange rate (USD)	¥121.05	¥108.84
Exchange rate (EUR)	¥134.31	¥120.33

* Figure for capital investments include leased assets.

* The exchange rates given above are average rates for the period from January to December. (Subsidiaries outside Japan undertake their settlement of accounts in

【FY2016 management policies】

1. Pursuit of the TADANO Group's Core Values (Safety, Quality, Efficiency)

2. Completion of objectives from the final year of the Mid- Term Management Plan (14-16) and planning for the next Mid-Term Management Plan (17-19)

3. Preparation for and response to sudden market drops and escalating competition

• Revenues and profits declined for the first time in six years

  • Further decline in demand for Mobile Cranes

  • Foreign exchange effects

• Sales decreased both in and outside Japan

  ⇒Net sales in Japan: ¥104.9 billion  ¥102.2 billion (-2.6%)

  Decrease in Mobile Cranes, slight decrease in Truck Loader Cranes, increase in Aerial Work Platforms

  ⇒Net sales outside Japan: ¥104.4 billion  ¥77.4 billion

  (-25.9%)

  Continuing decline in demand, strong yen

• Outside Japan sales ratio : 49.9%  43.1%

• Income decreased from the previous year-end results: Operating income: ¥31.0 billion  ¥18.4 billion Ordinary income: ¥30.6 billion  ¥18.4 billion Net income: ¥19.6 billion  ¥11.8 billion

  2

  Income Statement (vs. Previous Year)

  (Unit: millions of yen)

  [Key changes]

   COGS ratio: 69.9%  72.2%

  • Despite the introduction of new models in Japan and efforts to maintain appropriate sales prices and to increase market shares outside Japan, due to lower sales and foreign exchange effects the COGS ratio up by 2.3% from the previous fiscal year.

• Selling, general, and administrative expenses:

  ¥408 million decrease

  -	¥363 million
  -	¥224 million
  +	¥179 million

  • Variable costs:

  • Personnel costs:

  • Other expenses:

  FY 2015		FY 2016		Increase/ decrease
  Amount	Percentage	Amount	Percentage
  Net sales	209,426	100.0%	179,676	100.0%	-29,749
  Cost of sales	146,298	69.9%	129,682	72.2%	-16,615
  Gross profit on installment sales	-91	-0.0%	54	0.0%	146
  Gross profit	63,036	30.1%	50,048	27.9%	-12,987
  Se lling, general, and administrative expenses	31,973	15.3%	31,564	17.6%	-408
  Operating income	31,062	14.8%	18,484	10.3%	-12,578
  Non-operating income and loss	-382	-0.2%	6	0.0%	388
  Ordinary income	30,680	14.6%	18,490	10.3%	-12,190
  Extraordinary income and loss	-563	-0.3%	-1,147	-0.6%	-584
  Income before income taxes	30,117	14.4%	17,342	9.7%	-12,774
  Corporate taxes	10,608	5.1%	5,401	3.0%	-5,207
  Net income attributable to noncontrolling interests	-113	-0.1%	58	0.0%	171
  Net income attributable to Tadano Ltd.	19,621	9.4%	11,881	6.6%	-7,739

  • Non-operating income and loss:

    • Non-operating income: ¥623 million  ¥758 million

    • Non-operating loss: ¥1,006 million  ¥752 million

  • Extraordinary income and loss:

    • Extraordinary income: ¥517 million  ¥150 million

    • Extraordinary loss: ¥1,080 million  ¥1,298 million Gain on sales of investment securities: ¥105 million Loss on valuation of investments in

capital of affiliates: ¥973 million

Impairment loss: ¥199 million

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Income Statement

(MMaajjoorr Factors Leading to Change in Operating Income)

Operating income fell ¥12.5 billion due to lower sales, foreign exchange effects, and other factors.

(Millions of yen)

FY 2015 Volume Sales prices Foreign

exchange

Expenses Others FY 2016

4

Balance Sheet (vs. End of Previous Period)

(Unit: millions of yen)

FY 2015		FY 2016		Increase/ decrease
Amount	Percentage	Amount	Percentage
Cash deposit	73,618	31.3%	68,745	29.9%	-4,873
Accounts receivable	51,143	21.7%	48,717	21.2%	-2,425
Inventories	53,021	22.5%	54,877	23.9%	1,855
Other current assets	7,699	3.3%	5,624	2.4%	-2,075
Total current assets	185,483	78.8%	177,965	77.4%	-7,518
Tangible fixed assets	38,982	16.6%	41,183	18.0%	2,201
Intangible fixed assets	1,187	0.5%	1,181	0.5%	-6
Investment and other assets	9,747	4.1%	9,469	4.1%	-277
Total fixed assets	49,917	21.2%	51,834	22.6%	1,917
Total assets	235,400	100.0%	229,799	100.0%	-5,600

[Key changes]

• Accounts receivable decreased:

  ¥51.1 billion → ¥48.7 billion

  ⇒ The receivable turnover period deteriorated. (FY2015: 89.1 days → FY2016: 99.0 days)

• Inventories increased:

  ¥53.0 billion → ¥54.8 billion

  (The ¥54.8 billion includes ¥16.4 billion in TFG.)

  ⇒ The inventory turnover period deteriorated. (FY2015: 92.4 days → FY2016: 111.5 days)

• Interest-bearing debt increased:

  ¥36.8 billion → ¥37.2 billion

  ⇒ Short-term: decreased by ¥0.7 billion; Long-term: increased by ¥1.1 billion

  Accounts payable	35,845	15.2%	26,080	11.3%	-9,764
  Interest-bearing debt	36,869	15.7%	37,235	16.3%	365
  Other liabilities	27,889	11.8%	23,934	10.4%	-3,954
  Total liabilities	100,603	42.7%	87,250	38.0%	-13,353
  Total equity	134,796	57.3%	142,549	62.0%	7,752
  Total liabilities and equity	235,400	100.0%	229,799	100.0%	-5,600

• ROA (operating income basis)

13.5% → 7.9%

◆ ROE 15.4% → 8.6%

5

Overview of Cash Flow

Total cash flow fell ¥4.8 billion due to smaller cash flow from investing activities.

Income before income taxes:

¥17.3 billion

Depreciation and others:

¥6.2 billion

Increase in long term borrowings: ¥1.2 billion

Cash flow from operating activities:

+ ¥3.3 billion

Cash flow from investing activities:

• ¥4.7 billion

  Cash flow from financing activities:

• ¥2.4 billion

  Foreign exchange difference:

• ¥0.8 billion

  Total cash flow:

• ¥4.8 billion

Payment of corporate taxes:

¥7.9 billion

Increase in inventory:

¥3.7 billion

Decrease in trade payables:

¥8.6 billion

Acquisition of tangible fixed assets and others: ¥4.7 billion

Payment of dividends and others: ¥3.6 billion

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