TADANO : Explanatory Materials for FY2016 Second Quarter Consolidated Financial Results

Explanatory Materials for FY2016 Second Quarter 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.

November 2016 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: 8,121 (as of September 30, 2016)

[Net sales] ¥209,426 million (FY 2015)

[Number of employees] Consolidated: 3,415; non-consolidated: 1,500 (as of September 30, 2016)

[Major subsidiaries] 11 subsidiaries and one affiliate in Japan:

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.

TADANO KYOSHU CENTER K.K. TADANO BUTSURYU K.K. TADANO SYSTEMS Inc.

TADANO BUSINESS SUPPORT K.K. NITTSU JUKI SERVICE 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., JTL-TADANO (Hebei) Ironparts Co., Ltd. [China] 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 [Australia]

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

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Key PPooiinnttss ooff FFYY 22001166 IInntteerriimm FFiinnaanncciiaall RReessuullttss

(Unit: millions of yen)

FY 2015 Interim FY 2016 Interim Percent

change

[FY 2016 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-

   Net income attributable to

   Amount Percentage Amount Percentage

   Net sales	104,189	100.0%	90,914	100.0%	-12.7%
   Operating income	16,187	15.5%	10,094	11.1%	-37.6%
   Ordinary income	15,983	15.3%	10,024	11.0%	-37.3%

   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 first time in six years

  ·Demand for Mobile Cranes fell

  ·Foreign exchange effects

• Net sales in Japan remained unchanged;

  Tadano Ltd. 10,724 10.3% 6,973 7.7% -35.0%

  FY 2015 Interim	FY 2016 Interim
  Capital investment	¥1,397 million	¥1,459 million
  Depreciation	¥1,315 million	¥1,517 million
  Exchange rate (USD)	¥120.23	¥111.81
  Exchange rate (EUR)	¥134.17	¥124.62

  Figures for capital investments include leased assets.

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

  net sales outside Japan fell

  =>Net sales in Japan: ¥50.8 billion  ¥49.7 billion (-2.2%) Decreases in Mobile Cranes and Truck Loader Cranes, growth in Aerial Work Platforms

  =>Net sales outside Japan: ¥53.3 billion  ¥41.1 billion (-22.8%)

  Demand decreased in major markets.

• Outside Japan sales ratio : 51.2%  45.3%

• Income decreased from the previous interim results: Operating income: ¥16.1 billion  ¥10.0 billion Ordinary income: ¥15.9 billion  ¥10.0 billion Net income: ¥10.7 billion  ¥6.9 billion

  2

  Income Statement (vs. Previous Year)

  FY 2015 Interim		FY 2016 Interim		Increase/ decrease
  Amount	Percentage	Amount	Percentage
  Net sales	104,189	100.0%	90,914	100.0%	-13,275
  Cost of sales	72,533	69.6%	65,282	71.8%	-7,250
  Gross profit on installment sales	-110	-0.1%	94	0.1%	204
  Gross profit	31,545	30.3%	25,726	28.3%	-5,819
  Selling, general, and administrative expenses	15,358	14.7%	15,631	17.2%	273
  Operating income	16,187	15.5%	10,094	11.1%	-6,092
  Non-operating income and loss	-203	-0.2%	-70	-0.1%	133
  Ordinary income	15,983	15.3%	10,024	11.0%	-5,959
  Extraordinary income and loss	-24	-0.0%	-57	-0.1%	-33
  Income before income taxes	15,959	15.3%	9,966	11.0%	-5,992
  Corporate taxes	5,203	5.0%	2,957	3.3%	-2,245
  Net incom e attributable to noncontrolling interests	30	0.0%	35	0.0%	4
  Net incom e attributable to Tadano Ltd.	10,724	10.3%	6,973	7.7%	-3,751

  (Unit: millions of yen) [Key changes]

  + COGS ratio: 69.6%  71.8%

  • Despite efforts to maintain appropriate sales prices and cost reductions, decreased sales and foreign exchange effects drove the COGS ratio up by 2.2 percentage points from the same period of the previous fiscal year.

• Selling, general, and administrative expenses:

  ¥273 million increase

  • Variable costs: - ¥69 million

  • Personnel costs: + ¥60 million

  • Other expenses: + ¥282 million

• Non-operating income and loss:

  • Non-operating income: ¥239 million  ¥309 million

  • Non-operating loss: ¥443 million  ¥379 million

• Extraordinary income and loss:

  • Extraordinary income: ¥1 million  ¥1 million

  • Extraordinary loss: ¥25 million  ¥58 million

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Income Statement

(Major Factors Leading to Change in OOppeerraattiinngg Income)

Operating income fell 6 billion yen due to lower sales, foreign exchange effects, and other factors.

(Millions of yen)

FY 2015	Volume	Sales prices	Foreign	Expenses	Others	FY 2016
Interim	exchange	Interim

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Balance Sheet (vs. End of Previous Period)

(Unit: millions of yen)

FY 2015 Year-end		FY 2016 Interim		Increase/ decrease
Amount	Percentage	Amount	Percentage
Cash deposit	73,618	31.3%	66,798	29.2%	-6,819
Accounts receivable	51,143	21.7%	48,201	21.1%	-2,942
Inventories	53,021	22.5%	58,287	25.5%	5,265
Other current assets	7,699	3.3%	6,965	3.0%	-734
Total current assets	185,483	78.8%	180,253	78.8%	-5,230
Tangible fixed assets	38,982	16.6%	37,906	16.6%	-1,075
Intangible fixed assets	1,187	0.5%	1,008	0.4%	-179
Investm ent and other ass ets	9,747	4.1%	9,606	4.2%	-140
Total fixed assets	49,917	21.2%	48,522	21.2%	-1,394
Total assets	235,400	100.0%	228,775	100.0%	-6,625

[Key changes]

• Accounts receivable decreased:

  ¥51.1 billion � ¥48.2 billion

  =>The receivable turnover period deteriorated. (FY 2015 Interim: 90.1 days/FY 2015 Full-year:

  89.1 days

  � FY 2016 Interim: 97.0 days)

• Inventories increased:

¥53.0 billion � ¥58.2 billion

(The ¥58.2 billion includes ¥16.6 billion in TFG.)

=>The inventory turnover period deteriorated. (FY 2015 Interim: 93.5 days/FY 2015 Full-year:

1. days

   � FY 2016 Interim: 117.3 days)

   • Interest-bearing debt increased:

Accounts payable	35,845	15.2%	32,262	14.1%	-3,582
Interest-bearing debt	36,869	15.7%	37,302	16.3%	432
Other liabilities	27,889	11.8%	23,696	10.4%	-4,192
Total liabilities	100,603	42.7%	93,261	40.8%	-7,341
Total equity	134,796	57.3%	135,513	59.2%	716
Total liabilities and equity	235,400	100.0%	228,775	100.0%	-6,625

¥36.8 billion � ¥37.3 billion

=>Short-term: increased by ¥0.4 billion; Long-term: decreased by ¥0.0 billion

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Overview of Cash Flow

Total cash flow decreased by ¥6.8 billion due to smaller cash flow from operating activities.

Income before income taxes: Payment of corporatetaxes:

¥9.9 billion

Depreciation and others:

¥ 2.5 billion

Cash flow from

operating activities:

• ¥4.5 billion

  Cash flow from investing activities:

• ¥1.5 billion

¥5.6 billion

Increase in inventory:

¥9.9 billion

Decrease in accounts payable:

¥1.4 billion

Acquisition of tangible fixed assets and others:

¥1.5 billion

Net increase in short-term borrowings: ¥2.8 billion

Cash flow from financing activities:

+ ¥0.9 billion

Foreign exchange difference:

- ¥1.7 billion

Payment of dividends and others:

¥1.9 billion

Total cash flow:

- ¥6.8 billion

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