TOKYO KEIKI : Annual Report 2021

For the Fiscal Year Ended March 31, 2021

Annual Select® 2021

TOKYO KEIKI INC.

2-16-46Minami-Kamata,Ohta-ku, Tokyo

(Securities Code: 7721)

[phone]

Corporate Profile

Established in 1896 as Japan's first manufacturer of measuring instruments, TOKYO KEIKI INC. had its start as a producer of pressure gauges. For 125 years, we have embraced the themes of world-class technology, quality that responds to the expectations of our customers and creation of new value in the development and manufacture of numerous new products that are reflective of the times and dramatic advances in technology.

TOKYO KEIKI INC. is comprised of the Marine Systems, Measurement Systems, Fluid Power & Control Systems, Inspection Systems, Electronics Systems, and Communication & Control Systems Companies. The products and services provided to customers by these six companies contribute to the enhancement of our society.

Navigational safety and energy savings of ships is greatly improved by the autopilots, radars, electronic chart display & information systems, and other products provided to the large and diverse maritime market by the Marine Systems Company. The Measurement Systems Company's highly regarded and proven ultrasonic flowmeter and its radar level gauge products are vital components in water and wastewater management systems and river monitoring disaster prevention systems. Addressing the themes of energy savings, environmental compatibility, and computerization, the Fluid Power & Control Systems Company provides a wide variety of hydraulic products for injection molding machinery and machine tools. The remote control of construction equipment enabled by the wireless control systems and other products manufactured by the Company factors greatly in the realization of unmanned construction and labor savings. Inspection equipment provided by the Inspection Systems Company is utilized by the printing industry to detect imperfections in printed material as well as problems in the printing process, issues that are critical for rigorous quality control. The Communication

• Control Systems Company supplies microwave devices which are core components in wireless information equipment and power electronics. The Company also provides helicopter broadcasting systems that optimize television relay circuits and inertial sensors that are essential for attitude control of autonomous mobile robots and other applications. Advanced aerospace electronic equipment for the defense market and marine traffic systems for the Japan Coast Guard are among the products offered by the Electronics Systems Company.

• Annual Select is an English-language disclosure format developed by ZAIHON, INC. to increase the level of convenience of investors outside Japan based on Japanese-language statutory disclosure material, timely disclosure material prescribed by securities exchanges and voluntarily disclosed IR material. Annual Select is a registered trademark of ZAIHON, INC. Reproduction or copying without prior permission is prohibited.
• While every best effort has been made to provide a translation meeting the quality standards required of professionals, the Company does not guarantee it is 100% accurate. Therefore, please verify the original Japanese text for any final judgments made based on this information.

I. Summary of Selected Financial Data (Consolidated)

	86th fiscal year		87th fiscal year	88th fiscal year		89th fiscal year		90th fiscal year
	From April 1, 2016		From April 1, 2017	From April 1, 2018		From April 1, 2019		From April 1, 2020
	to March 31, 2017		to March 31, 2018	to March 31, 2019		to March 31, 2020		to March 31, 2021
Net sales	41,394		43,803	46,692		47,440			42,081
(Million yen)
Ordinary profit	1,252	1,511	2,660	2,011		1,458
(Million yen)
Profit attributable to owners	709		1,120	1,936		1,425			945
of parent
(Million yen)
Comprehensive income	1,370	1,508	1,476	676		2,695
(Million yen)
Net assets	27,356		28,425	29,481		29,644			31,939
(Million yen)
Total assets	52,206	58,045	58,349	54,577		53,546
(Million yen)
Net assets per share	1,624.07		1,695.16	1,764.15		1,782.35			1,919.21
(Yen)
Basic earnings per share	42.72	67.61	117.19	86.76		57.67
(Yen)
Diluted earnings per share	-		-	-		-			-
(Yen)
Equity ratio	51.61	48.28	49.75	53.46		58.74
(%)
Return on equity (ROE)	2.67		4.08	6.79		4.90			3.12
(%)
Price-earnings ratio (PER)	27.03	16.70	9.39	8.01		16.37
(Times)
Net cash provided by (used	(2,949)		463	1,638		2,915			7,068
in) operating activities
(Million yen)
Net cash provided by (used	(1,569)	(1,374)	(1,135)	(1,139)		(928)
in) investing activities
(Million yen)
Net cash provided by (used	741		2,589	(920)		(3,456)			(2,247)
in) financing activities
(Million yen)
Cash and cash equivalents at	8,163	9,828	9,397	7,709		11,588
end of period
(Million yen)
Number of employees	1,495		1,522	1,571		1,660			1,672
[Separately, average number	[391]		[358]	[333]		[232]			[221]
of temporary employees]

(Persons)

Notes: 1. Net sales do not include consumption taxes.

1. Diluted earnings per share is not described since no dilutive shares exist.
2. On October 1, 2017, TOKYO KEIKI INC. carried out a one-for-five common share consolidation. Accordingly, net assets per share and basic earnings per share have been calculated as if the share consolidation had been carried out at the beginning of the 86th fiscal year.

(Source: Annual Securities Report)

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Tsuyoshi ANDO

Representative Director, President & CEO

II. To Our Stakeholders

FY2020 Operating Results and FY2021

Forecasts

I would like to extend my sincerest appreciation for your patronage of TOKYO KEIKI.

May 1, 2021 marked the 125th anniversary of the founding of TOKYO KEIKI. We are deeply honored by the kind support and patronage you have shown to us over the many years that have made it possible to continue our various business activities for such a long time, culminating to this day.

Established in 1896 as Japan's first manufacturer of measuring instruments, TOKYO KEIKI had its start as a developer of pressure gauges that are vital for ships. In an era when cutting-edge technologies had to be imported from overseas, our initiatives for the domestic production of precision instruments formed part of Japan's modernization. Our constant drive since

foundation has been to always take the challenge to develop new things and to meet the expectations of society. Although our products may not be easily visible in everyday life, they fulfill important roles in many fields such as in traffic, energy, agriculture, fisheries, and disaster prevention, and also support safety of people's lives. We believe we have a duty to continue ensuring people's safety and to solve social issues with the technological resources we have accumulated to date through innovation.

Long before the advent of the term ESG, TOKYO KEIKI has been sincerely looking at solving social issues. We have also been active in initiatives for improving the workplace environment and welfare benefits for our employees. We will steadfastly promote management for constant growth, i.e., sustainable management, toward future milestones of our 150th and 200th years.

With regard to the Group's consolidated earnings for fiscal 2020, there was a decrease in deliveries of large projects in the public-sector market for the Defense & Communications Equipment Business, and the impact of the spread of the novel coronavirus disease (COVID-19) caused weak performance in the Hydraulics and Pneumatics Business. As a result, net sales decreased from fiscal 2019 by 11.3% to ¥42,080 million, operating profit decreased 33.3% to ¥1,250 million, ordinary profit decreased 27.5% to ¥1,460 million, and profit attributable to owners of parent decreased by 33.7% to ¥950 million.

The operating margin fell by 1.0 percentage points from the previous fiscal year to 3.0%, which was below the target of 8%. Meanwhile, the equity ratio improved by 5.2 percentage points compared with the previous fiscal year to 58.7%, which was mainly attributable to a 7.8% increase in equity and a 1.9% decrease in total assets.

Return on equity (ROE) dropped by 1.8 percentage points compared with the previous fiscal year to 3.1%, due to a decrease in profit, and did not reach the 8% target.

In fiscal 2021 (fiscal year ending March 31, 2022), the Japanese economy is expected to continue to be undermined, with inevitable renewed restrictions on various corporate activities given that containment of COVID-19 is still not in sight.

Amid this business environment, our outlook for fiscal 2021 anticipates sales of ¥42,900 million, an

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increase of ¥820 million (1.9%) due to increased revenues in all businesses other than Defense & Communications Equipment Business, while we do expect a temporary decline in sales in the Defense & Communications Equipment Business during the in-between season for large orders. In addition, despite an increase in selling, general and administrative expenses including research and development expenses for growth, such as for expansion of business areas and acceleration of global expansion, we forecast an increase in gross profit and improvement in the cost of sales ratio. Therefore, we expect increased revenue and increased profits, and forecast operating profit to increase by ¥100 million (8.0%) to ¥1,350 million, ordinary profit to increase by ¥10 million (0.8%) to ¥1,470 million, and profit attributable to owners of parent to increase by ¥190 million (19.6%) to ¥1,130 million as well.

In terms of the impact of COVID-19 on our earnings forecast for fiscal 2021 (fiscal year ending March 2022), we forecast the following: Earnings in the Hydraulics and Pneumatics Business, which was greatly affected in the previous fiscal year (fiscal year ended March 2021), have continued to recover since the third quarter of the previous fiscal year, mainly in overseas markets. In addition, since a market recovery trend has also been evident from the production trends of major clients and from the forecasts of each industry association, we forecast sales to return to pre-COVID levels in the fiscal year ending March 2022. Earnings in the Marine Systems Business are expected to be firm in the future, although they have suffered little impact since the third quarter of the previous fiscal year, despite impacts on deliveries to overseas shipyards and onboard operations in the previous fiscal year. Apart from these, we anticipate sales coming in from projects in each business that had been delayed in the previous fiscal year. Nevertheless, the railway equipment business, included in the Others Business, is likely to be impacted by the substantial decline in business profits of railway operators due to the COVID-19 pandemic. The COVID-19 vaccine rollout is progressing in Japan and should lead to normalization of the economy from the second half of the fiscal year. Since sales of our major businesses in a year are weighted toward the third quarter and beyond, we do not anticipate the overall impact of COVID-19 in fiscal 2021 to be as great as it has been in fiscal 2020.

Going forward, we will continue to work towards achieving our plan while monitoring the state of COVID-19, and will promptly disclose any matters arising that should be disclosed.

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We distributed an ordinary dividend of ¥25 per share in fiscal 2020. Furthermore, for fiscal 2021, in addition to an ordinary dividend of ¥25 per share, we intend to distribute a special commemorative dividend of ¥5 for the 125th anniversary, making a total annual dividend of ¥30.

On behalf of the senior management and workforce at TOKYO KEIKI, I would like to close by asking all investors for your ongoing and further support and cooperation.

Tsuyoshi ANDO

Representative Director, President & CEO

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