TOKYO SEIMITSU : Presentation Material - FY2018/3 Interim Earnings Conference(with Speaker's note)

Announcement of FY2018/3 Second Quarter Business Results

(April 2017 to September 2017)

November 14th, 2017

Tokyo Seimitsu Co., Ltd.

*

Hitoshi Yoshida, President and CEO Ticker Symbol: 7729.T

Co ri ht 2017 Tok o Seimitsu Co., Ltd. 7729.T All ri hts reserved.

Cautionar y Statement with respect to Forward-Looking Statements

This presentation data contains "forward-looking statements" that are based on current best available information and policies.

There are various factors such as world economic conditions and semiconductor/automobile market conditions which will directly and indirectly impact the Company's results in the future.

As a result, future outcomes may differ from those projected in this presentation .

Data in presentation

Information listed in this presentation is summarized in Billions of Yen or percentage except as otherwise noted. As a result, there may be a case where the total of individual amount and total amounts in each matter may differ.

Audit procedure

This presentation is not subject to audit procedures.

Co ri ht 2017 Tok o Seimitsu Co., Ltd. 7729.T All ri hts reserved. 2

• FY2018/3 1H (April to Sep., 2017) Consolidated revenue and profit marked increase mainly because of firm sales and profit in SPE segment.

• Consolidated Sales amount:

  43.7 Billion JPY (YoY +17%) (* Billion JPY hereafter referred to as "B")

  30.3B from SPE Segment (SPE), and 13.3B from Metrology Segment(Metrology).

• Operating income: 8.9B(SPE 6.4B, Metrology 2.5B)

• Ordinary Income: 9.0B and Net Income attributable to owners of parent: 6.4B

• Operating Income of SPE, Ordinary Income, and Net Income achieved historical highest record on half-year basis.

• Business Results for 2nd quarter (2Q, July to Sep., 2017) Sales: 23.8B (SPE 16.1B, Metrology 7.6B ).

  Operating income: 4.9B (SPE 3.3B, Metrology 1.6B) . Ordinary income: 4.9B, and Net Income: 3.5B.

• Sales and profit increased QoQ and YoY.

• SPE's Sales and Operating Income in 2Q exceeded forecasts.

• Firm demands for semiconductor devices and electric components overall, and plant utilization stayed high.

• As was originally forecasted, short-term demand peaked out in summer.

  However, demand for Grinders and CMP were firm, and 2Q's Orders had minor decline.

• Orders for 1H were 29.3 B (slightly less than 20% up YoY)

• 2Q's backlog was 16.6B, remained relatively high level.

• SPE's overseas sales ratio in 1H was 80%.

• While sales to Japan remained steady, sales to Asia significantly increased.

  Consequently, overseas sales ratio rose.

• 2Q's Sales (7.6B) and Operating Profit (1.6B) in Metrology were on track.

• Along with recovery in Metrology related market, Sales and profit are on the track of recovery from 2Q.

  Business results for 1H showed increase YoY.

• 2Q's Orders in Metrology business were 7.5B, 1H's Orders were 14.9B, and 2Q's backlog was 7.6B.

• Because of firm demand from Automobile industry in Japan (50% of Orders) and bottomed-out demand from overseas,

  2Q's orders increased for 4 consecutive quarters,

  as well as 1H's orders increased by slightly more than 10% YoY.

• Consequently, 2Q's backlog remained relatively high.

• Overseas sales ratio in 1H in Metrology business was 32%.

• The amount of Overseas sales was same as FY2017/3 1H.

  Sales to Japan increased, therefore, the overseas sales ratio declined slightly.

• Currently Orders to overseas have been increased, and they will be reflected in Sales hereafter.

• Total Assets as of September 2017 was 122.9 B (+8.4 B from FY2017/3 end)

• Breakdown of an increase

  Current Assets:+ 6.1B (Cash + 2.5 B, AR +2.7 B, and Inventories +1.6 B) Fixed Assets: + 2.4B

• Total Liability was 30.0B (increased by 2.7B due to AP increase)

• Net assets was 93.0B (increased by 5.8B)

• Equity ratio is 74.9% and interesting bearing debts at the end of September was 1.3B.

• Cash Flow (CF) from Operating Activities: + 6.8B mainly because of profit.

• CF from Investing Activities: - 2.9B mainly due to capital expenditure.

• Consequently, Free Cash Flow (FCF) came to +3.9B.

• CF from Financing Activities: - 1.5B mainly from dividend payment.

• Closing cash balance amounted to 36.4B.

• Number of employees (Consolidated, including part time employees) as at the end of September 2017 was 2,692, an increase by 147 from March 2017.

• Main reasons for the increase were as follows.

• Increase in R&D and MFG employees in SPE segment.

• Increase in Sales and Service/Supports employees due to market expansion in China.

• R&D expenditure in FY2018/3 1H was 3.6B based on the policy of "To strengthen product competitiveness".

• Capex was 1.6B (mainly because of investment in replacement of equipment)

• Depreciation was 1.3B.

• No annual plan change in FY2018/3.

• Market outlook for each business segment is:

• SPE:

  Demand has been peaked out as we originally forecasted, however, the demand decline is not as huge as in the past because of firm demands for Grinders

  and CMP.

  Based on seasonality, we anticipate recovery in latter half of FY.

  (Expect potential demands for Memory devices, Automotive devices, and Electric components)

  - Metrology Equipment:

  Expect firm demands from manufacturingin Japan

  Overseas demand is recovering especially in China, expect to boost business results.

  Expect demands from Automation/ IoT trend, that has potential of market expansion.

  • The Company improved FY2018/3 forecast, based on current trend (especially SPE segment).

  • The forecasted sales: 85.0B, Operating Income: 16.0B, Ordinary Income: 16.0B and Net Income: 11.2B.

    (Will achieve historical highest operating income, ordinary income, and net income)

  • Based on the dividend policy (targeting dividend payout ratio of 30%), Annual dividend per share improved from 72 Yen to 82 Yen.

    (Refer to the document "Tokyo Seimitsu announces revision of forecasts,

    Interim Dividend and projection of Year-end Dividend for Fiscal Year ending March 31st, 2018" released on November 14th, 2017.)

  • Orders in SPE business in FY2018/3 2H are anticipated to have seasonal decline from 1H, but to stay relatively high.

  • Orders in Metrology business in FY2018/3 2H are forecasted to increase from FY2017/3 2H.

  • The Corporate Philosophy, which is the basis of long-term target is:

    " Growing together with partners and customers by collaborating technology, knowledge and information to create the world's No.1 products."

  • This philosophy is reflected in our motto and the corporate brand.

  The Company group continues to proceed with its growth strategy in line with this outlook.

• SPE segment's strengths are precision positioning and in-house manufacturing, that enable enhanced business opportunities for developing new technologies and devices.

• Metrology segment's strengths are precision, high resolution measuring technology and its reliability that will enable future growth through our new products and from overseas demand.

• Each segment is subject to variable market conditions, but the combination of both segments can offset fluctuations and realize stable business performance.

  • Long-term: To maintain strong corporate structure with over 10% ROE.

  • Mid-term(by FY2019/3): To achieve historical highest OP (15.0 billion yen) .

  • In the improved forecast of FY2018/3, the Company will achieve Mid-term target.

  • Business strategy for both segments is to increase product competitiveness in mainstream markets, and allocate resources to markets that can expect stable demand or potential growth.

  • Semiconductor market is in structural growth phase, with a concept of "connectivity" at the core

  • The demand for Memory devices, Automotive devices, and Electric components will show steady increase in this phase.

  • Our strategy is to maximize the strength in our equipment by dropping the needs on equipment for these semiconductor devices to adapt individual products and elements

  • Main two strategies in Metrology business.

  • Increase in sales with products for stable and growing industries and sales expansion of OMI(Optical Measuring Instruments)

  • Increase in overseas sales with response to growing needs for automation and IoT, and a launch of easy operation models for global use.

ACCRETECH is Tokyo Seimitsu

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