Fiscal Year 2014 First Half Results October 31, 2014 TOTO
Contents 1. Financial Results for First Half of FY 2014 2. FY 2014 Full Year Financial Plan 3. Topics of FY2014
Overview of Financial Results for First Half of FY 2014 Consolidated financial results for first half of FY 2014 are broadly in line with the plan. Sales and operating profit decreased while recurring profit. The Domestic Housing Equipment Business was affected by the drop in consumer spending following the increased demand experienced before the Japanese consumption tax hike. The Overseas Housing Equipment Business has remained favorable. 1
Financial Results for First Half of FY 2014 Financial results Y billion, rounded down 2Q, FY13 2Q, FY13 Gap between YoY 2Q, FY12 plan and Results Plan Results (%) forecast/outlook Results Reference Compared with two years prior Net Sales 2,473 2,505 2,439 66 34 2,200 +239 ( 3%) ( 1%) (+11%) Operating Profit 152 123 120 3 32 63 +57 ( 2%) ( 21%) (+90%) Recurring Profit 171 123 133 10 38 68 +65 (+8%) ( 22%) (+95%) Extraordinary Loss 48 3 0 3 48 11 +11 Net Profit 183 74 85 11 98 41 +44 (+15%) ( 54%) (+107%) 2
Financial Results for First Half of FY 2014 Sales and profit by business segment < Net Sales > < Operating Profit > Y billion, rounded down 3,000 2,500 2,000 1,500 1,000 500 0 2,473 Remodeling New Housing 2,439 Remodeling New Housing Others New Domain Overseas H.E. Domestic H.E. 2Q,FY13 2Q,FY14 YoY(%) Domestic H.E. 1,961 1,847 6% (Remodering) 1,331 1,222 8% (New Housing) 630 625 1% Overseas H.E. 428 497 +17% New Domain 82 93 +15% Others 1 1 +20% 180 152 120 160 140 120 100 80 60 40 20 0 2Q,FY13 2Q,FY14 YoY Domestic H.E. 128 54 74 (Remodering) 106 43 62 (New Housing) 22 10 11 Overseas H.E. 50 89 +39 New Domain 9 4 +5 Others 17 19 2 The new Mid-term Management Plan (2014 2017) announced on April 30, 2014 stated that the Fuel Cell business segment would be shifted from Other to New Domain in FY2014. However, this segment remains in Other at present because R&D activities to popularize home fuel cell products are currently in progress. Overseas Housing Equipment/New Domain Businesses: Favorable growth achieved Domestic Housing Equipment Business: Decreased sales and profit both in remodeling and new housing caused by drop in consumer spending following the increased demand experienced before the Japanese consumption tax hike 3
Financial Results for First Half of FY 2014 Sales per Products in Domestic Housing Equipment Business Y billion, rounded down Restroom Products 4 Net Sales 2Q, FY13 2Q, FY14 YoY(%) 756 741 2% Fittings 2% Bathrooms 6% Modular Kitchens/Basins 23% Bath/Kitchen Products Total 1,054 972 8% Others Total 204 193 5% Total (before adjustment) 2,016 1,908 5% Domestic H.E. Total 1,961 1,847 6% Internal sales or sales transferred between different segments Year-on-year sales decrease for all products/resumption in July of acceptance of new orders for kitchen systems Investment to increase sales in the modular kitchens and basins business
Financial Results for First Half of FY 2014 Sales and profit per region in Overseas housing equipment In Local Currency Net Sales Currency 2Q,FY13 2Q,FY14 YoY(%) 2Q,FY13 2Q,FY14 YoY 5 Operating Margin Americas $ million 114.4 129.2 +13% 4.0 4.0 +0.0 3.1% Billion China Chinese yuen 14.0 15.4 +10% 2.7 4.0 +1.3 26.0% Asian & Oceanian Region $ million 74.9 94.5 +26% 7.3 21.7 +14.4 23.0% Europe million 13.8 14.1 +2% 2.8 2.0 +0.8 14.2% In Japanese Yen Americas Y billion 112.8 130.9 +16% 3.9 4.0 +0.1 China Y billion 223.9 251.1 +12% 43.1 66.0 +22.9 Asian & Oceanian Region Y billion 73.8 95.7 +30% 7.1 22.0 +14.9 Europe Y billion 17.7 19.4 +10% 3.5 2.6 +0.9 Total Y billion 428.4 497.4 +16% 50.6 89.4 +38.8 Exchange rates 1$ 98.6 101.4 1 Chinese yuen 16.1 16.3 1 128.5 138.3 Operating Profit Favorable business in all regions and increase in sales and profit in local currency terms (reduction in loss in Europe)
Financial Results for First Half of FY 2014 Cause of increase/decrease of operating profit Cause of Increase/Decrease Y billion, rounded down 2Q,FY14 Domestic Housing Equipment Business Positive Factors Negative Factors Usual Cost Reduction +16 V Plan Cost Reduction +14 Decrease in Remodeling Sales Decrease in New housing sales Increase in material prices V Plan investments Strengthening investment sales Increase in labor cost Respond to the expansion of volume zone market Others Profit and loss in Overseas Housing Equipment Business Profit and loss in the New Domain Business Others Cost Reduction Total 74 +30 38 1 10 11 14 12 12 6 +39 +5 2 32 6
Contents 1. Financial Results for First Half of FY 2014 2. FY 2014 Full Year Financial Plan 3. Topics of FY2014
FY 2014 Full Year Financial Plan Financial Plan Y billion, rounded down FY14 FY13 Result 1st Half Result 2nd Half Former Plan Revised Plan Revised Plan YoY (%) FY12 Result Reference Compared with two years prior Net Sales 5,534 2,439 2,935 3,001 5,440 94 +678 4,762 ( 2%) (+14%) Operating Profit 471 120 249 252 372 99 +139 233 ( 21%) (+60%) Recurring Profit 504 133 256 246 379 125 +119 260 ( 25%) (+46%) Extraordinary Loss 65 0 17 20 20 86 36 +16 Net Profit 441 85 149 138 223 218 +54 169 ( 50%) (+32%) No change to full-year forecast from start-of-year announcement 7
TOTO V-Plan 2017: Financial Summary and Plans Net Sales Operating Income Operating Margin (In 100 millions of yen) 7,000 ( 億円 ) (In 100 millions ( 億円 of ) yen) 700 6,000 600 5,000 8.5% 7.9% 8.7% 9.4% 500 4,000 6.8% 400 3,000 4.9% 300 4.1% 2,000 3.2% 200 1,000 1.3% 1.7% 100 0 08 09 10 11 12 13 14 (plan) 15 (plan) 16 (plan) 17 (plan) (FY) 0 Decrease in sales and profit forecast for FY2014 affected by the drop in consumer spending following the increased demand experienced before the Japanese consumption tax hike, but sustainable growth expected after 2014 8
FY 2014 Full Year Financial Plan Dividend Plan FY13 Result FY14 Plan 1H Y10.0 Y13.0 2H Y13.0 Y13.0 Full Year Y23.0 Y26.0 The dividend for the 2nd half is 13 yen as planned, and the full-year dividend is planned to be 26 yen. 9
Contents 1. Financial Results for First Half of FY 2014 2. FY 2014 Full Year Financial Plan 3. Topics of FY2014
Topics: Domestic Housing Equipment Business Promotion of remodeling strategy Strengthening of TDY(*) collaboration The number of collaboration showrooms has been increased to further strengthen cooperation among TDY. With the 20th anniversary of the TOTO Remodel Club, TOTO will continue and enhance proposals such as Green Remodel Evaluations and Remodeling for the Future. Strengthening products for public bathrooms Establishing new standards for public bathrooms Public compact toilet bowls and flush tanks A new flushing system combining the advantages of tank-type and flush-valve type toilets that doesn t need electricity. Easy to install, saves water and continuous flushing (4.8 liter flush) Press release on the 20th anniversary of the Remodel Club with the three presidents of TDY (*TDY= TOTO/DAIKEN/YKK AP) Enhancement of showroom events Collaboration rooms by the three companies opened in Fukuoka in June, and in Yokohama (TY) in September. Another room will open in Nagoya in spring 2016. Joint events with Remodel Club stores and remodeling fairs are being held at 104 showrooms nationwide. An upgrading campaign is also in progress. Washlet PS With an eco-remote control that does not need dry-cell batteries or external wiring Upper photo: a set compromising a public compact toilet bowl and a Washlet PS Lower photo: Eco-remote control that doesn t need dry-cell batteries Proposal to address population aging through TDY collaboration A TDY collaboration to join the International Home Care & Rehabilitation Exhibition for the first time. Proposal of spaces and products allowing people to live free from worries in facilities for the elderly and during care at home. Plant remodeling fairs started at factories nationwide on October 11 For details, please refer to our website: http://www.toto.co.jp/remodel/koujyou/ Proposal for a bathroom with a sliding door by DAIKEN and a front board by TOTO Exhibition of a terrace window by YKK AP and a bedside toilet by TOTO 10
Topics: Overseas Housing Equipment Business China: sustainable growth maintained Despite the slowing real-estate market, housing demand in the target zone is stable. Under these circumstances, stable growth was maintained in response to changes, such as the shift of market growth from large cities to outlying cities and by leveraging TOTO s strengths as a luxury brand in China. YoY sales (on a local currency basis) 1Q 2Q 3Q 4Q Annual total 2013-11% +10% +13% +18% +8% 2014 +16% +7% +5% +7% Asia and Oceania: driven by Taiwan and Vietnam Stable sales across all of Asia Sales across Asia (on a local currency basis) exceeded the plan due to increased demand in Japan and improved productivity in Vietnam. Taiwan: enhancing expansion of Washlet sales Vietnam: adoption in hot spots Improvement to local product development Established a development center in Shanghai to strengthen the product line-up to meet local needs as a luxury brand. Will launch new products on an ongoing basis to improve development capabilities in China and shorten development times. Promotion with a focus on TVCF to further promote and expand Washlet sales in the Taiwanese market Lotte Center Hanoi, Hanoi s largest complex, whose grand opening took place in September 2014, has facilities like hotels, offices and malls, all using TOTO products. New market: A TOTO plant in India has started operations and promotion is in progress to have TOTO products used at famous locations. Upper photo: Shanghai Development Center Photo to left: Toilet bowl with integrated tank, which is popular internationally. Washlet wiring is designed not to be visible. Photo to right: The CII Classic Faucet developed for China has won the Red Dot Design Award. 11 A sanitary ceramics plant has started operations in Gujarat, India, and Anandiben Patel, Chief Minister of Gujarat cut the tape at the opening ceremony. Approximately 400 flush toilets and approximately 300 urinals are used at the 2nd terminal of Mumbai International Airport, which started operation in January 2014.
Topics: New Domain Business Ceramic Business Moved into the black during the 1st half as planned Aim to stay in the black for the whole year Growth in sales in all products due to the recovering semiconductor market and the brisk optical communications market. In particular, demand for Yttria AD coating expanded, as one of TOTO s Only One technologies. Green Building Materials Business Sales decreased but profit did not worsen compared with the previous year owing to structural improvements Productivity improved due to previous innovations, despite the influence of the drop in consumer spending following the rush in demand prior to the Japanese consumption tax hike, and favorable sales of new HydroCera products Sales (100 millions of yen) Profit (100 millions of yen) 2Q, '13 2Q, '14 YoY 38.2 51.9 +36% -4.5 0.3 +4.8 Joined Semicon West 2014 (San Francisco), one of the largest international trade fairs in the world in the field of semiconductor manufacturing equipment, materials and members. TOTO promoted its technologies including AD method. Sales (Unit: 100 million yen) Profit (Unit: 100 million yen) Dmitry Tatarin Horizont KALZIP Alcoa Architectural Products Photo credit: Olympstroy State Corporation 2Q, '13 2Q, '14 YoY 43.9 41.4-6% -5.1-4.6 +0.5 Globalize the HYDROTECT cycle and promote its popularization. HYDROTECT was used for the Olympic Cauldron at the Sochi Olympics; at the same time, materials for coating aluminum from ALCOA Inc. are being increasingly used. Fuel cells Aim to develop fuel cells into a viable business at an early stage by promoting the manufacture and development of solid oxide fuel cells (SOFCs), which uses one of TOTO s Only One technologies, and power generation modules, which are core components of fuel cells. 12
Topics: Highly Thought of by External Parties Selected as a member of Dow Jones Sustainability Indices World for four years running Selected for four years running as being in approximately the top 10% companies with regard to excellence in sustainability in DJSI, a global social responsibility investment index. TOTO s bedside flush toilet won the Excellence Award in the 6th Robot Awards. The bedside flush toilet for houses and facilities (rooms) for the elderly where toilet support is provided for those in need of care won the Excellence Award in the Service Robot Section in the 6th Robot Award hosted by the Ministry of Economy, Trade and Industry and the Japan Machinery Federation. TOTO shared the award with the laboratory run by Professor Masayuki Otsuka, College of Architecture and Environmental Design, Kanto Gakuin University. Selected as a member of CDP s Climate Performance Leadership Index for the first time TOTO was selected as a member of the Climate Performance Leadership Index and the Climate Disclosure Leadership Index for FY 2014, being highly rated by CDP for our efforts to prevent global warming. We were selected as a member of the CPLI for the first time and as a member of CDLI for three years running. Eri Hayakawa, TOTO track team, placed fourth in the women s marathon at the Asian Games Eri Hayakawa, a member of the TOTO track team, placed fourth in the women s marathon at the Asian Games held in Incheon, Korea. Her time was 2:33:14. 13
This presentation material contains forward-looking statements based on assumptions, estimates and plans as of October 31, 2014. Actual performance may differ materially from these forward-looking statements due to risks and undermined factors arising from changes in the world economy, competition and foreign currency exchange rates.