Results of Operations Half Year Ended September 30, 2009 KITO CORPORATION TSE 1 st Section November 19, 2009
Content 1. First Half of FY 2010 Financial Results 2. Second Half of FY 2010 Financial Outlook 3. Reference Material 2
1. First Half of FY 2010 Financial Results 2. Second Half of FY 2010 Financial Outlook 3. Reference Material 3
First Half of FY 2010 : Financial Highlights in millions FY 2009 1H FY2010 1H Pct. of sales Pct. Of sales YoY N e t s a l e s 16,790 100.0% 11,127 100.0% 33.7% Operating income 1,660 9.9% 85 0.8% 94.8% Ordinary income 1,654 9.9% 79 0.7% 95.2% N e t i n c o m e 883 5.3% 4 0.0% 99.5% 6,567.43-32.31-99.5% Capital investment 682-338 - - Depreciation cost 652-523 - - Note Exchange rate FY2009 1H FY2010 1H USD 105.7 96.3 CAD 103.7 83.7 EUR 163.4 133.2 Despite signs of recovery in certain regions and index, companies capital investments remain sluggish as there is still uncertainty over the global economy. We made efforts to reduce material procurement cost and cut expenses and fixed costs but earnings decreased substantially for not being able to cover a substantial decrease in sales. 4
Half Year Business Results in millions Net sales Operating margin 20,007 16,953 16,790 15,816 Operating 14.8% 14.4% margin 11,127 9.9% 4.5% FY2008 1H FY2008 2H FY2009 1H FY2009 2H FY2010 1H 0.8% 5
Consolidated Net Sales by Region in millions FY2009 1H FY2010 1H YoY Share Share Difference Pct. change Consolidated net sales 16,790 100.0% 11,127 100.0% 5,663 33.7% J a p a n 7,093 42.2% 4,054 36.4% 3,039 42.8% North America 4,618 27.5% 2,895 26.0% 1,722 37.3% c h i n a 2,977 17.7% 2,667 24.0% 309 10.4% A s i a 607 3.6% 418 3.7% 189 31.1% E u r o p e 953 5.7% 728 6.6% 224 23.5% O t h e r s 542 3.3% 362 3.3% 180 33.2% Note Exchange rate FY2009 1H FY2010 1H USD 105.7 96.3 CAD 103.7 83.7 EUR 163.4 133.2 6
Net Sales by Region (Japan) The improvement in factory utilization rate centered on automobiles did not lead to new capital investments due to overcapacity. Distribution inventory adjustment almost completed. Place hope on recovery in certain demand in Asia including semi-conductor and liquid crystal. 5,982 4,221 3,851 3,255 3,404 3,242 3,114 3,415 in millions 1,964 2,091 Apr-Jun Jul-Sept Oct-Dec Jan-Mar Apr-Jun Jul-Sept Oct-Dec Jan-Mar Apr-Jun Jul-Sept FY3/2008 FY3/2009 FY3/2010 7
Net Sales by Region (North America) The sales in the entire market nearly decreased by half after the turn year but our sales only decreased by about 30% due to the expansion of market share. Showed a partial budget implementation effect -particularly for energy-related budget but can not be optimistic. In Canada, did particularly well in oil sand. 24,715 16,929 16,505 19,199 19,611 18,097 20,771 20,543 USD in thousands 13,277 12,386 Apr-Jun Jul-Sept Oct-Dec Jan-Mar Apr-Jun Jul-Sept Oct-Dec Jan-Mar Apr-Jun Jul-Sept FY3/2008 FY3/2009 FY3/2010 The graphs represent net sales in the US market 8
Net Sales by Region (China) Orders are improving after early spring and the factory utilization rate in the second quarter (Apr-Jun *) recovered to last year s peak level. Focused on nuclear power stations, railways and other infrastructure-related demands. Substantial improvement in earnings from last year due to the effect of cost reduction. RMB in thousands 80,543 88,433 94,160 98,109 96,060 113,054 108,741 88,646 90,805 102,440 Jan-Mar Apr-Jun Jul-Sept Oct-Dec Jan-Mar Apr-Jun Jul-Sept Oct-Dec Jan-Mar Apr-Jun FY3/2008 FY3/2009 FY3/2010 China s fiscal year begins in January and ends in December. 9
Comparisons of Quarterly Net Sales and Operating margin Quarterly net sales and operating margin in millions Net sales 7,993 8,796 8,138 7,677 Operating margin 11.4% 8.5% 5,224 5,902 5.3% 3.5% 1.8% -0.4% Apr-Jun Jul-Sept Oct-Dec Jan-Mar Apr-Jun Jul-Sept FY3/2009 FY3/2010 10
Comparisons of Operating income Factor for 1,575 million decline in operating income in millions Rise in product prices Decrease in material costs Decrease in sales Decrease in SG&A expenses FY2009 1H Exchange FY2010 1H 11
FY2010 First Half Consolidated Balance Sheet in millions FY2009 FY2010 1H Difference FY2009 FY2010 1H Difference Current assets 18,118 15,407 2,711 Current liabilities 7,418 4,857 2,561 Cash & deposits 4,656 4,162 494 Notes and accounts payable 4,542 2,653 1,889 Note & accounts receivable 4,916 3,637 1,279 Short-term debt 522 440 82 Inventory assets 6,881 6,416 465 Accrued liabilities 1,130 749 381 Fixed assets 9,722 9,498 224 Fixed liabilities 3,173 3,103 70 Tangible fixed assets Intangible fixed assets Investment & other assets Total assets 7,601 528 1,592 27,861 7,293 727 1,477 24,923 308 199 115 2,938 Bond Allowance for retirement Benefits for employees Total net assets Total liabilities and net assets 1,200 1,809 17,269 27,861 1,050 1,887 16,963 24,923 150 78 306 2,938 Notes and accounts receivable Account receivable decreased due to decrease in net sales and amount of orders Notes and accounts payable Decrease in accounts payable (material cost, etc.) associated with drop in production [Inventory Implemented production adjustment to trim inventories Accrued liabilities Decrease in sales direct cost and other expenses due to drop in sales Decrease in indirect material cost and other expenses associated with drop in production 12
FY2010 First Half Consolidated Cash Flows in millions Major items of cash flows from operating activities ( 438 million) Income before income taxes Depreciation cost Decreased trade receivable Decreased accounts payable 78 million 523 million 1,213 million - 1,849 million Income taxes 614 million Major items of cash flows from investing activities (- 513 million) Acquisition of plant facilities Acquisition of intangible fixed assets - 343 million - 5 million Operating CF Investing CF Financing CF Free CF Major items of cash flows from financing activities (- 519 million) Decreased short-term debt Payments for bond issue Dividends paid - 86 million - 150 million - 202 million 13
1. First Half of FY 2010 Financial Results 2. Second Half of FY 2010 Financial Outlook 3. Reference Material 14
Japan and North America FY2010 Priority Measures Focus on attracting customers by developing detailed services using an extensive operating base. Realize customer needs with a capacity to deal with specialty goods backed by technical strength. Approach and cultivate priority industries (electricity, railroad, blast furnace, food, etc.). Obtain infrastructure demand through public spending. Attract demand for upgrading associated with aging electric power and substation facilities. Efforts in the second half Japan A dedicated sales team will continue to cultivate priority industries Release products designed based on customer needs for particular industries North America Strengthen activities for energy-related industries Continuing inventory reduction measures 15
China Steady Growth in China Maintain strong sales Expand sales of rope hoist that have the largest market share Expand sales in China Expand sales location in northern and inland areas Number of agents in China Obtain expanding domestic demand Develop traffic improvement network-related demand Continue to work toward nuclear power business Strengthening supply system Expand the factory as a production base for global market products (plan to operate in 2011) Production capacity: 36,000 units/year 65,000 units/year (1.8 times) 16
FY2010 Downward Revisions to Full Year Business Results in millions Net sales Operating income Ordinary income Net income Previous forecast 28,000 1,300 1,200 600 Consolidated Actual Pct. changes 24,500 12.5% 700 46.2% 700 41.7% 300 50.0% Previous results 32,605 2,366 2,045 1,185 Previous forecast 18,000 100 350 200 Nonconsolidated Actual Pct. changes 14,800 17.8% 500-300 - 200 - Previous results 23,319 1,125 1,231 792 17
We will continue providing values beyond customer expectations and maximize KITO brand in the market to aim to become the world s best and genuine hoist manufacturer. 18
1. First Half of FY 2010 Financial Results 2. Second Half of FY 2010 Financial Outlook 3. Reference Material 19
Corporate Profile Corporate name KITO CORPORATION Founded November 1932 Head office Listing Representative Business Employees Affiliate company Capital Shares outstanding 2000, Tsuijiarai, Showa-cho, Nakakoma-gun, Yamanashi August 9, 2007 TSE 1 st Section Stock code:6409 Yoshio Kito, CEO Manufacture and sale of hoists, cranes, etc. Consolidated 1,555 Non-consolidated 633 12 consolidated subsidiaries 3,976 million 135,241 shares No. of shareholders 8,229 Major shareholders Shareholders Each date is as of September 30, 2009. 20
Product Line Product category Manual products Electric products Crane Others Manual chain hoist Standard product Specialized product Specialized product Others Standardized product for general customers needs Share of sales 71% Originally designed & manufactured products for customers various needs Share of sales 23% After-sales services, etc. Lever block Electric chain hoist Rope hoist Saddle crane components Manual chain hoist (100t) Light crane Overhead travelling crane System crane Manipulator Provision of various components, maintenances, etc. Sling products Share of sales 6% =KITO s Major Products 21
Product Development to Meet the Diversified Needs Offer products for a diversity of industrial fields in Japan and overseas. Deal quickly with customer s needs. Holds a dominant share in Japan (established KITO brand). Environmental energy related Wind power generation Transportation Solar power generation Mining Construction & engineering Clean room Entertainment Shipbuilding Airline industry Manufacturing Natural resources 22
KITO Global Network KITO Group overseas subsidiaries and sales agent network in over 50 countries JIANGYIN KITO CRANE CO., KITO EUROPE GmbH LTD. Germany China KITO KOREA CO., LTD. Korea SHANGHAI KITO TRADING in CO., LTD. Began operation in in January 2009 China KITO CORPORATION (Japan) Domestic network Domestic sales offices: 16 16 Over 600 authorized sales agents Over 100 service offices SIAM KITO CO., LTD. Thailand KITO PHILIPPINES, INC. Philippines KITO CANADA INC. Canada Domestic sales agent :about60 HARRINGTON HOISTS, INC. U.S.A Domestic sales agent :about90 Including 2 subsidiaries in North America, 1 in Philippines, 1 in Thailand Overseas manufacturing subsidiaries Overseas sales subsidiaries Overseas network KITO and overseas subsidiaries: 12 Overseas subsidiaries branches, etc.: 3 Overseas representative office: 2 Overseas sales agent in over 50 countries 23
Cautions regarding these materials These materials are prepared for the purpose of providing information concerning KITO and are not intended as a solicitation to purchase securities issued by KITO. These materials are based on information as of September 30, 2009 unless indicated otherwise. All opinions, forecasts and other forward-looking statements reflect the judgments of KITO when these materials were prepared. KITO provides no guarantee that this information is accurate or complete. Furthermore, forward-looking statements are not promises concerning future performance and may be revised at any time without prior notice. 24