YAMASHIN-FILTER CORP. Future Growth Potential Materials YAMASHIN-FILTER CORP. TOKYO STOCK EXCHANGE NUMBER6240 November 5th, 2014 Contents 1. Corporate Profile P3 2. Business Overview P6 3. YAMASHIN Core Values P10 4. Growth Strategies P16 5. Reference P23 © YAMASHIN-FILTER CORP., 2014. All rights reserved. 1 1. Corporate Profile Corporate profile Financial highlights © YAMASHIN-FILTER CORP., 2014. All rights reserved. 2 1. Corporate Profile YAMASHIN-FILTER CORP. Business Manufacturing and sales of filtration products for construction and industrial machinery, process filtration systems and related components. Established April 5th , 1956 President/CEO Atsuhiko Yamazaki Number of Employees Consolidated 327 Non-consolidated 113 as of March 31st , 2014 Capital 822,642,500 yen Head Office 16th Floor, Nisseki-Yokohama Bldg., 1-1-8 Sakuragi-cho, Naka-ku, Yokohama 231-0062, Japan R o k a j i n i t s u k a f u r u Contributing to Society through Filtration Corporate Principle ISO9001 2008 JIS Q 9001 2008 Certified ISO14001 2004 JIS Q 14001 2004 Certified Certifications Corporate Name © YAMASHIN-FILTER CORP., 2014. All rights reserved. 3 FY 3/11 Units million yen Financial highlights FY 3/12 56th period 57th period non-consolidated non-consolidated FY 3/13 FY 3/14 FY 3/15 (forecast) 58th period consolidated 59th period consolidated 60th period consolidated (forecast) YoY 1. Corporate Profile 9,924 10,678 9,088 10,530 11,069 105.1% Gross income 3,789 3,065 3,671 4,440 4,719 106.3% 38.2% 28.7% 40.4% 42.2% 42.6% - 2,105 2,560 3,615 3,730 3,902 104.6% 21.2% 24.0% 39.8% 35.4% 35.3% - 1,683 505 55 710 817 115.1% 17.0% 4.7% 0.6% 6.7% 7.3% - 2,091 789 69 709 787 111.0% 21.1% 7.4% 0.8% 6.7% 7.1% - 1,207 531 253 336 530 157.6% 12.2% 5.0% 2.8% 3.2% 4.7% - Operating income Operating income ratio Ordinary income Ordinary income ratio Net income Net income ratio SG & A ratio SG & A Gross income ratio Sales For FY 3/15, YAMASHIN plans for ¥11,069 million of consolidated sales globally ¥817 million of consolidated ordinary income ¥530 million of consolidated net income © YAMASHIN-FILTER CORP., 2014. All rights reserved. 4 2. Business Overview Overview of YAMASHIN's business YAMASHIN's global footprint Core business flow chart © YAMASHIN-FILTER CORP., 2014. All rights reserved. 5 2. Business Overview Overview of YAMASHIN's business Filter for Construction Machinery Provide filtration products to a wide range of industries including machine tool, press machine, rail, agricultural machinery and marine industries. Filters for construction machinery 88% FY3/14 Sales ¥10.53 b Filters for Industrial machinery 4% Top market share in hydraulic oil filter for construction machinery. Manufacture and sales of filtration products used in oil, fuel, drive-train systems. Filter for Industrial Machinery Process Filter Process Provide products for filtration and Filters separation in the manufacturing and 8% processing of electronic components, liquid crystal displays and food products. Successful development and realization of nano-level filtration Global leader in hydraulic filtration for on-highway and off-highway construction machinery. © YAMASHIN-FILTER CORP., 2014. All rights reserved. 6 2. Business Overview: YAMASHIN's global footprint Develop / Design • YAMASHIN AMERICA INC. YAI • YAMASHIN EUROPE BRUSSELS BVBA YEB • YAMASHIN THAI Ltd. YTL • YAMASHIN FILTER SHANGHAI INC.(YSI) • YAMASHIN-FILTER CORP.(YMF) • YAMASHIN CEBU YCF FILTER MFG. CORP. Center( YMF Sales • Yokohama Research & Development Manufacture • YAMASHIN FILTER (SIP) TECHNO- • YSK CORP LOGY INC. YST • Saga Branch Office YSI/YST YAI YMF Headquarter/Yokohama R&D C YEB YTL YSK/Saga Branch Office YCF YAMASHIN operates in a globally integrated structure from development through manufacturing to final sale of filtration products. © YAMASHIN-FILTER CORP., 2014. All rights reserved. 7 2. Business Overview: Core Business Flow Chart FY3/14 Net sales and component ratio of filter products for construction machinery New machinery market Line parts ¥4,586 m 49% Line parts After-market parts Construction machinery manufacturer (OEM) Construction machinery End Users Genuine replacement parts Aftermarket parts ¥4,850m 5 1% B After-market ”Line parts” indicates a filter for new vehicle and/or machine. “Aftermarket parts” indicates a filter for replacement part or more commonly known as a “service part”. YAMASHIN DOES NOT compete with its valued OEM customers in the marketplace. © YAMASHIN-FILTER CORP., 2014. All rights reserved. 8 3.YAMASHIN Core Values Aftermarket support Designing Products with VOC in-mind Earning our customer's trust © YAMASHIN-FILTER CORP., 2014. All rights reserved. 9 When machines are in operation, demand for aftermarket parts increases. 1,200 900 600 600 , Filter for new machine market Volumes of shipments of new machinery 300 300 0 2012 2012 2013 2013 2011 2011 2010 2010 2009 2009 2013 2013 2012 2012 2011 2011 2010 2010 2009 2009 0 + 1,200 900 (Thousand Vehicles) * ' & % $ " ! # , 1,500 Number of machines in operation Volume is usually more than five times larger than volume of line parts(new machine. ) Aftermarket parts 1,500 (UOM; Thousands Vehicles) ) ( 3. Characteristics of YAMASHIN Aftermarket support Source: Above figures are estimated by YAMASHIN based on the various published information. The volume of the replacement filter market is expected to be more than five times larger than the volume of filters for new machine market © YAMASHIN-FILTER CORP., 2014. All rights reserved. 10 3. Characteristics of YAMASHIN Aftermarket support YAMASHIN's share of hydraulic return filters for hydraulic excavators. Comparison of sales of filters for new machines and aftermarket Aftermarket parts Line parts Economic Slowdown Financial Crisis FY2012 Highest rate of market share of new machines in the industry with our competition far behind us. YAMASHIN's market share is roughly 70% Source: Yano Research Institute FY3/10 FY3/11 FY3/12 FY3/13 FY3/14 Large market share with line parts allows YAMASHIN to support and retain a larger aftermarket volume. © YAMASHIN-FILTER CORP., 2014. All rights reserved. 11 3. Characteristics Designing Products with VOC in-mind Development process of filters Major Filter Components Selection of structure and material Prototype manufacturing Validation Outer Tube To protect the filter media Concept creation (Yokohama Research & Development Center) Banding To retain pleated media stability Filtration Media Prototype manufacturing Filter media The most important component of the filter that captures contamination Inner Tube To protect against filter collapse Validation of design Multi-pass testing machine YAMASHIN works with our customer every step of the way to design a product and meets and exceeds their expectations. © YAMASHIN-FILTER CORP., 2014. All rights reserved. 12 Required performance B Filter Durability The volume of hydraulic fluid that flows in construction machinery varies depending on the operation performed. At times, about 1,000 /min of fluid passes through the return filter. Ability to work in high pressure applications The high pressure of hydraulic circuits creates an extremely difficult environment for circuit components. Filters must be built to withstand a load of about 9 tons/m . YAMASHIN products 3. Characteristics Designing Products with VOC in-mind Yamashin expertise Expertise in the construction machinery field Long history of product development in hydraulic system components designed in Japan since the 1960s. Expertise in the other fields YAMASHIN has a long history of expertise in the development in a variety of fields such as process and industrial machinery. 2 YAMASHIN has the expertise to produce highly durable filter products which meet and exceed our customer needs © YAMASHIN-FILTER CORP., 2014. All rights reserved. 13 Strong trust relationship with construction machinery manufacturers 3. Characteristics Genuine filter seminars in local areas YAMASHIN DOES NOT COMPETE with our OEM customers. Local Dealer Customer A End-Users Aftermarket Construction machinery manufacturer* (OEM) Customer B Customer C Internet 2009 2010 2011 2012 2013 The number of seminar participants has exceeded 45,000 people in total since 2009. YAMASHIN Seminar held in China YAMASHIN is able to earn and keep the trust of customers as a valued business partner. © YAMASHIN-FILTER CORP., 2014. All rights reserved. 14 4.Growth Strategies Business environment Growth strategies © YAMASHIN-FILTER CORP., 2014. All rights reserved. 15 Status of emission control by region 40,000 40,170 41,375 42,616 2012 2012 2013 2013 2014 E 2015 E 2015 2016 E 2016 6 7 6 5 4 2014: Tier 4F 3 Stage B India 2014:Bharat Stage3 India (Tier3Tier Level) 2014: 3 level level Brazil Brazil 2015:MAR-1 2014: Tier 2 (Tier3 Level) Tier3(Scheduled in 2015) . , + * ) ( ' & % $ # " ! & % 1 - 0 Japan Japan 2014:Tier4F 2 28,000 H 27,591 2 27,050 5 26,520 H 28,000 Reference: Above figures are estimated by YAMASHIN based on IR information channels and OEM production forecasts. various / 26,225 2 25,462 H 24,720 25,000 EU 2014:Stage B Tier4Interim Level 2014: 2014: Tier 4F 24,000 24,000 USA Tier4 USA Final Reference: MITI Industrial Structure Council report for FY6/13 emission control exhaust gas regulation to restrict emissions exhaust gas as pollution-abatement measures 115,000 133,504 126,061 119,043 112,000 Tier3(Scheduled in 2015) 36,000 44,000 38,203 37,454 36,720 China Tier2 Level 2014:Stage China Tier3(Scheduled in 2015) level 2014: Tier 2 level 39,265 38,495 37,740 35,000 307,405 295,897 275,000 275,000 284,913 39,000 Market demand for new hydraulic excavator Number of machines 4.Growth Strategies : Business environment Strong demand is expected for the next few years. High emission regulation is one of the reasons for demand increase. © YAMASHIN-FILTER CORP., 2014. All rights reserved. 16 D 4.Growth Strategies : Business environment Transmission (Drive-Train) Hydraulic Fuel Engine There are many market sectors that YAMASHIN has recently entered that will help advance expansion of business in our on-highway and off-highway business. © YAMASHIN-FILTER CORP., 2014. All rights reserved. 17 H 4.Growth Strategies Three strategies Business expansion Strategy Develop new markets Strengthen and protecting our base business Using the hydraulic filter business as the core, YAMASHIN will explore new opportunities within the machinery markets, and further expand the business to other industrial sectors. © YAMASHIN-FILTER CORP., 2014. All rights reserved. 18 H 4.Growth Strategies Enlarge hydraulic filter business in the construction machinery market Key measure Action plan Find and identify customers (and machine types) that have not implemented YAMASHIN’s hydraulic filter Protect and Expand Investment to strengthen and expand YAMASHIN development capability Cost improvement by improving production technology and reorganizing supply chain Increase Genuine Parts Percentage and Share Product initiatives such as measures for counterfeit products Training initiatives such as measures to raise awareness of filter functions Target All machinery manufacturers There is still potential for current customers to use more YAMASHIN products All customers Collaborating with our valued customers to protect the after-market parts business. Enhance YAMASHIN’s revenue base by maintaining and strengthening our core competencies in filtration. © YAMASHIN-FILTER CORP., 2014. All rights reserved. 19 H 4.Growth Strategies Expand the business to new areas within the construction machinery market Key measure Action plan Target Diversify the range of machines that use YAMASHIN’s products. On-Highway and Off-Highway OEMs Product Line Expansion Greater filter variations Environmental Compliance Increase the use of YAMASHIN products by utilizing opportunities created by periodic introductions of new models Introduce products suitable for fuel conditions of emerging countries Major construction machinery manufacturers Introduce products that comply with tighter emission gas control regulation in each country For regulations, use regional information to solve customers’ problems Aggressive penetration into areas within the on-highway and off-highway machinery markets that are new to YAMASHIN. © YAMASHIN-FILTER CORP., 2014. All rights reserved. 20 H 4.Growth Strategies Foster and develop new markets Key measure Market Segment Diversification Action plan Target Full-scale entry into the industrial market Industrial machinery manufacturers Already have had transactions with customers in many industries ; currently determining priority market sectors Expand and improve R&D system and manufacturing system Filter Filter market market Filter consumption :: large Filter consumption large Vehicle market Agricultural machinery market Performance requirements -low- Machine tool market Railroad market Emission control area Construction machinery market Airplane market Petrochemical market Performance requirements -low- Shipping market Robot market Filter consumption : small Aim for overall segment expansion leveraging YAMASHIN's experience and know-how. © YAMASHIN-FILTER CORP., 2014. All rights reserved. 21 5.Reference About hydraulic filter for construction machinery © YAMASHIN-FILTER CORP., 2014. All rights reserved. 22 G G Move Stop Bend Travel motor is driven by hydraulic pressure Move the shovel Move the cylinder using hydraulic pressure D H 5.Reference About hydraulic filter for construction machinery Turn the upper body Swivel motor is driven by hydraulic pressure Construction machinery is operated using hydraulic pressure. © YAMASHIN-FILTER CORP., 2014. All rights reserved. 23 Hydraulic cylinder D H 5.Reference About hydraulic filter for construction machinery Control valve Swivel motor Hydraulic pump Travel motor Reference Japan Construction Equipment Manufacturers Association Hydraulic fluid goes to all parts of construction machinery, where hydraulic components transform hydraulic pressure into machinery movement. © YAMASHIN-FILTER CORP., 2014. All rights reserved. 24 Hydraulic circuit : The importance of keeping it clean D H 5.Reference About hydraulic filter for construction machinery Reaches the hydraulic circuit through sliding parts like cylinders Primary entry points for contamination Enters along with atmospheric contamination from the hydraulic fluid tank Residual contamination from production process or overhaul. Contamination internally generated by hydraulic circuit components like pumps and/or motors. Even small contamination causes malfunctions because hydraulic circuit is so sensitive Enormous expenses for repairs due to Effects of malfunctioning circuits hydraulic component malfunctions Delays in construction schedules and deliveries Safety problems due to construction machinery malfunctions Contamination in hydraulic circuits is the cause of about 70% of construction machinery malfunctions Failure to keep a hydraulic circuit clean can result in damage to circuit components © YAMASHIN-FILTER CORP., 2014. All rights reserved. 25 Air breather Return filter D H 5.Reference About hydraulic filter for construction machinery Line filter Reference Japan Construction Equipment Manufacturers Association Filtration is an indispensable part of the hydraulic system. © YAMASHIN-FILTER CORP., 2014. All rights reserved. 26 Forward-looking statements This presentation contains plans, outlooks, strategies and other information associated with expectations for future results of operations. This information is based on the judgments of management in accordance with information that is currently available to YAMASHIN-FILTER CORP. Economic and/or market conditions and actual results may change based on these events which are outside of YAMASHIN-FILTER CORP.’s control. Actual results of operations may differ from these forward-looking statements. Please contact us with any comments or questions: Management Planning Office, YAMASHIN-FILTER CORP. Telephone Number (JAPAN) : +81-45-680-1671 E-mail : [email protected] © YAMASHIN-FILTER CORP., 2014. All rights reserved. 27
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