アネスト岩田（6381） – [Delayed]Supplementary Presentation Material of FY2021 Full-Year Financial Results and New Mid-term Business Plan

Supplementary Presentation Material of FY2021 Full-Year Financial Results and New Mid-term Business PlanANEST IWATA CorporationMay 26, 2022Prime Market of the Tokyo Stock Exchange – Machinery Securities Code 6381 Table of contentsFY2021 financial highlightsHighlights of FY2021 financial resultsAnalysis of causes of operating income increase/decreaseSales by area and by productCash flow statementProspects for FY2022Capital investment plan and R&D costMeasures to increase shareholder returnsTopicsReference information2FY2021 financial highlightsOverseas markets contributed to increase in sales due to recovery from the Covid-19 pandemic and our measures. November’s revised values were exceeded.Sales: 42,337 million yen (up 6,748 million yen, or 19.0％, from last year)Operating income: 4,780 million yen (up 1,335 million yen, or 38.8％, from last year)Air energybusiness Contribution from SCR, a subsidiary acquired in 2018, accelerated. Sales of general-purpose air compressors remained brisk, mainly in China, throughout the year. Sales of vacuum pumps for semiconductor-related equipment grew.Sales: 25,015 million yen (up 4,149 million yen, or 19.9%, from last year)Operating income: 2,513 million yen (up 692 million yen, or 38.0%, from last year)Operating income ratio: 10.0％ (up 1.3 points from last year) Sales of products, mainly spray guns, grew mainly in the United States and Europe.Coatingbusinessby Covid-19 last year. Sales of coating systems were down as sales activities were restricted Sales: 17,321 million yen (up 2,599 million yen, or 17.7%, from last year)Operating income: 2,267 million yen (up 634 million yen, or 39.7%, from last year)Operating income ratio: 13.1％ (up 2.1 points from last year)(Notes) The operating income by business was calculated using our unique standards.3Highlights of FY2021 financial resultsSales and all income indicators have reached record highs since the company’s foundation in 1926. Overseas markets (particularly the market in China, where the results of operations of SCR, an acquired subsidiary, are steady) contributed to increase in sales. The impact of fluctuations in foreign exchange rates was 1.69 billion yen. The increase in the operating income ratio was due to the improved product mix and the streamlining associated with the work reform.FY2020FY2021Year-on-yearFY2021 result forecastsInitial forecastRevised Nov. 5Actual(million yen)Profit ratio(％)Actual(million yen)Profit ratio(％)Increase/decrease amount(million yen)Increase/decrease rate(％)Profit ratiochange (P)Forecast(million yen)Forecast(million yen)35,588―42,337―+6,748+19.0―38,50040,5003,4444,2532,6239.74,78011.3+1,335+38.812.05,57213.2+1,318+31.07.43,5418.4+918+35.0+1.6 +1.2 +1.0 3,6004,1002,5154,2504,7702,960106.82 yen109.80 yenDepreciated by 2.98 yen103.00 yen109.00 yen121.81 yen129.89 yenDepreciated by 8.08 yen118.00 yen130.00 yen15.48 yen17.03 yenDepreciated by 1.55 yen15.00 yen16.80 yenSalesOperating incomeOrdinary incomeNet income attributable to owners of parentAverage exchange rate of yen to the US dollarAverage exchange rate of yen to the euroAverage exchange rate of yen to RMBDividend Interim 13 yen (12 yen)Year-end(Forecast) 17 yen (12 yen)Annual(Forecast) 30 yen (24 yen)* Dividends: Shown within ( ) are the initially forecast dividends. The FY2021 year-end dividend will be formally decided at the 76th ordinary general shareholders’ meeting, to be held on June 24.4Analysis of causes of operating income increase/decreaseAs in the 3rd quarter, the growth in sales compensated for the cost increase resulting from increased activities, contributing to the rise in income.Increase in gross profit(Sales – costs)+3,301Reduction in retirement benefit expenses+48(million yen)4,780Increase in payment of salaries and employee benefits-1,077Increase in sales-related expenses-386Increase in goodwill amortization and other depreciation costs-135Increase in other expenses-414+1,335FY20213,444FY2020[+] Increase in sales : 42,337 million yen (up 6,748 million yen from last year)[+] Improvement in cost-to-sales ratio : 56.9％ (down 1.1 points from last year)・Changes in the product mix (up for coating equipment and down for coating systems), increase in income of the U.S. subsidiar y that acquired a business, etc.[+] Improvement in selling, general & administrative expenses ratio : 31.8％ (down 0.5 points from last year)・Establishment of cost control through the use of the Web and optimization of face -to-face sales activities, etc.[-] Increase in goodwill amortization : 254 million yen (up 49 million yen from last year), depreciation cost (up 85 million yen from last year)・Acquisition of a business (sale of coating equipment) in the U.S., etc.[-] Increase in commission fees included in other expenses (up 308 million yen from last year)・The commission fees*1 related to IT investments are approx. 148 million yen. *1 Related to the order-receiving system including product 5information management, etc.Sales by area and by productDue to booming overseas markets and our successful measures, the overseas sales ratio increased (62.1%).JapanEurope Growth in sales While the delayed supply of air compressor motors impacted us, the increase was propped up by countermeasures. Sales activities for coating systems were restricted by Covid-19, which pushed the sales down. In Japan, the competitive environment was harsh, but profitability was prioritized with price increases, etc. Growth in sales Despite the spread of infection by variants, effective sales promotion measures using the web and social media were taken. Sales of spray guns for car repair coating grew. Sales of vacuum pumps also grew steadily as the economy picked up.Asia Growth in sales Sales of air compressors in China by SCR, as well as sales associated with exports grew at a high level, and so did the sales of medical air compressors by the subsidiary in India. Southeast Asia also shifted to a recovery trend, except for coating systems.North America, etc. Growth in sales Growth of coating equipment due to the partial transfer of business in the car repair coating market in the United States; and increase in sales due to finding new customers for vacuum equipment. Sales of medical air compressors in Brazil also grew steadily.(million yen)FY2020FY2021Increase/decrease amountIncrease/decrease rate (%)Air energy businessCoating businessAir compressorVacuum equipmentCoating equipmentCoating system■Composition ratioFY2021(FY2020)JapanEuropeAsiaNorthAmerica, etc.15,27116,050779+5.14,6515,6631,011+21.810,98814,5363,548+32.34,6776,0861,409+30.1Total35,58842,3376,748+19.0○○◎◎◎◎◎◎◎◎○◎◎◎◎×-◎××America, etc.14.4%（13.1％）Europe13.4%（13.1％）Japan37.9%（42.9％）Asia34.3%（30.9％）* Converted to actual sales in each individual area◎ 10％, 3％ 〇 < 10％, 0％ < △ < 3％, 0％ > ▼ > -3％, -3％ ● > -10％, × -10％6Cash flow statementThe operating CF was down 710 million yen. The free CF was down 720 million yen from last year, and the cash and cash equivalents were 12.9 billion yen. Operating CF: (-) The earnings were down 2,038 million yen because fluctuations in the “decrease (increase) in notes and accounts receivable-trade”. Investing CF (-) “Purchase of property, plant and equipment and intangible assets” was up 354 million yen. Financing CF: (-) “Cash dividends paid to non-controlling shareholders” were up 214 million yen.FY2020FY2021Year-on-yearOperating cash flowInvesting cash flowFree cash flow(million yen)ActualActualIncrease/decrease amountOperating CF4,6023,889-7124,848 4,079 4,297 4,141 (million yen)4,602 3,889 3,535 2,811 2,598 Changes in cash flowInvesting CF‐1,067-1,078-10Free CF3,5352,811-7240Financing CF-1,958-2,103-145▲ 1,543▲ 1,067▲ 1,078Cash and cash equivalents11,64312,916+1,273▲ 3,485FY2017FY2018FY2019FY2020FY20217594 ▲ 551Acquisition of a subsidiary in ChinaProspects for FY2022Sales of 44,000 million yen (up 3.9%) and operating income of 4,900 million yen (up 2.5%)FY2021 (Actual)FY2022 (Planned)Actual(million yen)Composition ratio(％)Target amount(million yen)Composition ratio (％)Increase/decrease amount(million yen)Increase/decrease rate(％)100.044,000100.0+1,662+3.9SalesAir compressorAir energyVacuum equipmentSubtotalCoating equipmentCoatingCoating systemSubtotalOperating incomeAir energyCoatingOrdinary incomeNet income attributable to owners of parentAverage exchange rate of yen to U.S. dollarAverage exchange rate of yen to euroAverage exchange rate of yen to RMB42,33722,9502,06425,01514,4512,86917,3214,7802,5132,2675,5723,541109.80129.8917.0154.24.959.134.16.840.911.313.28.4ーー26,00059.1+984+3.9――――――40.911.112.88.1――――+678+119+86+32+77+39――――+3.9+2.5+3.5+1.5+1.4+1.1――――18,0004,9002,6002,3005,6503,580118.00 137.00 18.50 (Actual)(Forecast)* Dividend (interim + year-end ＝ annual)1 3 y e n + 1 7 y e n = 3 0 y e n1 5 y e n + 1 6 y e n = 3 1 y e n* Dividends: The FY2021 year-end dividend will be formally decided at the 76th ordinary general shareholders’ meeting, to be held on June 24. The FY2022 values are forecasts.8Uncertainty is expected to continue globally due to, for example, the conflict in Eastern Europe and the Covid-19 pandemic, mainly in China. We aim to achieve increase in sales and income with the spread of price increases and by continuing the work reform.Prospects for FY2022PreconditionsSales of 44,000 million yen (up 3.9%) Impact of the Covid-19 pandemic, mainly in Southeast Asia and China, on the world economy Impact of soaring resource prices, for example, due to the conflict in Eastern Europe, on the world economy, including the European economy As for the exchange rate, an assumed rate is used as a basis but will be reviewed flexibly. Impact of the short supply of semiconductor and electronic parts on production Steady delivery of unfilled orders for coating systemsOperating income of 4,900 million yen (up 2.5%) As in FY2021, the continuation of sales reform and operational efficiency improvement As for costs, avoidance of swing back to a situation before the Covid-19 pandemic, and aiming for creation of profits Further spread of price increases due to soaring raw material and logistics costs9Capital investment plan and R&D costIT investment went as planned. Factory capital investment slid to the next fiscal year to consider increasing production. The actual values declined.(Actual) 4Q: Amount of capital investment 78.4% (IT -related investments: 603 million yen), R&D cost 91.1%About 753 million yen were used annually, including about 150 million yen for items not yet subject to receiving inspection, such as the construction of work reform-related systems and the improvement of networks.For factory capital investment, we reconsidered increasing production and slid it to the next fiscal year.IT-related investmentsO t h e r i n v e s t m e n t s(million yen)Actual(Progress rate)PlanContentsFY2021Amount of capital investmentDepreciation cost1,568（78.4％）2,0001,510（97.4％）1,550R&D cost＊1,048（91.1％）1,150Sales42,337－・ Machine tools (creation of new ones and upgrading of existing one)・ Upgrading and enhancement of production lines・ Establishment of communication infrastructure・ IT-related investmentsAmount of capital investment(million yen)2,000 1,568 1,244 1,112 Note) R&D cost: Total of general administrative expenses and manufacturing costs related to research and developmentDepreciation cost(million yen)R&D cost (million yen)1,509 1,426 1,510 1,680 1,084 1,045 1,048 1,200 FY2019FY2020FY2021FY2022FY2019FY2020FY2021FY2022FY2019FY2020FY2021FY202210(forecast)(forecast)(forecast)Measures to increase shareholder returnsDividendpolicyDividendStock buyback We secured internal reserves to invest in growth and ensure stable dividends. The payout ratio was 35% or more. FY2021 (planned): 30 yen (annual) (13 yen (interim) ＋ 17 yen (year-end)) FY2022 (forecast): 31 yen (annual) (15 yen (interim) ＋ 16 yen (year-end)) We bought back up to 682,000 shares of our company’s stock (1.65% of shares issued excluding treasury shares) or shares worth of up to 500 million yen The period from Jan. 27, 2022, to June 30, 2022 was scheduled. Buyback completed on April 28 616,900/682,000 shares (90.5％) 499.9/500 million Number of shares issued: 41,745,505yen (100％)Changes in dividend3031* FY2016Special dividend of 1 yen included.2020222424Dividend(yen)* Dividends: The FY2021 year-end dividend will be formally decided at the 76th ordinary general shareholders’ meeting, to be held on June 24. The FY2022 values are forecasts.11FY2016FY2017FY2018FY2019FY2020FY2021FY2022(planned)(forcast)TopicsRecognized as a “Health and Productivity Management Brand 2022” for the first time (March 2022) In March 2022, ANEST IWATA was recognized as a company that practices management conscious about its employees and their families in the “Health and Productivity Management Brand”* and “Outstanding Health and Productivity Management Organization (White 500)” systems (for two years in a row as a White 500 company). ANEST IWATA carries out various health maintenance and improvement activities strategically so that our employees and their families can live happily and healthily. We have also been recognized in the “Sports Yell Company 2022” system as a company that makes active efforts to promote sports for health improvement, such as establishing internal training gyms. We will enlighten all our employees about the importance of health and, at the same time, make concerted efforts to promote activities toward health maintenance and improvement, with an aim to be the “top White 500 company in the machinery sector”.*1: “Health and Productivity Management Brand” refers to a system established jointly by the Ministry of Economy, Trade and Industry and the Tokyo Stock Exchange to select the best health and productively management companies. From 2,299 corporations recognized in the “Outstanding Health and Productivity Management Organization” system in all industry sectors, one company is, in principle, selected from each industry sector.12 Details of profit and loss statementsThe increase in sales and the product mix contributed to bringing down the cost-to-sales ratio. The establishment of cost control associated with the work reform led to a drop in the selling, general & administrative expenses ratio by 0.5 points. The operating income ratio rose by 1.6 points.FY2020FY2021Year-on-yearActual(million yen)Composition ratio(％)Actual(million yen)Composition ratio(％)Increase/decrease amount(million yen)Increase/decrease rate(％)35,588―42,337―Composition ratio change (pts)―SalesCost of salesGross profitSelling, general & administrative expensesOperating incomeNon-operating incomeNon-operating expensesOrdinary incomeExtraordinary incomeExtraordinary lossesProfit before income taxesIncome taxesNet income attributable to non-controlling shareholdersNet income attributable to owners of parent20,66214,92611,4813,444940131962134,1361,0924202,62358.141.932.39.72.60.40.30.611.63.11.27.424,10918,22713,4474,7808929915455,5411,3926073,54156.943.131.811.32.10.20.00.13.31.48.46,7483,4473,3011,9651,335-48-31-81-16730018691813.11,40519.016.722.117.138.8-5.1-24.031.0-84.3-78.634.027.544.335.04,25312.05,57213.21,318-1.1 1.1 -0.5 1.6 -0.5-0.11.2 -0.2 -0.5 1.5 0.20.31.0 13 FY2021 Changes in business resultsVacuum equipmentCoating equipmentAir energyCoating[Total]Amount: million yenSalesYear-on-yearFY2021FY2021１Q1 to 2Q1 to 3Q1 to 4Q１Q２Q３Q4Q9,10020,36030,22942,337Sales9,10011,2599,86912,107[Quarterly]Amount: million yen31.6%23.2%18.5%19.0%Year-on-year31.6%Air compressor5,06111,19916,88922,950Air compressor5,061Year-on-year34.2%26.4%21.3%18.9%Year-on-year34.2%20.7%17.1%6,1389.9%5,68912.3%4119141,4372,064411502522627Year-on-year52.0%36.5%36.1%32.2%Sales5,47312,11418,32625,015SalesYear-on-year35.4%27.1%22.3%19.9%52.0%5,47335.4%25.9%6,64021.1%35.4%6,21213.9%3,3117,15610,44614,4513,3113,8453,2904,004Year-on-year22.3%Coating system31638.1%1,08928.9%1,45625.9%2,869Year-on-year22.3%55.3%12.7%Coating system316772366Year-on-year92.3%-40.1% -40.0%-11.4%Year-on-year92.3%-53.3% -39.5%8,24611,90317,321SalesSalesYear-on-yearOperating income3,62726.3%89317.7%2,378Year-on-year117.8%66.3%Air energyCoatingOperating income4471,250Year-on-year123.6%55.8%Operating income4461,12813.0%3,52742.7%2,02853.2%1,49917.7%4,78038.8%2,51338.0%2,26739.7%Year-on-yearOperating incomeYear-on-year3,62726.3%8934,61811.8%1,485117.8% 45.6%3,6573.7%1,14910.4%777Air energyCoatingOperating income447803Year-on-year123.6% 33.4%49.1%-2.4%Operating income446681371767Year-on-year112.2%79.7%30.7%Year-on-year112.2% 63.3%-28.5%61.2%14Vacuum equipmentYear-on-yearYear-on-yearCoating equipmentAir energyCoating20.2%6,06112.7%24.2%6,68913.7%18.5%1,41373.8%5,41829.3%1,25228.7%485Mid-term Business Plan “500&Beyond”(FY2022 to FY2024)ANEST IWATA CorporationWhat we would like to convey3-year mid-term business plan”500&Beyond”First step of the long-term vision “Vision 2030″Aim for organic sales of 50 billion yen or greater in the final year, FY2024.Plan M&As for the main purpose of expanding the area coverage in both businesses.The capital source is cash on hand and treasury stocks. In addition, take the FY2035 sales of 100 billion yen into consideration as well.BusinessstrategyTargeting at the overseas markets, which are growing, increase the sales of air compressors and high- to mid-price range coating equipment (spray guns).Input high value-added, competitive, environmentally friendly oil-free air compressors and medium-size general-purpose air compressors.Promote the sales of spray guns for highly difficult coating, as well as reasonable ones that meet certain specifications mainly for emerging countries.Achieve both profitability improvement and quantitative expansion, thereby accelerating growth.OverseasmarketsDomestic marketBecause the markets are growing, increase sales to accelerate business expansion.Because the market is mature, increase profitability by increasing the unit price with high value-added products.Invest-mentShare-holderreturnsThe capital source is the operating cash flow and cash and deposits.Capital investment mainly to increase production capacity; and IT investment mainly in ERP (enterprise resource planning) to reinforce the management foundation. M&As are also important options for growth. Debt financing as the case may be.Active shareholder returns Conduct active shareholder returns with an aim to increase the dividend. Establish new indicators and achieve them, with a dividend payout ratio of 35% as a rough guide. Our company’s stock purchase limit: 1.5 billion yen (about 4% of the total number of shares outstanding)16Table of contents ANEST IWATA ESG Management of ANEST IWATA Business Model of ANEST IWATA What is the compressed air created with an air compressor used for? Sales composition ratio of main products by industry Market sizes and our market shares Market trends and business strategies Review: The profit ratio is in an upward trend. Prospects for FY2024 Overseas – Expansion with organic sales and M&As M&A strategy and successful examples Uses of cumulative operating cash flow With a View to Becoming a Company with Sales of 100 Billion Yen17ANEST IWATA18ANEST IWATA started by manufacturing coating spray gunsWe started by manufacturing coating spray guns and air compressors for inspecting those guns.Founded in 1926(Former company name: Iwata Seisakusho)Product differentiationconceptStarted manufacturing of spray guns using an American-made spray gun as a model・Environment-friendly・Ability to present proposals for coating surface creationCoating robotAirbrushSpray gunCoating hand gunAtomize paint with compressed airAir compressorCompressorStarted manufacturing of air compressors for spray gun inspectionDiversification of productsDevelopment of new applications・Oil-free・Energy-savingCoating businessCoating equipmentEq ui p ment uni ts such as sp ray guns and p ai nt sup p l y p ump sCoating systemS ystems comb i ni ng coati ng eq ui p ment wi th venti l ators, d ri ers, and coati ng rob otsbusinessAir energy Air compressorAir compressors, N2 gas generators, and auxiliary equipment such as tanksVacuum equipmentVacuum pumps and auxiliary equipment such as valvesOil-free scroll vacuum pumpOil-free scroll air compressor19Manufacturer specializing in air compressors and coating machinery and appliances (spray guns)ANEST IWATA at a glanceAir energy business for manufacturing air compressors; and coating business for handling coating equipment and systemsSales composition ratio（FY2021)25,015 million yen59.1％17,321 million yen40.9％Air compressor products 54.2％Vacuum equipment products 4.9％Coating equipment products 34.1％Coating system products 6.8％Operating income composition ratio（FY2021)2,513 million yen 52.6％2,267 million yen 47.4％Air energy businessCoating businessAir compressor productsMachines that compress gas, mainly airVacuum equipment productsMachines that suck in gas to reduce the pressure, creating a vacuumCoating equipment productsTools for painting and coating by spraying paints and other liquids, and machines for transporting liquidsCoating system productsSystems that handle a coating process and processes before and after it in a series of flows,including coating equipmentFor use in machine drive sources at factories, train door opening/closing control, hospital facilities, etc.For use in advanced research institutes, car/food factories, etc.Supply of products related to painting and coatingDesign and sale of coating linesFactoryTrain/busGeneral industrySemiconductor manufactureCarHome appliancesCar partsRailway vehicleMedicalFoodFoodResearch instituteWood, metal, and plasticArt and hobbiesWood products/home appliancesConstruction machinery/heavy machineryOil-free scroll air compressorOil-free scroll vacuum pumpSpray gun for the car repair coating marketRotary coating robot20Value creation and main KPIs of ANEST IWATAReprinted from Integrated Report 202121ESG Management of ANEST IWATA22ESG is in our DNA. Achieving record high profits for 96 years since our foundationBy placing ESG at the base of management, we have gotten over several recessions for 96 years since our foundation, achieving record high sales and operating income.Sales in FY202142.3 billion yenOperating income4.7 billion yenSynergy of acquiring SCR (2017)Succeeded in developing oil-free scroll air compressors(1991)Started overseas expansion with air compressors on a full scale (2009)100thanniversaryAttempted overseas expansion in Europe with spray guns(1968)ESG management: Accumulation of detailed experiences is the key to success. Continuing to enhance each of E, S, and G is a driver for growth. We were aware of environmental issues from early on, and mass-produced oil-free air compressors, which compress air with no oil. Faced with regulations in the United States and Europe, we developed and mass-produced spray guns that can atomize paint not containing organic solvents and reduce air pollution. As long as there are production plants somewhere in the world, there will be no changes in the basic structure, which requires air compressor (compressed air). Accumulation of detailed experiences is the key to success. Continuing to enhance each of E, S, and G is the point for long-term prosperity. The business reform, which we had been promoting for some time, accelerated due to the COVID-19 pandemic, so that we achieved record highs with 42.3 billion yen in sales and 4.7 billion yen in operating income in FY2021. Increase in sales overseas contributed to growth. We dedicated ourselves to increasing the shares in the overseas air compressor markets, in particular, where our superiority is easy to bring out.23ESG is in our DNA. Growth strategy ESGES G1980’s President”Pure-play manufacturers like us cannot survive unless we continue to consider what products cancontribute to the world.”To grow in the global market, we need to develop and commercialize products that are excellently environment-friendly. Developed the world’s first air-cooled oil-free air compressor based on small-size scroll type air compressors, which enabled us to expand our business by developing new markets, such as food and beverage manufacture and medical applications. Advantages of oil-free products as compared with the oil feed type• Environmentally friendly• Improved quality of compressed air• Increased productivityCompression System24ESG is in our DNA. Growth strategy ESGES G Oil-free air compressors account for less than 50% in the domestic market in the number of units. The sales ratio of oil-free air compressors in ANEST IWATA is about 58%.It is estimated that they account for around 15% to 20% in the global market. There is large room for increase in the overseas markets, in particular. In value terms, the oil-free air compressors of our group account for about 60% of total air compressor sales (FY2021). In FY2021, about 58% The only manufacturers that mass-produce air compressors of various models are ANEST IWATA (pure-play manufacturer) and one domestic all-around manufacturer.The all-around manufacturer has not been successful in developing sales channels for air compressors alone in the overseas markets. We expanded the supply of oil-free air compressor main units as OEM products to air compressor-specializing large manufacturers overseas.Ratio of oil-free air compressors Oil-free air compressors are about 1.5 times higher in price than the oil feed type. In contrast, the profit ratio is higher than that of the oil feed type. The overseas air compressor markets are less severe in price competition than the Japanese market. As compared with an operating income ratio of about 10% in Japan, it is possible to secure 10% to 20% overseas. (Details on page 37.) Raising prices due to soaring material costs was implemented in Japan as well.In the overseas markets, periodic price revision and price increase become widespread.70%60%50%40%30%20%10%0%ANEST IWATAGlobal market25ESG is in our DNA. Growth strategy ESGES G1980’s President”Pure-play manufacturers like us cannot survive unless we continue to consider what products can contribute to the world.”To grow in the global market, we need to develop and commercialize products that are excellently environment-friendly.・ Rise of water-based paint notcontaining volatile organiccompounds (VOCs), which are among the causes of atmosphericenvironment destruction and health damage・Increasing demand for spray guns that can easily form coated film ofrequired quality, can reduce the total amount of paint used, andcan also reduce the working hoursDevelopment of spray guns dedicated for car repair coating, especially for water-based paints, which are hard to atomize because of their higher viscosity than general solvent-based paints, which contain large amounts of VOCs, as well as difficult-to-apply paints that have high design propertiesLatest spray gun dedicated for car repair coating, WS-400 Series 226ESG is in our DNA. Growth strategy ESGE SGImprovement of management power through investment in management foundation: Human resourcesHuman resource investmentPrevious mid-term plan measureMeasuresImprove the work environmentAchievementsRecognized in the “Health and Productivity Outstanding Organization (White 500)” system(two years in a row since 2021)Achieve the placement of the right people at the right placeSystem for training human resources so that they can be active overseasChanges in employment structureAdopt job-type employmentInfrastructure personnel managementPromote talent managementDiversityEnsure that diverse human resources can exhibit their abilitiesDevelop personnel strategies through group company-wide optimization27ESG is in our DNA. Growth strategy ESGE SGDX promotionImprovement of management power through investment in management foundation: DXPrevious mid-term plan measureMeasuresEnhance infrastructures and networksVisualization of global business management and improvement of efficiency of consolidated accountingAchievements• Build a customer integrated database• Open an official EC site• Operational efficiency improvement system(Improvement of responses to inventory confirmation, delivery, distribution confirmation, etc.)Increase in the number of higher-accuracy inquiries due to domestic sales reform• Make preparations for renovating the core systeminformation• Study digitalizing design technology • Improve the functions of estimation and order-receiving systemsAfter confirming further domestic sales reform, we plan to expand DX reform to the overseas markets.28ESG is in our DNA. Growth strategy ESGE SGEnhancement of the supply chain: Stabilization and optimization to support production and sales increasesImpacts on the results of operationsMoney amount (operating income)MeasuresIncome-increasing factors• Cost rate improvement• Establishment of a logistics department• Optimization of the collaboration system through supplier evaluationIncome-decreasing factors• Soaring raw materials• Shortage of logistics resources• Global supply-demand imbalance+0.5 billion yen-1 billion yenPowerful production systemSupply chain management systemPrice increases29ESG is in our DNA. Growth strategy ESGE SGQuality assuranceRealize safe and secure product quality, so that:• Sales personnel in our group can propose and sell with confidence.• Dealers and service shops can recommend to customers with a sense of security.• After purchase, customers can be satisfied with product quality.⇒Divide three activity policies into nine issues and promote them.Assurance policyIssuesAimed-for quality = Customer satisfactionKGI: Customer satisfactionKPI: Customer complaint rateThe target is a 20% reduction from the FY2021 level at the end of the mid-term in the next period.③Enhance product safety②Enhance quality reliability①Review the quality systemRules that can be followedDownsizingGlobalShare the assurance policyMonitoringTransmit information timely and improve efficiencyComplaint handlingStandardize analysis keysDefect preventionIncrease quality by,for example, making changes to existing productsRecurrence preventionIdentify causes, increase the quality of measures, and expand them horizontallyProduct riskmanagementClarify the corporate attitudeProduct safetyPrevent risks from occurringComplianceRespond to product accidents and PL30ESG is in our DNA. Growth strategy ESGS GEBusiness model with the dispersion of risks in mind.During bad times, customized products supported our business performance. During good times, general-purpose products contributed to revenue.15%19%20%25%21%Manufacturing of automobiles and other transportation equipmentManufacturing of general machinery and electric/electronic equipmentManufacturing of food and beveragesSpecific markets (medical, vehicle-mounted, etc.)OEM, etc.Customize: Manufacture and pricing according to customer specifications* Specific uses such as medical, car-mount, analysis uses(The ratio of oil-free air compressors are very high.)Estimates based on our domestic data collected in FY2021Risk distribution chartPossibility of occurrenceBusiness activitiesITHuman resourcesLaws and regulationsOther①Risks related to business activities• Business environment• Product quality• Business expansion including M&As②Risks related to human resources• Securing of human resources• Labor problems③Risks related to IT• IT investment• Information securityImpact④Risks related to laws and regulations• Environmental regulations• Fraudulent acts violating laws and regulations• Intellectual property• International taxation• Accounting including impairment loss of non-current assets, etc.⑤Other risks• COVID-19• Unpredictable events(such as acts of terror and natural disasters)31ESG is in our DNA. Growth strategy ESGS GEAppoint multiple independent directors from early on to acquire external knowledge and, at the same time, create a transparent governance system.(The ratio of external, independent directors at our board of directors is about 64%.)To enhance governance, establish a management meeting with independent officers as observers.32Business Model of ANEST IWATA33What is the compressed air created with an air compressor used for?Conventional usesSpecific uses (specific markets) that we have developed for oil-free air compressors Blowing away the chips generated during machining with a Manufacture of food, beverages, chemicals, etc. Operating air cylinders that can be seen in robot motions, etc. machine tool (air blow)(equipment in operation) In the graph below, painting and coating are included in “Other”.Main uses of compressed air at production plants OEM Physics and chemistry/Research and development Medical treatment at hospitals, dental offices, etc. Mounting in the braking systems of commercial and other vehicles(including the supply of oil-free air compressor main units to top-class air compressor manufacturers overseas)Other20%Air blow40%Air leakage5%Securing of workpieces10%Adsorption (transportation)10%Equipment in operation15%Estimated by us34Sales composition ratio of main products by industryPreviously, both air compressors and spray guns (coating equipment) were mainly for automobiles and general industries. Development of uses by inputting new products contributed to sales. For air compressors for automobiles and general industries, the oil feed type, frequently used for some time, accounted for the main part of air compressor sales, but by inputting the oil-free type, we were successful in developing new demand in food and beverages, specific markets, OEM, etc.Air energy businessAir compressorsFY2021* Shown in parentheses are values in FY2020.Coating businessSpray guns (coating equipment)FY2021* Shown in parentheses are values in FY2020.Ratio of new uses developed56％20%(20%)15%(15%)19%(20%)25%(25%)21%(20%)Manufacturing of automobiles andother transportation equipmentManufacturing of general machineryand electric/electronic equipmentManufacturing of food and beveragesSpecific markets (medical, vehicle-mounted, etc.)OEM, etc.15%(10%)44%(50％)41%(40％)Automotive (manufacturing andrepair)Manufacturing of general industrialproducts (wooden, metal, and plasticproducts, etc.)Hobbies, art, etc. (airbrushes)Estimates based on our domestically collected dataEstimates based on our domestically collected data35Market sizes and our market sharesThe growth driver is the increase in sales of air compressors in the overseas markets.Global air compressor market:About 1,400 billion yenGlobal spray gun (coating equipment) market:About 140 billion yenOur market shares in terms of money value: About 1%Our market share in the United States and Europe in terms of number of units:25 to 30%EuropeAsiaNorth AmericaEuropeAsiaJapanNumber of small air compressorsAbout 25 to 30%OtherJapanNumber of hand spray gunsAbout 75% or moreNorth AmericaOther* Market shares and market sizes are estimated by us.36Air energy market trend and business strategyOverseas marketsDomesticmarketPrice competition is less severe than in Japan. Expand profits by increasing shares in overseas markets.Secure income with oil-free and other value-added products in a mature market.Huge and high-margin overseas marketsMature and increasingly eco-conscious domestic marketMarket sizeApprox. 1,400 billion yenApprox. 80 billion yen (approx. 6% of the global market)CompetitorsMultiple manufacturers almost solely specializing in air compressorsMajor electronics manufacturer A, steel manufacturer B, etc.Major player’s operating income ratioApprox. 10 – 20%Less than 10%Market structureSeveral major manufacturers deal with air compressors as their main business. Price competition is less severe.Price competition is always severe as all-around manufacturers supply air compressors with other products.Profitability assessmentThere is price competition, but there is much room for us to increase our shares and profits, compared to the domestic market.The market is mature and price competition is severe.Increasing profits is difficult.Our sales and share12.5 billion yen (approx. 1% share)10.5 billion yen(approx. 13% share, mainly small-size air compressors)Our strategyIncrease overseas sales through M&A and other meansIncrease high-margin products (e.g., oil-free scroll-type)* Investigated or estimated by ANEST IWATAAir energy business strategy Air compressor strategy (Air compressors account for approx. 92％ of sales in FY2021.)37Coating market trend and business strategyOverseas marketDomesticmarketIn addition to the competitive high-end range, we will seek to achieve growth in the mid-range spray gun market.Although this is a mature market, we will secure profit with value-added products by leveraging our large market share (our hand spray guns have a share of approx. 75％).Huge overseas markets; each can be developed according to their local characteristics.Mature domestic market where there is a need for value-added productsMainplayersSATA GmbH & Co. KG, Carlisle Fluid Technologies (Devilbiss brand), etc.Carlisle Fluid Technologies (Devilbiss brand)Meiji Air Compressor MFG, etc.Our products: WIDER, ’kiwami Series, etc.Market sizeApprox. 140,000 million yenApprox. 14,300 million yenReason why we can expect to expand market shares abroadMajor competitors have strengths in the high-end range, whichrepresents our main product line. Products of the high-endrange are often not necessary in emerging nations. We canimprove productivity and expect to increase sales by settingproduct specifications and price ranges for each individual area.Major competitors have strengths in the high-end range, and itremains difficult for brand change to take place. We boast awealth of know-how gained from years of operating in theEuropean and American markets and have launched commercialmodels in these markets. If the use of water-based paintincreases as environmental regulations are tightened, there ispotential for us to increase sales. We will meet demand for mid-range products by marketing a second brand.Market size investigated or estimated by ANEST IWATA in FY202138Review of the results thus far of the mid-term business plan: The profit ratio is in an upward trend.The sales plan was not achieved due to the COVID-19 pandemic, but the work reform we had promoted accelerated, and the operating income ratio is in an upward trend.Starting in 2016, we gained a solid footing by expanding overseas bases, acquiring human resources, mainly engineers, complementing the product range with M&As, and organizing and reinforcing the production line.Starting in 2021 amid the COVID-19 pandemic, the sales and work reforms, including IT investment, accelerated, promoting the development of a system that can increase sales while suppressing selling, general & administrative expenses.Million yenFY2015FY2016FY2017FY2018FY2019FY2020FY2021Sales29,52429,54832,81738,80739,09135,58842,337- Air energy- CoatingOperating income15,59713,92616,09013,45718,13314,68223,05315,75222,22416,86620,86614,72225,01517,3213,7963,7333,8244,3393,8763,4444,780Changes in operating income ratio12.9%12.6%The decrease from FY2017 was due to M&As including SCR and the increase in hiring human resources.11.7%11.2%The decrease in FY2019 was due to the product mix associated with, for example, the increase in sales of coating systems and the COVID-19 pandemic at the end of that period.9.9%9.7%FY2015FY2016FY2017FY2018FY2019FY2020FY202111.3%39Prospects for FY2024: Oil-free products and operational efficiency improvement contribute to income growth.FY2021 (Actual)FY2024 (Planned)Actual(million yen)Ratio(%)Organic target value(million yen)Composition ratio(%)100.050,000100.0Prospects for FY203542,33722,9502,06425,01514,4512,86917,3212,5132,267SalesAir energyAir compressorVacuum equipmentSubtotalCoating equipmentSubtotalCoatingCoating systemOperating incomeAir energyCoatingOverseas sales compositionAir energyCoatingOil-free product consolidated sales ratioSGA ratio54.24.959.134.16.840.910.013.154.1％73.7％60％31.8％29,50059.0――――41.011.0*9.812.7――――20,5005,5002,9002,60055.9％71.5％60％ or more30％ or less Sales of 100 billion yen Operating income ratio of 10% or greater Increase in overseas sales ratio Expansion of domestic service business Suppression of selling, general & administrative expenses with IT investment effect, total personnel cost management, and work reform40Indicators to place particular emphasis on* For the air energy business, we expect to invest in new businesses and product development, in particular.Overseas – Expansion with organic sales and M&As (Planned values reflect only organic sales.)Overseas sales expanded from 39.6% to 62.1% in the past 10 years. With a technical tie-up with SCR, acquired through M&A in November 2017, the sales of oil feed type screw air compressors were expanded toward the global market (including the Japanese market).Overseas sales (%)Note) Converted to actual sales in each individual areaOther (includingUS)Changes in sales of main overseas companies merged and acquiredFY201139.6％9.713.216.7Organic salesCompanies purchasedJapanAsiaEurope50,00040,00030,00020,00010,0000FY201856.4％1330.612.8Europe: 10 companiesAsia: 14 companiesOther area: 9 companies13.4FY202162.1％14.434.312.7％13.1％15.2％33 companies17.5％0.9％2.5％Sales of companies merged and acquired increased by a factor of 26.7 in six years.FY2011FY2012FY2013FY2014FY2015FY2016FY2017FY2018FY2019FY2020FY202141M&A strategy and successful examplesOur group extracts candidates, led by both Air Energy and Coating Divisions, and evaluates them together with the Headquarters.The capital source for M&As will be cash on hand and treasury stocks.Our desired purposes of M&As• Regional coverage (For air compressors, the standards for electrical equipment, pressure vessels, etc. differ from country to country. By acquiring local manufacturers, we can obtain local procurement routes for parts conforming to standards, optimal sales channels and service functions for the local areas.)• Complement of technologies, know-how, and product rangesCompanies that reserve necessary standards. Manufacturers that have procurement, production, sale, and service systems.Emphasis is placed on securing standards. The company size does not matter. (Small sizes are OK.)CandidatesSuccessful examples• H&S in Germany (manufacture of airbrushes. By expanding equipment, sale destinations were increased.)• SCR in China (manufacture of mid- to large-size air compressors. By utilizing our and our subsidiary’s sales channels, sales increased considerably.)* Sales were up about 37% from FY2018.Successful examples with collaborations with merged & acquired companiesWe acquired an air compressor manufacturer in Brazil as a subsidiary, and started mass-production of oil-free air compressors.This subsidiary in Brazil developed sales channels, establishing sales channels from the subsidiary to local hospitals.42Uses of cumulative operating cash flow (concepts for shareholder returns and capital policies)Active investment for growth and the expansion of the business scaleThree years (April 2022 to March 2025)Cumulative operating cash flow* Illustration of distributing money amountsOperating cash flow15 to 16 billion yen Investment for production capacity increasePromote the capacity of Fukushima and Akita Factories (installation of additional lines and replacement with advanced equipment) to increase products to be exported overseas IT investmentTo promote global management, enhance enterprise resource planning (ERP)Promote business management and consolidated accounting including overseas bases For M&As, use private funds and treasury stocks.Capital investment5 to 6 billion yenBreakdownEquipment maintenance and replacement/Production capacity increase3 to 4 billion yenIT investment2 billion yenResearch and development/New expansion/M&As, etc.5 billion yenShareholder returns/dividend/stock buyback5 billion yen Aim to achieve an ROE of 10.0% or greater (FY2024) Payout ratio: Roughly 35% Our company’s stock purchase limit: 1.5 billion yen or greater43With a View to Becoming a Company with Sales of 100 Billion Yen44The new mid-term plan is the first step for the mid- to long-term vision, “Vision 2030”.Achieve both ESG and earning power (SX*) and improve our corporate valueMarch 2022 The sustainability council was launched.September 2022 Materiality will be released.2026Become a 100-year company2022-2024New mid-term business planVision 2030Add color to the world and bring about an enriched society with fluid and air technologiesCorporate vaue ilmprovement2022202420262030* Sustainability transformation45Mid- to long-term vision, “Vision 2030”, and beyond (evolution of technologies and products)Expansion of product areaExpansion of business areaEmphasis on environment and social contribution by realizing innovationsSales100 billion yenInvest in scroll technologiesEnter gas compression/recovery marketsBecome one of the “world’s leading oil-free air compressor manufacturers”Expand use-by-use productsDevelop cutting edge technology spray gunsBecome one of the “world’s leading coating equipment/systemmanufacturers”42.3 billion yen(Actual value in FY2021)2022202420272030 and after46businessAir energy Coating businessCreating a system for developing new businesses: Making new businesses our future core businesses① Create markets and develop new products and services by utilizing the core technologies and know-how cultivated thus far② Enter new areas, not on extensions of conventional businesses, from the sustainability viewpoint, by utilizing core technologies(“gas compression/recovery businesses” by utilizing scroll compression technologies, “development of particle/coated film formation devices” by expanding liquid spray technologies, etc.)Discover and trainin-house entrepreneursBusiness creationLaying of groundworkDevelop new productsand services①Next-generationnew businesses②NewProducts and servicesExistingExistingbusinessesLiquid atomization technologies,gas compression technologies, etc.Develop marketsand customers①ExistingMarkets and customersNewContribute to revenueDiscover future core business candidates”Gas compression/recovery businesses”,”development of particle/coated film formation devices”, etc.47DisclaimerNotes on the descriptions about future prospects and other mattersThe future prospects for our company mentioned in this document are based on the currently available information.Please be advised that there are various external factors that can impact our business performance, such as the global economy, exchange rate fluctuations, the industry’s market conditions, and capital investment trends, and that the actual performance may differ from what is stated herein.This document is intended to provide investors with relevant information and not meant to invite or recommend anyone to buy or sell shares in our company or any other securities.Contact:IR Corporate Communication Office, Corporate Planning Department,ANEST IWATA CorporationPhone: 045-591-9344E-mail: ir_koho@anest-iwata.co.jpURL : https://www.anestiwata-corp.com/48