Slide 1: Presentation on CLSA Japan Forum 2016
Presentation on CLSA Japan Forum 2016 Kimihisa Tsutsui President & COO SANKYO CO., LTD. February 24, 2016 at Grand Hyatt Tokyo The Company's plans, strategies and forecasts, except historical facts, contained in this document may be subject to change due to factors of risk and uncertainty. Therefore
Slide 2: About SANKYO
About SANKYO
Slide 3: Our Company
2 Our Company SANKYO CO., LTD. 1st Sec. of the TSE #6417 Head Office Shibuya-ku, Tokyo JAPAN Paid-in Capital JPY14,840 million Established April 1966 Number of Employees 1,092 (As of December 31, 2015) Manufacturing and sales of pachinko and pachislot machines Design g of and interior work for p pac
Slide 4: Brands Structure
3 3 Brands Structure Bisty Pachinko and Pachislot Machines Development and Manufacture: Bisty Sales: Fields Strength g in p products using g licensed IP SANKYO JB Pachinko and Pachislot Machines Pachinko Machines Development, Manufacture, and Development and Manufacture: JB Sales: SANKYO Sales: SANK
Slide 5: Development Hand in Hand with the Pachinko Industry
4 Development Hand in Hand with the Pachinko Industry 1966 Established the Company 1999 Pachislot Mei-Q (Nagoya City, Aichi Prefecture) (entry to the pachislot business) 1980 Fever 2001 Sanwa Plant opened (SANKYO joined the top tier) (Isesaki-shi, (Isesaki shi, Gunma Prefecture) 1981 Head office rel
Slide 6: 5-year Financial Highlights Consolidated Statements of Income
5 5-year Financial Highlights Consolidated Statements of Income (mil yen) FY 3/2012 FY 3/2013 FY 3/2014 FY 3/2015 FY 3/2016E Net Sales 173,682 104,150 158,453 146,579 150,000 Operating Income 40 315 40,315 7 023 7,023 28 023 28,023 13 233 13,233 14 000 14,000 persentage 23.2% 6.7% 17.7% 9.0% 9.3% Re
Slide 7: Reasons for Low ROE
6 Reasons for Low ROE 1 Sluggish sales (market share has not reached the target) 2 Deterioration of net income ratio (the rise in products’ breakeven points, sales plans not achieved) (mil yen) FY 3/2011 FY 3/2012 FY 3/2013 FY 3/2014 FY 3/2015 FY 3/2016E Net Sales 201,606 173,682 104,150 158,453 146
Slide 8: Policy on Growth Strategy
7 Policy on Growth Strategy Active Active Market Penetration Product Development (Market share increase) (Peripheral prod products) cts) Certain demand exists ((Approx. pp 1 trillion yen) y ) Next-generation g g game machines Schemes for patent revenues etc. have already Resolution of management iss
Slide 9: Signs of Recovery of Financial Performance
8 Signs of Recovery of Financial Performance 1 (recovery of the market share of the mainstay pachinko machines business) 25% 20% Sanyo S SANKYO 15% Kyoraku Heiwa+Olympia Sammy 10% 5% Current management g structure Hideyuki Busujima, CEO Kimihisa Tsutsui, COO 0% CY2010 2011 2012 2013 2014 Source: Pac
Slide 10: Signs of Recovery of Financial Performance (sales rep evaluation)
9 Signs of Recovery of Financial Performance 2 (No. 1 in terms of sales rep evaluation) Main evaluation items Politeness and use of language 1 SANKYO 70.3pt Punctuality Friendliness Attentiveness and considerateness Knowledge and thoughts on current issues outside the industry 2 Company A 69.7pt Log
Slide 11: Signs of Recovery of Financial Performance (Pachinko & Pachislot Award 2015)
10 Signs of Recovery of Financial Performance 3 (PACHINKO & PACHISLO AWARD 2015: First and second places in the Pachinko Award “Yupachi Type Category” (pachinko machines for light players)) From among pachinko and pachislot machines introduced in 2014, those that captivated a large number of players
Slide 12: Business Results for the First Nine Months of FY 3/2016
Business Results for the First Nine Months of FY 3/2016 (April 1, 1 2015 to December 31, 31 2015)
Slide 13: Business Results for the First Nine Months of FY 3/2016 (Highlights)
12 Business Results for the First Nine Months of FY 3/2016 (Highlights) FY 3/2015 FY 3/2016 YoY million yyen 9 Months 9 Months Net Sales 113,510 99,452 -14,058 -12.4% Operating Income 10,910 13,077 +2 167 +2,167 +19.9% Recurring Income 11 511 11,511 14 372 14,372 +2,861 2,861 +24.9% Net Income 6,996
Slide 14: Game Machines Sales Results
13 Game Machines Sales Results FY 3/2015 FY 3/2016 YoY 9 Months 9 Months Unit Sales of 248,057 205,386 -42,671 Pachinko Machines -17.2% SANKYO+JB 96,194 133,004 +36,810 36 810 +38.3% Bisty 151 863 151,863 72 382 72,382 -79,481 79,481 -52.3% Unit Sales of 48 056 48,056 67 747 67,747 +19,691 P hi l t
Slide 15: Operating Income
14 Operating Income FY 3/2015 1st 9 Months 10,910 (Apr -Dec) The gross profit of the pachinko machine sales decreases. -4,998 The gross profit of the pachislot machine sales increases. +936 Advertising expenses decreases. +628 Sales commission decreases. +3,160 R&D expenses decreases. +2,688 Other f
Slide 16: Forecast of FY 3/2016 (Highlights)
15 Forecast of FY 3/2016 (Highlights) million yen FY 3/2015 FY 3/2016 YoY 9M FY 3/2016 Net Sales 146,579 150,000 +3,421 3 421 99,452 +2.3% Operating Income 13 233 13,233 14 000 14,000 +767 13 077 13,077 +5.8% Recurring Income 14,870 15,000 +130 14,372 +0 9% +0.9% Net Income 8,728 10,000 +1,272 9,905
Slide 17: Schedule of Implementation of Various Regulations
16 Schedule of Implementation of Various Regulations 2015 Machines with high gambling properties Sep Announcement of machines that apply and their gradual removal Regulations common to pachinko and pachislot Regulations for pachinko 2015 1/320 Regulations for pachislot Nov LLower the th upper limit
Slide 18: Treatment of Machines With High Gambling Properties and Machines With the Pin Issue
17 Treatment of Machines With High Gambling Properties and Machines With the Pin Issue Number of Pachinko machines installed Number of Pachislot machines installed 2,950 thousand units 1,640 thousand units Machines with the pin issue* Machines with high gambling properties Machines with high gamblin
Slide 19: Image of a Pachinko Machine Compliant with the New Standards
Image of a Pachinko Machine Compliant 18 with the New Standards CR Fever Densha de GO! SP CY2000 CY2014 Launched in May 2000 Pachinko ball rental income trill. yen 28.80 24.50 Pachinko 20 20 20.20 11 50 11.50 mil people 1/315 player population Gross p profit trill. yyen 50% from pachinko 3 10 3.10 2
Slide 20: Image of a Pachislot Machine Compliant with the New Standards
Image of a Pachislot Machine Compliant 19 with the New Standards Pachislot Aquarion V CY2011 CY2014 Launched in March 2011 Pachinko ball rental income trill. yen 25.40 24.50 Pachinko A+ART player population mil people 12 60 12.60 11 50 11.50 Gross p profit trill. yyen +1.5 1.5 tokens from pachislot
Slide 21: Expectations and Issues of the Machines Compliant with the New Standards
Expectations and Issues of the Machines Compliant 20 with the New Standards Issues 1 Broadening of the player base 2 1 Increase of machine Unsatisfactory for heavy players utilization hours 3 2 Enhancement of the industry’s image Prize exchange rate Expectations 3 High-cost structure of the industry
Slide 22: Response to the New Standards / SANKYO's Strengths
21 Pachinko Reg 2012 CR Virus Vi B Breaker k 1 Pachinko Reg 2004 CR Fever Dai-Yamato 2 3 Excels in low-volatility Strengths also in specifications and light Pachislot Reg 2004 proprietary products whose middle spec machines Pachislot Neon Genesis Evangelion break-even point is low 1/319 83% Palot Re
Slide 23: Policy on Return of Profits to Shareholders
22 Policy on Return of Profits to Shareholders FY 3/2016 Views on purchase of treasury stock DPS 150 yen Flexible decision-making, decision-making Including interim dividend considering the following factors Dividend Policy Stock price Opinions of shareholders Stable dividend and investors Commitmen
Slide 24: Share price and return of profits to shareholders (results)
23 Share price and return of profits to shareholders (results) (DPS Y150.00) 8,000 Repurchase of Own Shares 1.0Mil shares 1.0% (ratio to the total number of shares issued and 7,000 Retirement of outstanding excluding treasury stock) treasury stock Y 7.3 billion (acquisition cost) 8.0 Mil shares 6,00
Slide 25: Appendix
Appendix
Slide 26: Business Results for the First Nine Months of FY 3/2016
25 Business Results for the First Nine Months of FY 3/2016 FY 3/2015 FY 3/2016 Forecast FY 3/2015 FY 3/2016 Consolidated: million yen 9 Months 9 Months YoY Full Year Q1 Q2 Q3 Q4 Q1 Q2 Q3 Net Sales 113,510 99,452 -14,058 150,000 20,688 16,156 76,666 33,069 35,947 38,701 24,804 Pachinko 85,226 66,123
Slide 27: Pachinko Machines Business
26 Pachinko Machines Business FY 3/2015 FY 3/2016 Forecast FY 3/2015 FY 3/2016 Consolidated: million yen 9 Months 9 Months YoY Full Year Q1 Q2 Q3 Q4 Q1 Q2 Q3 Net Sales 85,226 66,123 -19,103 102,200 7,433 12,785 65,008 28,911 20,762 32,615 12,746 Operating Income 10,483 12,203 +1,720 14,700 (2,497) (
Slide 28: Pachislot Machines Business
27 Pachislot Machines Business FY 3/2015 FY 3/2016 Forecast FY 3/2015 FY 3/2016 Consolidated: million yen 9 Months 9 Months YoY Full Year Q1 Q2 Q3 Q4 Q1 Q2 Q3 Net Sales 18,755 22,110 +3,355 34,000 10,683 329 7,743 299 11,504 3,428 7,178 Operating Income 4,071 4,715 +644 5,000 3,864 (2,336) 2,543 (1,
Slide 29: Gross Margin/Operating Margin
28 Gross Margin/Operating Margin FY 3/2015 FY 3/2016 Forecast FY 3/2015 FY 3/2016 Consolidated 9 Months 9 Months YoY Full Year Q1 Q2 Q3 Q4 Q1 Q2 Q3 Gross Margin 43.6% 45.0% +1.3pt 42.7% 48.7% 43.9% 42.2% 40.4% 43.2% 47.2% 44.0% Operating Margin 9.6% 13.1% +3.5pt 9.3% 0.1% (30.2%) 20.6% 7.0% 16.1% 14
Slide 30: Game Machine Market
29 Game Machine Market Situation of Parlors that Are Members of Zennichiyuren 3,500 No. of outlets currently in operation No. of installed Pachinko Machines 3,163 3,000 2,900 3,107 10,638 10,613 10,571 10,558 3,042 3,009 10,480 10,423 10,407 10,400 2,954 10,365 10,342 10,327 10,325 2,603 2 494 2,494
Slide 31: Number of Titles Sold (All Manufacturers)
30 Number of Titles Sold (All Manufacturers) Pachinko Machines ・Sales p per title CY2014: 18,666 units (2,016,000 units/108) CY2010 121 CY2015: 18,518 units (2,000,000 units/108) 2011 107 2012 106 2013 106 2014 108 2015 108 0 20 40 60 80 100 120 140 160 Pachislot Machines S l per title ・Sales il CY2
Slide 32: Compliance with Format Inspection
31 Compliance with Format Inspection Pachinko Machines including Arrange Ball,Jong-Kyu 2010 2011 2012 2013 2014 2015 Applicant 658 614 598 503 613 731 Pass 544 536 534 412 505 519 Fail 112 69 87 71 97 172 SANKYO+JB 25 21 30 28 40 38 Bisty 9 12 6 10 10 8 SANKYO Group Total 34 33 36 38 50 46 Pachislot
Slide 33: Contact Us
32 Contact Us +81-3-5778-7773 ir-desk@sankyo-fever.co.jp y jp http://www.sankyo-fever.co.jp/ https://www.facebook.com/sankyo.fever http://ch.nicovideo.jp/SANKYOFEVERTV https://www.youtube.com/user/SANKYOFEVERTV