Yokogawa Electric Corporation Investors' Guide · CENTUM VP e.g. Downstream (※) Transmission of...

2019

© Yokogawa Electric Corporation

0

Investors' Guide

Security code：6841

Yokogawa Electric Corporation

2019


1

Contents

1. Corporate profileCorporate Data, The Yokogawa Philosophy,Changes of Main Products and Services of Yokogawa,Global Network, Sales/Operating income, Profit Attributable to Owners of Parent, Reform of Business Structure, Business Segments

2. Control businessMeaning of Control, Solution portfolio, Business model, Trend of Global Sales, Sales ratio by region・Recent major projects・Numberof employees, Major Industries, LNG(Energy Supply Chain, Value Chain),Contract-type(MAC), Strengths, Market share, Shake out of industries

3. AppendixOverview of long-term business framework and mid-term business plan,Treasury strategy and capital policy, Shareholder value(TSR),Enhancement of corporate governance, Initiatives for sustainability targets

2019


2

Corporate Data

※At the end of March 2019

Founded:

Hitoshi Nara

Company name: Yokogawa Electric Corporation

September 1, 1915

Capital stock: 43.401 billion Yen

President and Chief Exective Officer: Hitoshi Nara

Net Sales: 403.7 billion Yen（Overseas sales ratio:68.3%）

Operating income: 34.6 billion Yen

28.4 billion Yen

R&D expenses/sales ratio:

6.5%

Number of employees: 17,848（Outside Japan 11,363 Japan 6,485）

Shareholder equity ratio: 61.7％

Dividend: 32 Yen (Dividend per share)

Market cap: 536.4 billion Yen ＊September 30, 2019

Net income:

Corporate Headquarters

2019


3

The Yokogawa Philosophy

As a company, our goal is to

contribute to society through

broad-ranging activities in the areas of

measurement, control, and information.

Individually, we aim to combine

good citizenship with the courage

to innovate.

FounderDr. Tamisuke Yokogawa

Quality first

Pioneering spirit

Contribution

to society

Founding Principles

2019


4

Changes of Main Products and Services of Yokogawa

Technical innovation in industries

1910s: electrification Analog era Digital era

1980s: microcomputers

1990s: open architecture

2000s: networking

Control systemsIndustrial

instrumentsMeasuring

instruments

Meters

Founding1915

Present

2010s: cyber-physical system

Time fortransformation

-Yokogawa has a 100 year history of continuallytransforming itself.

-Our current IA* business has been achievinggrowth by moving into new countries/regions.

-Now, with the ICT revolution underway, is thetime for transformation.

*Industrial Automation Solution services

2019


5

Global Network

Service office

Response center

Service network

Yokogawa China（China）

Yokogawa Europe（The Netherlands）

Yokogawa Electric CIS（Russia）

Yokogawa Electric Korea（Korea）

Yokogawa Corporation of America

（U.S.A.）

Yokogawa Americado Sul

（Brazil）

Yokogawa headquartersTokyo, Musashino City

Yokogawa Middle East & Africa

（Bahrain）

Yokogawa India（India） Yokogawa Electric International

Yokogawa Engineering Asia（Singapore）

Yokogawa's global network of 113 companies spans 60 countries.


230 service offices in 80 countries2,000 service engineers

2019


6

376.5

316.6 325.6 334.7347.9

388.5405.8 413.7

391.4406.6 403.7

420.0

4.7 2.6

11.1

16.6 18.4

25.9

29.8

39.6

31.6 32.7 34.6

40.0

0

5

10

15

20

25

30

35

40

45

50

0

50

100

150

200

250

300

350

400

450

Sales/Operating income

FY09 FY10 FY11 FY12 FY13 FY14 FY15FY08 FY16 FY17

FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18FY19

Forecast

US dollar

US ドル(Yen) 100.66 92.61 85.13 78.82 83.33 100.67 110.58 119.99 108.95 110.70 111.70 110.00

ROS (%) 1.3 0.8 3.4 5.0 5.3 6.7 7.3 9.6 8.1 8.0 8.6 9.5

Sales Operating income

Sales

Operating income

(Billion¥)

FY19Forecast

FY18

Record high

2019


7

(Million Yen)

(%)

-12

-8

-4

0

4

8

12

-50,000

-30,000

-10,000

10,000

30,000

50,000

FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18

Profit Attributable to Owners of Parent 親会社株主に帰属する当期純利益Net Income/Net Sales 売上高当期純利益率

Trend of Profit Attributable to Owners of Parent

Broken away from the deficit for three years (FY08-FY10)

FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18Sales

売上高(Million Yen) 376,534 316,606 325,620 334,671 347,899 388,463 405,792 413,732 391,433 406,590 403,711

Income before Tax

税引前当期利益(Million Yen) -9,400 -10,693 -1,025 11,672 20,496 21,750 27,426 41,936 35,523 29,381 38,428

Profit Attributable to Owners of Parent

親会社株主に帰属する当期純利益(Million Yen) -38,446 -14,799 -6,692 5,952 14,688 12,341 17,223 30,161 25,759 21,449 28,446

Profit Attributable to Owners of

Parent/Sales

売上高親会社株主に帰属する当期純利益率 (%)-10.2 -4.7 -2.1 1.8 4.2 3.2 4.2 7.3 6.6 5.3 7.0

2019


8

Reform of Business Structure (FY08-FY18)

Transfer MEG* business to Ricoh Company, Ltd.

FY08

Measuring instruments

Life science

Photonics

Advanced stage

Semiconductor testers

Japan System Techniques Co., Ltd

Medical information

Control

Measurement

Other Businesses

FY18

Transfer/Withdrawal

Withdrawal

Transfer/Withdrawal

Spin-off

Kokusai Chart Corporation Transfer

Yokogawa Digital Computer Corporation

Transfer

*MEG= Magnetoencephalograph

IA Systems & Service (SS)

Transfer(Sep.2019)

Transfer

Aviation and Other Businesses

Measurement

IA Products & Service (PS)

Control

YDC Corporation Stock transfer 79.8%(Jan. 2017)

Operating income4.7

29.0

▲25.0

0.7

Operating income34.6

34.0

1.9

▲1.3

Withdrawal from the panel meterBusiness (Mar. 2017)

(Billion ¥)

Premium Solutions & Service (PSS)

(Apr.2016)

NKS Corporation

Yokogawa DenshikikiCorporation

Transfer(Dec.2018)

Acquire(Dec.2018)

2019


9

Business Segments

Measurement 22.9 billion yen

5.7%

4.0%

Aviation and

Other Businesses16.0 billion yen

364.8 billion yen

90.3 %

Control

DL850

WT3000

Flat panel displays

CSU-X1

80%@2008

70% @2006

59%@2002

60%@2004

Field instrumentsDCS

403.7Total

Billion yen

FY18 Sales Breakdown

2019


10

Meaning of Control

Control：

To get the temperature and flow rate of each step through sensors, and to control equipment to achieve the targeting rate

distributed control system

CENTUM

ISA100 wireless sensors

Transmitter

Gas Analyzer Transmitter

2019


11

<Refining>

<Receiving raw materials like crude oil, etc.>

<Petrochemicals & chemical>

<Distributed control system: DCS>

CENTUM VP

<Field equipment>

e.g. Downstream (※)

Transmission of

measurement value

Furnaces & Pipelines, etc.

Measurement of

temperature,

pressure and

flow rate, etc.

Control of

each equipment

※Yokogawa is strongest in downstream industry. Generally, Oil & Gas industry is divided into "the domain of exploration, field development and production" and "the domain of refinery,

transportation and Sales". In oil & gas industry, the former is called upstream, while the latter is called downstream, compared with the flow of the river.

Control and monitor of the entire plant

About Control ~ Image ~

2019


12

Solution Portfolio in Control Segment

Consul-ting

Engineering & design

Lifecycle service

Systemintegration

Physical security＆

cyber security

Application

Automation

Business

Operations

Strategy

planning

Supply chain

optimization

Asset lifecycle

optimization

Operational

risk management,

Production

management

Asset

managementEnergy

managementQuality

management,

ControlControl

systemsSafety

systemsEdge

controllers

Field

Devices

OT

sensors

IIoT

sensors

Operation Management & Control

Integrated performance managementand process optimization

value

Insights

Analytics

Data

etc.

etc.

From “Automation Supplier” to “Trusted Partner”

2019


13

Over entire facility lifecycle, continue to provide support and propose solutions that capitalize on Yokogawa’s strengths.

・Focus on OPEX business over long-term（＝ OPEX business is cumulative）➡Expand service business while making strategic use of M&A and alliances.

・CAPEX business fluctuates, but plays essential role in generating continuous OPEX business

opportunities. To increase CAPEX orders, we need to keep developing new business areas.

Initial 4 year 8 year 12 year 15 year

OPEX

a. Solution service

b. System upgrade

c. Instrumentation

replacement

d. Annual maintenance

contract

etc.

CAPEX

Digital

transformation

Design

Combined test

FEED

Delivery, start-up

Engineering

Ability to

integrate OT

and IT

Problem-

identifying

capability

Yokogawa’s OPEX business strengths

Business opportunity

(cumulative)

4 years 8 years 12 years 15 years

NEW

Acquired RAP

International

Collaborating with

ExRobotics B.V.

＜Yokogawa Business Model＞

Sustainable growth by balancing CAPEX and OPEX business (e.g.)

2019


14

100.6 99.4 103.5 100.5 97.9 98.1 101.8 105.6 107.0 109.4 112.0

156.2 161.2 173.7 195.2238.4 259.9 264.9 242.5 256.3 255.4

275.0

256.8 260.6277.2

295.7

336.3358.0 366.7

348.1363.3 364.8

387.0

7.7%

6.3%7.2%

6.1%

7.2% 7.6%

10.0%

8.8% 8.4%9.3%

10.1%

34.0

24.2

39.0

30.4

18.0

19.916.5

19.9

30.6

27.1

＜Exchange rate＞

Operating incometo sales ratio

FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18FY19

Forecast

US$ (¥) 92.61 85.13 78.82 83.33 100.67 110.58 119.99 108.95 110.70 111.07 110.0

Sales outside Japan was up more than 70% in 10 years(Billion¥)

FY14FY11FY10 FY13FY12FY09 FY16FY15 FY17 FY19

Forecast

Operating income(Billion¥)

■Outside Japan ■Japan

FY18

Trend of Global Sales in Control Segment

36.7

2019


15

Middle EastAfrica12.3%

Europe8.5%

North America

7.9%

China11.6%

⚫ PETRONAS, RAPID PJT⚫ Map Ta Phut Olefins Co., Ltd.

petrochemical plant complex construction PJT⚫ INPEX, Ichthys LNG PJT (Australia)⚫ Chevron, Wheatstone LNG Project (Australia)➢ Approx. 3,100persons

※Destination-basedJapan:JapanSoutheast/Asia:Singapore, Korea, etc.China:ChinaIndia:IndiaEurope:Netherlands, France, U.K.,

Germany, etc.

Japan31.7%

Energy

SoutheastAsia

Far East18.0%

India3.4%

Russia4.5%

South andCentralAmerica

2.1%

⚫ Gazprom SakhalinⅡOil and Natural Cas Development PJT⚫ Yamgaz YAMAL LNG PJT➢ Approx. 500persons

⚫ Bharat Petroleum Corporation, Truckterminal automation PJT

⚫ RajCOMP water informationmanagement system

➢ Approx. 1,600persons

⚫ Shell＆CNOOC, Shell Nanhaipetrochemical complex PJT

⚫ PetroChina Control System for Water Source Facilities


⚫ TedaguaProvisur AeawaterDesalination PJT

➢ Approx. 400persons

Russia：RussiaNorth America：U.S.A., CanadaMiddle East/Africa ：Bahrain, Saudi Arabia, etc.South and Central America：Brazil, etc.

Sales ratio by region (※) ・Major projects・Number of employees

(already disclosed)

⚫ NAM-GLT,GLT-PLUS innovation & upgrade PJT

⚫ BPA,Major Multi-product Fuel Pipeline

Renovation PJT➢ Approx. 2,000persons

⚫ Saudi Aramco and Sumitomo Chemical Co., PETRO Rabigh 1,2 PJT

⚫ SEWA (UAE), Power and Desalination Station

⚫ TAKREER, Abu Dhabi Oil Refining PJT➢ Approx. 900persons

⚫ Industry know-how ⚫ Rich installed base

Environment, Chemical, Oil,Power, Pulp & paper,Iron & steel, Pharmaceutical, food, etc.


⚫ Chevron Phillips Chemical Company,USGC petrochemicals PJT

⚫ Shell, Norco chemical re-instrumentation program

⚫ Shintech, Ethylene PJT⚫ Cheniere Energy Partners, Sabine Pass LNG

PJT➢ Approx. 800persons

2019


16

Major Industries & Orders Breakdown

Oil, LNG(liquefaction), etc.

Petrochemical, Refinery

LNG(regasification), etc.

Bluk chemical, Specialty chemical, etc.

Foods, Pharmaceuticals, Iron & Steel,

Paper, LNG(carriers) etc.

Power generation, Renewable energy, etc.

Water treatment, etc.

Upstream

Downstream

Chemical

Others

Power

Water

FY18 Control Orders：393.6 billion yen(FY17 Control Orders：359.0 billion yen)

16%4%

4%

35%

39%

5%4%

17%

20%

15%

17%

24%

FY18

FY17


2019


17

＜Yokogawa’s LNG＞

YOKOGAWA share of LNG

LNG liquefaction LNG transportation

Liquefaction

87trains

LNG Carrier

73vessels

Regasification

50terminals

LNG regasification

LNG carriers

Liquefaction

trains

Regasification

plants

*Source: Company data

We are expanding our OPEX business with customers who are engaged in the natural gas liquefaction, LNG transport, gasification, storage, and delivery processes by providing manufacturing execution system (MES), simulation, energy management, and other solutions that cover the entire value chain.

⚫ Energy management

and optimization⚫ Simulation

64 66 442015

YokogawaYokogawa Yokogawa

2018

2019


18

EPC

Contract-type(MAC：Main Automation Contractor)

MAC: Main Automation ContractorEPC: Engineering, Procurement & ConstructionPMC: Project Management Consultant

Definitions

EPC EPC EPCEPC

PMC

CBA

MAC

2002:CSPC’s NanhaiPetrochemical Complex

2012:RabighⅡ2012:Ichthys2013:US Gulf Coast2014:RAPID etc..

MAC Orders

Yokogawa provides a total automation solution,

covering all project phases from initial design

to start-up, in cooperation with the customer.

Customer (E/U)

＜Megaproject＞

Companies

Scope ofinstrumentation

2019


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Yokogawa’s Strengths

● The four GENs- Professionals who have extensive knowledge of the four GENs:

genba (plant sites), genbutsu (actual things), genjitsu (current status),

and genchika (localization)

- 24/7 support system

● Trust- Reliable products with the same high quality, a long lifespan, and excellent

environmental resistance all over the world

- Ability to optimize processes for both industry and society (engineering)

- Perseverance and persistence (ability to carry through projects)

● Co-creation- Co-creating value with customers and serving as a provider of

holistic solutions spanning everything from management to field operations

- Extensive knowledge of industries, manufacturing processes, and engineering

- Good citizenship (our corporate philosophy), the pursuit of harmony, and

sharing the same goals as our customers

2019


20

2018 DCS Market Share

Asian Market share(market size US$4.96bn)

Global market share (market size US$15.04bn)

Source: ARC Distributed Control Systems Global Market 2018-2023

Yokogawa

Yokogawa

Chemical Market share(market size US$3.57bn)

YokogawaYokogawa DCS sales:¥192.5 billion・-¥1.4 billion, -0.7% year on year・53% of total control business (¥364.8 billion)

2019


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Shake out of industries

1990:

２７vendors

※ MIV: Main Instrument VendorMAC: Main Automation Contractor

1995:

１８vendors

2015:

６vendors

YOKOGAWA

CompanyＢ

Company A

Company C

Company D

Company E

3 Companiesin China

2 Companiesin Japan

2 Companiesin Europe

YOKOGAWA

Company Band Other 1

Company A

Company Cand Other 3

Company Dand Other 2

Company Eand Other 2


2 Companiesin Japan

YOKOGAWAand Other 1

Company Aand Other 1

Company Band Other 4

Company Cand Other 5

Company Dand Other 2

Company Eand Other 3


2 Companiesin Japan

GlobalizationSupplier

Downsizing

OpennessMIV(※)MAC(※）

2019


22

Appendix

2019


23

Appendix: Overview of long-term business framework andmid-term business plan

Phase3： 2020 -Growth to become an even more

profitable company

Phase2： 2018- 2020

Creating opportunity and establishing

foundation for growth

Phase1：2015 - 2017Establishing a foundation for

growth by transforming our

business structure

Long-term business framework

2015 2020 2025 2030 2050

⚫ Customer focus

⚫ New value creation

⚫ Highly efficient global

company

TF2017

Digital Transformation

TF2020

Mid-term business plan

Net-zero emissions Well-being Circular economy

Sustainability targets: Three goals

⚫ Transformation of existing

businesses

⚫ Creation of new businesses

and transformation of

business model

⚫ Improvement of productivity

through Group-wide

optimization

20192018

2019


24

Appendix: Treasury strategy and capital policy

Prioritize investments that maximize corporate value over the mid- to long-term.

Also, proactively increase dividends.

Precondition: keep shareholder capital at a level that can maintain an A rating

Organic FCF 85 billion yen or more(3 years, cumulative) Cash＋Free cash flow (FCF) Strategic investment＋

① Strategic investment cap ② Return to shareholders

M&A, alliances: 70 billion yen Stable and sustainable

dividend payment⚫ Dividend payout ratio:

seek to keep at over 30%

⚫ Prioritize investment in the transformation of existing

businesses and the creation of new businesses.

⚫ Purposes include acquisition of technologies, sales

channels, products and services, customers, human

resources, and know-how.

Even when temporary factors lead to a downturn in

financial results, maintain a stable dividend rate based

on the equity dividend rate.

2019


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Appendix: Shareholder value

Ensure that TSR* exceeds shareholders’ cost of equity while seeking to

maintain a close dialogue with the capital markets (investor relations).

Maximizing the shareholder value over the mid- and long-term

TSR

Capital gain

Growth potential

Profitability

Income gain

Dividend payment

Share buyback

Organic FCF + Cash

Business strategy and investment

Shareholders’

cost of equity ＜

Return to shareholders

*TSR : Total Shareholders Return

2019


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Appendix: Enhancement of corporate governance

YearAction

Directors Auditors Officers

Inside OutsideOutside

%Inside Outside Japanese Foreigner

2003 Introduced outside directors 7 1 13% 2 2 24 02004 Abolished retirement bonuses for directors 7 1 13% 2 3 24 02005 7 1 13% 2 3 26 0

2006Introduced one year tenure system for directors and revised articles of incorporation to reduce number of directors (25⇒15) 9 1 10% 2 3 27 0

2007Increased number of outside directorsIntroduced takeover defense measures 8 2 20% 2 3 29 0

2008 7 2 22% 2 3 30 0

2009Increased number of outside directorsRenewed takeover defense measures 7 3 30% 2 3 15 0

2010 5 3 38% 2 3 13 1

2011Renewed takeover defense measuresSold shares of a listed affiliate 4 3 43% 2 3 14 1

2012 4 3 43% 2 3 11 12013 4 3 43% 2 3 13 0

2014

Established Nomination and Compensation Committee (voluntary advisory body)

Discontinuation (non-renewal) of takeover defense measuresIntroduced standards to ensure independence of outside directors

6 3 33% 2 3 13 0

2015

Established Nomination Advisory Committee and Compensation Advisory Committee (voluntary advisory bodies)

Conducted outside evaluation of Board of DirectorsEstablished Yokogawa Corporate Governance Guidelines

6 3 33% 2 3 11 0

2016Increased number of outside directorsIntroduced a Restricted Stock Compensation Plan 6 4 40% 2 2 12 0

2017Appointed a woman as an outside member of the Audit & Supervisory BoardAppointed 2 foreign nationals as officers 6 4 40% 2 3 15 ２

2018Abolished the Senior Advisor, Advisor, and Honorary Corporate Associate PositionsAppointed an outside director as chairman of the BoardIntroduced new performance-linked stock compensation plan (PSU plan)

5 4 44% 2 3 14 3

2019Selected foreign national as director for the first time Outside director to be appointed for position of chairman of Board of Directors

4 4 50% 2 3 15 3

2019


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Appendix：Initiatives for Achieving Sustainability Goals

■2050年に向けた長期目標（Three goals）気候変動への対応すべての人の豊かな生活

Through our business activities, we aim to make the world a better place for future generations.

For the first time, Yokogawa was included in the 2019 Global 100 Most Sustainable Corporatios in the World Index, which is one of the leading sustainability indexes of the world.Yokogawa supports recommendations of the Task Force on Climate-related Financials Disclosures.

Resource efficiency improvement:

1 trillion yen（FY2030）

Mid-term targets for

2030

Business focus areas and overview of value

creation stories

Renewable and low-carbon energyContribute to avoid CO2 emissions through offering

of renewable energy and LNG solutions

Life innovation and safetySupport people’s health and prosperity through

provision of life-innovation solutions assurance of safe and comfortable workplaces

Energy saving and resourcesContribute to sustainability and economic

growth through stable and efficient operation and resource regeneration

●Renewable energy●Low-carbon energy

Supportdevelopment of

drugs andbiopharmaceuticals

Improvementof safety

On-sitemaintenance

solutions

Improvementof water

environment

●Advanced solutions●Consulting to improveproductivity

Avoided CO2 emissions （Cumulative from FY2018）

Amount of productivity improvement of

pharmaceuticals and food customers

(compared to FY2017)

Number of provided drug

discovery systems

(compared to FY2017)

Amount of improvement effect

proposed to customers (compared to FY2017)

Maintenance service sales

amount (compared to

FY2017)

Value creation themes

KPI

Target for 2020 60 million tons 2 times 20 times3,200

systems850 190 2 times 1.3 times

23.98 million tons 1.6 times 1.7 times2,543

systems339 144 The same level 1.1 timesFY2018 results

2020Medium-term targets

comply with the TF2020 business plan

2018review

Vision toward 2050（Three goals）

Stopping climate change Quality life for allCirculation of resources

and efficiency

Avoided CO2 emissions:

1 billion tons （Cumulative from FY2018 to 2030）

Safety and health value creation:

1 trillion yen(FY2030)

Improved productivityin manufacturing/

processing of pharmaceuticals/

foods

Long-termstable

operation ofplant

Number of shipped safety instrumented

system controller units

Number of provided on-site

maintenance solutions

Number of provided water environment improvement

solutions

2019


28

Disclaimer

The information pertaining to our business plans and forecasts that has been provided in this presentation and at analyst meetings contains forward-looking statements that are based on our management’s current knowledge and require the making of assumptions about future events.

As such, it cannot be guaranteed that these statements will not differ materially from actual results.

Yokogawa undertakes no obligation to publicly update or revise any forward-looking statements after the issue of this document except as provided for in laws and ordinances.

The copyright to all materials in this document is held by Yokogawa.

No part of this document may be reproduced or distributed without the prior permission of the copyright holder.

The information has not been restated to reflect the revision of the initially allocated acquired costs that was decided upon finalization of the tentative accounting treatment and application of the “Partial Amendments to Accounting Standard for Tax Effect Accounting”.

IR Sec. Treasury & IR DepartmentYokogawa Electric Corporation

Email: [email protected]

Phone: +81-422-52-6845

URL: http://www.yokogawa.com/about/ir/

2019.11.22

mailto:[email protected]

http://www.yokogawa.com/about/ir/

Yokogawa Electric Corporation Investors' Guide · CENTUM VP e.g. Downstream (※) Transmission of...

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