Daiki Axis Co., Ltd. (4245, First Section, Tokyo Stock Exchange) Issues Operating Performance for the Nine Months Ended September 30, 2018

TOKYO,Nov. 20,2018 -- Daiki Axis (TOKYO: 4245) is pleased to announce its results for the nine months ended September 30,2018.

Summary of Results

The fiscal year ending December 31,2018 is the "JUMP" year in the "HOP-STEP-JUMP" procession outlined in the Company's medium-term management plan,V-PLAN60,and also marks the 60th year since the Company's founding. During this year,Daiki Axis has been working to meet the numerical targets of its medium-term management plan. The Company's main business strategy is to focus on ensuring future revenue and profits through several initiatives. First,in the environmental equipment segment,the Company is strengthening the management of its recurring-revenue energy service company (ESCO) businesses in the areas of maintenance and water utilities,and bolstering sales overseas. Second,in the household equipment-related business segment,Daiki Axis remains faithful to a style of sales that adheres faithfully to the Company's roots,while cultivating new customers. Third,the Company is strengthening development and sales in the renewable energy segment to help expand future demand and contribute to the realization of a recycling society.

During the nine months ending September 30,2018,the Company generated net sales of JPY25,477 million (up 3.0% YoY),operating income of JPY446 million (down 43.3% YoY) and ordinary income of JPY585 million (down 33.6% YoY). Profit attributable to owners of parent was JPY511 million (up 15.4% YoY). As costs remained high,the gross profit margin was down year on year,and profit was affected by rising personnel costs and 60th anniversary project costs. Based on revisions to the shareholding policy,which were based on the Company's corporate governance code,JPY479 million in gains on sales of securities was recorded as extraordinary income while loss on sales of non-current assets and loss on retirement of non-current assets were recorded as extraordinary loss. Overall,segment income (operating income) finished below initial forecasts despite performance in line with the previous year's results in the household equipment-related segment. This shortfall was due to results in the environment equipment segment that were below expectations.

In the environmental equipment segment,sales of wastewater treatment systems declined somewhat year on year and fell short of projections. This decline occurred primarily because of the absence during the period of a project on the scale of a large project in China worth JPY607 million the Company completed during the same period of the previous fiscal year. Also,some earnings from comparable projects in Japan during the current year were included in the results of other accounting periods due to utilization of the percentage of completion method. Revenue in the recurring-revenue ESCO businesses in the areas of maintenance and water utilities was robust.

In terms of segment income (operating income),the Company was unable to secure a profit margin of the same level as the previous year's due to inhibiting factors,including reduced sales,which were accompanied by cost increases and JPY56 million in loss due to unprofitable construction in the domestic business. As a result,performance fell short of initial forecasts,with net sales finishing at JPY12,226 million (down 2.4% YoY) and segment income (operating income) at JPY764 million (down 24.0% YoY).

In the household equipment-related business segment,the Company made general progress with its marketing efforts and results were similar to those at the same time during the previous year. Sales of retail products through DIY stores fell year on year,despite new stores going into business,because of reduced sales to existing stores. Construction of stores—recorded in sales this fiscal year—increased substantially.

In terms of segment income (operating income),results were in line with initial forecasts,with net sales coming in at JPY11,824 million (up 6.1% YoY) and segment income (operating income) at JPY416 million (up 11.9% YoY).

In the renewable energy segment,the Company began recording subsidiary income from solar power generation in the second quarter of the previous fiscal year. During the current fiscal year,the Company recorded subsidiary income from solar power generation starting from the beginning of the year and began solar power generation during the second quarter. Results were somewhat lower than initial forecasts but increased significantly year on year. Sales of biodiesel fuel were also higher than they were at the same time during the previous fiscal year. The Company posted no sales results for the compact wind generation business but recorded JPY11 million in grant money for collaborative academic,business and government operations as non-operating income.

As for segment income (operating income),temporary connection inspection and examination costs incurred while commencing power generation amounted to JPY15 million. This weighed down results for the segment,which finished below initial forecasts. The Company recorded net sales of JPY177 million (up 39.6% YoY) and segment loss (operating loss) of JPY72 million (JPY55 million at the same time during the previous year).

In other segments,during the previous fiscal year,the Company recorded subsidiary construction sales in the engineering business starting in the second quarter. In the current fiscal year,the Company recorded these sales from the beginning of the year. The CreCla business posted a year-on-year increase in sales.

As a result,net sales were JPY1,248 million (up 34.5% YoY) and segment income (operating income) was JPY109 million (up 5.6% YoY) as the segment substantially exceeded initially projected figures.

The Company announced revisions to forecasts for the fiscal year ending December 31,2018 on the same day it disclosed financial statements for the nine months ended September 30,2018. The new projected figures are net sales of JPY35,600 million,operating income of JPY900 million,ordinary income of JPY1,030 million,and profit attributable to owners of parent of JPY960 million. The projected amount of net sales is unchanged from previously announced figure,but forecasts for income have been revised downward.

On the same day,the Company also announced its acquisition of stock in Crystal Clear Contractor Pte. Ltd.,making it a second-tier subsidiary. Crystal Clear Contractor mainly conducts pool maintenance for condominium hotels and private homes in Singapore. As Singapore's population increases,the number of pools is following suit,and Daiki Axis views expected growth in Crystal Clear Contractor's target market as an opportunity to accelerate plans to expand its own business operations overseas using its water treatment technology.

Daiki Axis Co.,Ltd. (4245,First Section,TSE) "Summary of Consolidated Financial Results for the Nine Months Ended September 30,2018" is available here:

http://www.daiki-axis.com/ir/info/index09.html

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