Fiscal Year 2009
First Half Result and Second Half Plan
October 30, 2009
1
October, 2009
1
Contents
1．Financial Result for First half of FY2009
2．FY2009 Full Year Financial Plan
3．First half Results and Second half Measures
2．Progress of V Plan 2017 (Long term Plan)
Reference ; New housing starts forecast
2
October, 2009
Today, we will be covering the topics you can see here.
2
Summary of FY 2009 1H Financial Results
Sales and profit decreases resulted in an overall loss
The fall in operating profit from lower sales was partially offset with cost and
SG&A cuts
- Sales for new housing fell substantially as demand for new homes remained weak.
- Sales for the Remodeling Business fell year on year, with no clear signs of a recovery
in remodeling demand.
- Overseas sales dipped substantially below the year-ago level in the period following
the financial crisis, reflecting the sharp fall in demand in the United States and the
stronger yen.
- Operating profit of 1.5 billion yen was achieved in 1H, in spite of an operating loss of
3 billion yen posted in the first quarter.
- Inventory cuts were larger than originally planned, thanks to reviews of the
production organization, including a reduction in the number of items.
3
October, 2009
Results for the first half of fiscal 2009 were disappointing, with declines recorded in both sales and
profit, and a net loss posted for the term.
In Japan, sales for new housing fell significantly from the year-ago period, reflecting weak demand
for new homes.
Remodeling demand also cooled, influenced by sluggish domestic consumption, with the result
that sales from the Remodeling Business were also down year on year.
The stronger yen affected our results in overseas markets, as did the rapid deterioration in U.S.
demand conditions in the aftermath of the financial crisis. The business downturn also affected our
performance in Asian markets. As a consequence, overseas sales fell short of the previous year’s
level.
The Group was able to absorb the effects of the sales decrease on operating profit to a certain
extent with inventory downsizing through across-the-board reviews of our production organization,
comprehensive cost-cutting, and savings through initiatives such as temporary releases from work
and wage cuts. We achieved a first-half operating profit of 1.5 billion yen, reversing the operating
loss of 3 billion yen posted in the first quarter.
The Group also exceeded its plan in inventory cuts, through a rigorous review of its production
organization and a reduction in the number of items.
3
FY 2009 First Half Financial Result
※¥ billion, rounded down
FY08 1H
Result
Net Sales
FY09 1H
Plan
(Revised on 9/30)
220.0
(205.0)
-1.5
(-2.2)
-2.0
(-1.7)
233.9
Operating Profit
3.8
Recurring Profit
4.0
Result
204.6
-1.5
-1.5
YoY
Difference
-29.3
(-13%)
-5.3
-5.5
Extraordinary Loss
-8.3
0
-0.9
7.4
Net Profit
-4.6
-4.0
(-5.0)
-4.6
±0
Decreased in sales and profit
4
Our results for the first half of fiscal 2009 are shown in the table.
Net sales fell 13% year on year, to 204.6 billion yen.
Operating profit fell 1.5 billion yen.
Recurring profit declined 1.5 billion yen.
We posted an extraordinary loss of 0.9 billion yen.
And as a result, the Group posted a net loss of 4.6 billion yen.
October, 2009
Sales by Business Segment
（¥ Billion）
250
（‘08 1H Result）
（‘09 1H Result）
233.9
204.6
( )=
YoY Growth
(-13%)
33.8
200
4.4
150
26.6
(-21%)
2.7
(-38%)
115.0
(- 5%)
121.1
100
50
74.6
60.3
(-19%)
0
FY08 1H Result
Overseas
New Business and Others
Remodeling
New Housing
FY09 1H Result
New Housing Starts
(Jan. - June)
540 thousands
400 thousands (-27 %)
Demand based
on delivery time
520 thousands
460 thousands (-11 %)
5
October, 2009
Looking at sales for segments including new housing, remodeling,
new
business and others, as well as overseas, sales for the new housing segment fell
19% year on year, to 60.3 billion yen, reflecting the impact of severe declines in
demand for new homes.
Sales for the remodeling segment were down 5% year on year, to 115 billion yen,
as weaker business confidence countered our efforts to communicate value to
customers and to stimulate demand that focused on remodeling club stores.
Sales for the new business and others segment dropped 38%, to 2.7 billion yen,
attributable to a steep fall in ceramics sales associated with capital investment
controls in the semiconductor industry.
Finally, sales for the overseas segment was down 21% from the year-ago period,
to 26.6 billion yen. This was primarily the result of sharp falls in sales in the
United States and Asia, which reflected rapidly worsening demand conditions.
Sales per Products -YoY Growth
FY09 1H Result
Products
YoY increase/decrease
Sanitaryware
Washlet
Restroom Products
Bathroom
Fittings
Modular Kitchen
Lavatory
Bath/Kitchen Products
Ceramics
TOTAL
-11%
-12%
-12%
-13%
-11%
-16%
-10%
-13%
-59%
-13%
Sales for all the products decreased impacted from demand decline
6
October, 2009
Looking at sales by product, several products enjoyed growing demand thanks to
their popularity with customers. These included the Octave series of lavatory
dressers, released in February and featuring a sink and improved storage capacity.
However, sales were down year on year for all product types, a reflection of
sluggish demand.
Cause of Increase/Decrease of Operating Profit
※Y billion, rounded down
Cause of Increase/Decrease
FY09 1H FY09 1H
Plan
Result
Positive Cost Reduction
Factors Decrease in SG&A
Decrease in material prices
Price Revision
Hold down sales activities
+1.5
+1.1
+0.7
+0.3
-1.0
+1.5
+5.9
+0.9
+0.5
+0.4
Negative Decraese in New housing sales
Factors Decrease in Remodeling Sales
Decrease in overseas sales
Increase in general products/Decrease in sales prices
Loss from decrease production due to furlough etc.
-1.1
-0.6
-1.7
-1.5
-1.2
-4.5
-2.1
-1.8
-1.5
-2.9
-0.6
-1.1
-0.7
-1.0
-5.3
Cost increase in allowance for retirement due to
decrease in interest income
Others
Total
-5.3
7
October, 2009
Looking now at factors that had a positive impact on operating profit, cost
reductions reached 1.5 billion yen as projected. Cuts in expenses meanwhile
exceeded our forecast to reach 5.9 billion yen, the result of Group-wide
efforts to reduce manufacturing and related costs, and also to lower selling,
general and administrative expenses. The Group also cut investments to boost
sales by 0.4 billion yen, for instance by postponing outlays that were unlikely
to produce immediate effects given weak demand. The effects of lower raw
material prices amounted to 0.9 billion yen, including the impact of the lower
copper price.
Negative factors for operating profit were as follows.
Operating profit fell on lower new housing and remodeling sales, with effects
of 4.5 billion yen and 2.1 billion yen, respectively.
The impact of the decline in production associated with inventory-reducing
activities and temporary releases from work totaled 2.9 billion yen.
As a result, operating profit declined 5.3 billion yen from the first half of the
previous fiscal year.
Cause of Increase/Decrease of Operating Profit
＜Performance in local currency＞
(Unit: Y billion, rounded down)
North & Central America
for external customers
Total sales including internal trades
Operating Profit
（Exchange rate JPY/US$）
'08/1H
14.4
14.4
1.0
106.42
'09/1H
(Unit: $ million, rounded down)
YoY difference
10.1
10.1
0.3
96.01
-30%
-30%
-65%
for external customers
Total sales including internal trades
Operating Profit
(Exchange rate JPY/Chinese Yuan)
'08/1H
11.8
18.3
3.0
15.51
'09/1H
-11%
-17%
-10%
(Unit: Y billion, rounded down)
Others
for external customers
Total sales including internal trades
Operating Profit
'08/1H
5.5
11.3
0.4
'09/1H
YoY difference
5.1
9.5
-0.1
- 9%
-16%
-
(Unit: Y billion, rounded down)
TOTAL
for external customers
Total sales including internal trades
Operating Profit
'08/1H
31.7
44.0
4.5
'09/1H
YoY difference
25.7
34.7
2.9
'09/1H
105
105
4
YoY difference
-23%
-23%
-61%
(Unit: Hundred Chinese yuan, rounded down)
YoY difference
10.5
15.1
2.7
13.22
135
136
9
＜Performance in local currency＞
(Unit: Y billion, rounded down)
China
'08/1H
-19%
-21%
-35%
'08/1H
7.6
11.8
1.9
'09/1H
7.5
10.7
2.0
YoY difference
-2%
-9%
+5%
North & Central America : Decreased
in sales and profit impacted from sharp
decrease in demand and strong yen.
China: Though sales for external
customers (sales in China) were healthy,
decreased compared to former year as
sharp increase in first half of FY08 for
Olympic demand. Total sales decreased
as export for Japan and U.S. decreased.
Others (Europe): Invested for
marketing and attending big trade show.
8
October, 2009
The table you see here shows the status of our overseas businesses.
United States: Sales were down sharply, falling 23% on a local currency basis and 30% on a
yen basis, reflecting the effects of exchange rate fluctuations.
China: Sales to external customers fell 2% on a local currency basis, and 11% on a yen basis,
influenced by exchange rate fluctuations.
A substantial sales boost in the first half of the previous fiscal year attributable to the Beijing
Olympics was the primary factor in the year-on-year sales declines. Actual performance in this
market remained strong.
Other areas: We invested in trade shows and marketing activities in Europe, where the Group
launched full-scale operations during the year.
Contents
1．Financial Result for First half of FY2009
2．FY2009 Full Year Financial Plan
3．First half Results and Second half Measures
2．Progress of V Plan 2017 (Long term Plan)
Reference ; New housing starts forecast
9
October, 2009
9
Summary of FY 2009 Full-Year Plan
Sales and profit forecasts have been revised downward, and a net loss is
anticipated for the second consecutive year, given a slow recovery in
domestic and overseas demand.
- The sales forecast has been revised from 455 billion yen to 418 billion yen, and the
operating profit forecast from 6.5 billion yen to 5 billion yen.
(2H operating profit is expected to rise from 2.6 billion yen in FY2008 to 6.5 billion
yen in FY2009.)
The FY 2009 net profit forecast has been revised from 2 billion yen to a loss of
1 billion yen.
- Net sales for new housing now forecast to fall 21% year on year, given sharp drops
in housing starts.
- Net sales for the Remodeling Business should decline 3% year on year, with a slow
recovery in demand offsetting efforts to stimulate the market for this Business
through new product introduction and sustained sales measures.
- Overseas sales are likely to drop 8% year on year, as the rebound in the United
States and other markets takes longer than originally anticipated.
- Minimize the operating profit decline by sustaining efforts to reduce costs and
lower SG&A.
10
October, 2009
The Group is revising downward both net sales and profits forecasts in its fiscal 2009 full-year plan.
This is based on our expectation that a recovery in demand in Japan and overseas will take more
time than initially anticipated.
We now expect full-year sales for new housing to decline 21% year on year, in light of the steep fall
in housing starts, which is likely to continue into the second half.
We predict full-year sales for the Remodeling Business will slip 3% year on year, as the slow
restoration of demand offsets our efforts to stimulate the market for this Business through new
product introduction and sustained sales measures.
Demand is picking up overseas, but the pace of recovery is showing signs of slowing in the United
States and other markets. In view of this trend, we forecast that overseas sales will fall 8% year on
year.
We aim to minimize the scale of declines in operating profit by continuing efforts to reduce selling,
general and administrative expenses, while taking steps to lower manufacturing costs. Through these
initiatives, we plan to increase our profit in the second half of the current fiscal year.
10
FY 2009 Full Year Financial Plan
※¥ billion, rounded down
FY08
Result
FY09
Original
Plan
1H
Result
FY09
2H
Plan
Total
YoY
Increase
Decrease
464.5
455.0
204.6
213.4
418.0
-46.5
(-10%)
Operating Profit
6.5
6.5
-1.5
6.5
5.0
-1.6
(-24%)
Recurring Profit
5.9
6.0
-1.5
5.5
4.0
-1.9
(-33%)
Extraordinary Loss
-20.4
-
-0.9
-0.5
-1.4
+19.0
Net Profit
-26.2
2.0
-4.6
3.6
-1.0
+25.3
Net Sales
Revised Sales and profit downward
11
October, 2009
We have revised our forecasts for the full year as shown in the table.
Specifically, we expect net sales to fall 10% year on year, to 418 billion yen.
Operating profit is now forecast to fall 24%, to 5 billion yen.
We expect recurring profit to decline 33%, to 4 billion yen.
And we anticipate an extraordinary loss of 1.4 billion yen.
Based on these figures, we are now predicting a net loss of 1 billion yen for
the year.
Sales by Business Segment (Full year Plan)
（¥ Billion）
500
（FY08 Result）
（FY09 Plan）
464.5
418.0
( )=
YoY Growth
(-10%)
59.0
400
54.0
7.7
5.6
300
245.8
239.0
(-8%)
(-27%)
(-3%)
200
100
152.0
(-21%)
119.4
Overseas
New Business and Others
Remodeling
New Housing
0
FY08 Result
New Housing Starts
(Calendar Year)　FY09 Plan
1.09million　0.8million (-27%)
Demand based
1.07million　0.9million （-16%）
on delivery time
Expect New Housing Starts to decrease
12
October, 2009
This graph shows our net sales forecast by business segment.
The Group originally estimated that housing starts would total 950,000 in
fiscal 2009. Given the sharp fall in new housing activity, we have revised this
figure to 800,000. Together with this change, we changed our net sales
forecast for new housing to 119.4 billion yen, down 21% from the previous
fiscal year.
Demand in the Remodeling Business is recovering, albeit at a pace that is
slower than originally anticipated. In view of this, we expect net sales for the
Remodeling Business to fall 3% year on year, to 239 billion yen.
Improvements in overseas markets are also likely to be slow, and so we
revised our full-year net sales forecast for the overseas segment to 54 billion
yen, a decrease of 8% from the previous fiscal year.
Sales per Products -YoY Growth (Full year Plan)
FY09 Plan
Products
YoY
Sanitary ware
Washlet
Restroom Products
Bathroom
Fittings
Modular Kitchen
Lavatory
Bath/Kitchen Products
Ceramics
TOTAL
-5%
-7%
-7%
-15%
-11%
-15%
-10%
-13%
-40%
-10%
13
October, 2009
This table shows our net sales forecast by product.
We plan to limit the year-on-year net sales decline for restroom products to
7%, through more aggressive actions to boost remodeling demand with
products centering on those in the new NEOREST Hybrid series, which we
released in August.
In the meantime, we expect that net sales for bathroom products and modular
kitchens will fall 13% year on year, primarily the result of a substantial
decrease in condominium starts.
Cause of Increase/Decrease of Operating Profit
※Y billion, rounded down
Cause of Increase/Decrease
Positive Cost Reduction
Factors Decrease in SG&A
Decrease in material prices
Price Revision
Hold down sales activities
Negative Decraese in New housing sales
Factors Decrease in Remodeling Sales
FY09
FY09
Original Plan Revised Plan
+3.7
+3.4
+1.5
+1.0
±0
+3.9
+11.0
+1.3
+1.1
+2.2
-4.1
-10.1
-2.2
-1.3
-2.3
-3.0
+1.8
±0
Decrease in overseas sales
Increase in general products/Decrease in sales prices
Loss from decrease production due to furlough etc.
Cost increase in allowance for retirement due to
decrease in interest income
Others
-2.9
-2.0
-1.2
-1.2
±0
Total
-1.4
-0.9
-1.6
Continue to reduce SG&A
14
October, 2009
This table shows factors that could cause our operating profit to fluctuate.
On this occasion, we revised our forecast for full-year operating profit to a
fall of 1.6 billion yen from the previous fiscal year.
Positive factors anticipated for operating profit include cost savings of 3.9
billion yen, a reduction in expenses of 11 billion yen and cuts in investments
to boost sales of 2.2 billion yen. We will continue these and other efforts to
reduce expenses.
However, we anticipate that operating profit will be strongly affected by
likely negative factors, including a decline in new housing sales of 10.1
billion yen, a fall in remodeling sales of 2.2 billion yen, and a drop in
overseas sales of 1.3 billion yen.
Cause of Increase/Decrease of Operating Profit
＜Performance in local currency＞
(Unit: Y billion, rounded down)
North & Central America
for external customers
Total sales including internal trades
Operating Profit
（Exchange rate JPY/US$）
FY08 Results
24.0
24.0
1.8
91.03
FY09 Plan
19.8
19.8
1.1
90.00
(Unit: $ million, rounded down)
YoY difference
-17%
-17%
-40%
for external customers
Total sales including internal trades
Operating Profit
(Exchange rate JPY/Chinese Yuan)
FY08 Results
21.9
33.5
5.9
13.22
FY09 Plan
22.6
31.4
6.2
13.50
Others
Total sales including internal trades
Operating Profit
FY08 Results
10.1
19.5
1.1
FY09 Plan
11.8
20.8
-0.1
+3%
-6%
+4%
YoY difference
+17%
+7%
-
(Unit: Y billion, rounded down)
TOTAL
for external customers
Total sales including internal trades
Operating Profit
FY08 Results
55.9
77.1
8.8
FY09 Plan
54.2
72.0
7.1
FY09 Plan
220
220
12
YoY difference
-16%
-16%
-40%
(Unit: Hundred Chinese yuan, rounded down)
YoY difference
(Unit: Y billion, rounded down)
for external customers
263
264
20
＜Performance in local currency＞
(Unit: Y billion, rounded down)
China
FY08 Results
YoY difference
-3%
-7%
-19%
FY08 Results
16.6
25.4
4.5
FY09 Plan
16.8
23.3
4.6
YoY difference
+1%
-8%
+2%
North & Central America：Decrease in
profit as decrease in sales
China：Increase in sales for external
customers (domestic sales) while export
sales decrease. Maintain the profit level
by working on cost reduction.
Others (Europe): Revised sales plan
downward due to delay in product
launch.
15
October, 2009
We think that both net sales and profit will decrease in the United States,
where demand remains anemic.
We expect net sales will rise 1% on a local currency basis in China, taking
into account risks such as the effects of the financial crisis. We forecast
operating profit of 0.46 billion yuan, as initially projected, and will improve
the figure on a yen basis through Group-wide cost-cutting activities.
In other regions, we are steadily advancing our efforts to develop sales
networks in Europe. At the same time, we are delaying our product releases in
Europe to make minor modifications needed to achieve wider acceptance. For
this reason, we have revised our net sales forecast for the region.
Dividend per Share
FY09 Plan
1H
¥5.0
2H
¥5.0
Full Year
¥10.0
Keep the dividend plan for 10yen
16
October, 2009
We have made no change to the dividend plan we originally announced.
Namely, we will continue with our plan to pay dividends totaling 1 billion yen in
fiscal 2009, including interim dividends of 5 yen per share and year-end dividends of
5 yen per share.
Contents
1．Financial Result for First half of FY2009
2．FY2009 Full Year Financial Plan
3．First half Results and Second half Measures
2．Progress of V Plan 2017 (Long term Plan)
Reference ; New housing starts forecast
17
October, 2009
17
Initiatives for Consolidating Our Financial Position
Profit improvement (year-on-year basis)
 Cost reduction
(primarily manufacturing cost reduction)
 SG&A expenses reduction
FY09 1H result
FY09 2H plan
Purchasing cost reduction
1.2
1.8
Production streamlining
0.2
0.4
Business withdrawal
0.1
0.2
1.5
2.4
Total
(Billion yen)
FY09 1H result
(Billion yen)
FY09 2H plan
Labor expenses (salary cuts for management position
holders, overtime controls, etc.)
Indirect expenses (reduction in traveling,
communications and other expenses)
Sales promotion expenses (reduction in advertising,
showroom and other expenses)
2.5
1.9
1.6
2.4
0.4
1.8
Variable cost reduction in response to sales decline
1.8
0.8
Total
6.3
6.9
Controlled cost in response to a sales decline and
reduced SG&A expenses 8% in 2Q (July to September).
Inventory reducing activities
70
65
67.2
Individual initiatives
Inventories
(billion yen)__
66.7
60
Sanitary ware, fittings and washlets
1H -6.4
55
2H plan -0.5
55.9
50
495
45
509
Modular kitchens
490
40
07.03
08.03
09.03
09.09
10.03
Reduction in the number of items: 15% in
Mar. 09 and 23% in Sep. 09, compared with
the Mar. 08 level
10.03
(Initial plan) (Revised plan)
Inventory reduction with shortened
production lead time
30% in Sep. 09, compared with the Sept. 08
level
18
October, 2009
I would like to talk about the actions we have taken to improve profit and reduce inventory, as
initiatives to consolidate our financial position.
To improve profit, we are reducing costs, primarily by cutting purchasing costs.
To lower selling, general and administrative expenses, we have introduced measures such as
reducing labor expenses through salary cuts for management and overtime controls, cutting
indirect expenses with reductions in traveling and communications expenses, and lowering sales
promotion expenses.
We effectively controlled our costs in response to the fall in net sales, and reduced selling, general
and administrative expenses by 8% in the second quarter.
We also lowered the breakeven cost to sales ratio by 10 points.
We significantly downsized the volume of modular kitchens in stock by shortening production lead
time and taking other steps, while reducing inventories of sanitary ware, fittings and washlets,
which had been our focus.
With these measures, in the first half we were able to reduce inventory by an amount greater than
the 5 billion yen set as the target for March 2010.
We plan to reduce inventories by another 0.5 billion yen in the second half.
Group Activities for Stimulating Remodeling Demand
Target: Stimulating long-term remodeling demand through concerted efforts
Giving all employees the ability to communicate the value and attractiveness of remodeling
to anyone, at any time and any place
Communicating: knowledge through
remodeling fairs in plants
Knowledge through Chain of activities
education
for knowing, communicating
-Activity
and connecting the value and
objectives
attractiveness of
-Commodities
remodeling
-Business flows
-Introduction system
-Customer service
styles
-What is remodeling?
- Customer response to commodities
- Clerks at remodeling club stores
- Jobs at remodeling club stores
Connecting: knowledge through
the introduction system
- Remodeling sites
- Voices of delighted customers
H1 Result: Held at 14 venues in Japan
 Total turnout: approx. 30,000
Plan to keep holding two fairs a year at each plant
19
October, 2009
Next, I would like to talk about the progress with Group-wide activities to stimulate
remodeling demand.
We launched these activities during the current fiscal year, and they are long-term
initiatives. Through this initiative, we seek to improve awareness among all our
employees, including those not usually involved in sales, about the value and
attractiveness of remodeling, communicating this value and appeal to customers
and acquaintances, and stimulating demand.
Our goal through these activities is to enable all employees to communicate the
value and attractiveness of remodeling, to anyone in any time and any place.
During the first half, we organized remodeling fairs at 14 plants in Japan.
Approximately 30,000 people visited these fairs.
The fairs gave employees the opportunity to inform their friends and local residents
about TOTO and the attractiveness of remodeling. They also allowed our plant
employees, who would normally have no contact with customers, to deepen their
understanding of remodeling by explaining its value and attractiveness verbally.
We plan to continue these activities and hold two fairs at each plant every year.
19
Overseas Businesses: North and Central America
 Business conditions in the United States
Housing demands remain sluggish.
Demand for high-end housing and commercial properties is likely to remain weak, in spite of
minor movements seen in the low-end housing market attributable to factors such as interest rate
falls, declining housing prices, and federal government measures to encourage home buying.
 TOTO’s strategy
Boost efforts to promote the sales of eco-friendly commodities, our strength.
Changes in the ratio of 4.8L toilet bowls to all toilet bowls sold
25%
30%
Shipments of 4.8L water-saving toilet
bowls rose sharply in a weak market.
25%
20%
12%
15%
10%
5%
2%
0%
07 H1
08 H1
09 H1
Demand has been weak, but products with strong features are enjoying growth.
20
October, 2009
I would now like to move on to explain our overseas businesses.
To begin, housing demand in the United States remains weak.
In this environment, TOTO is continuing to promote sales of ecological products,
an area of strength for the Company.
With stronger sales promotion, we are winning high marks among customers with
our 4.8L water-saving toilet bowls.
This popularity has meant that shipments of these toilet bowls as a percentage of
all toilet bowls shipped is rising rapidly each year.
We plan to continually step up our efforts to promote sales of eco-friendly
products such as water-saving showers, in which TOTO excels, in addition to
boosting sales of 4.8L toilet bowls.
Overseas Businesses: China
 Business conditions in China
The economy is recovering
China’s GDP expanded 7.9% in 1H, a substantial increase from 6.1% in FY08 1H.
The Chinese government expects the country’s economy to grow at a rate of 8% in FY 09.
However, exports have been declining at a rate in excess of 20%. There are also additional
causes for concern in China, including the durability of the effects on domestic demand
produced by large-scale government measures to stimulate the economy and ease credit.
Fiercely competitive environment to continue
Competition is intensifying among companies operating in China. They are scrambling for
market share and for agents.
TOTO aims to continually differentiate itself from competitors by introducing products that
incorporate its strength in high-end markets, where European companies are escalating
competition with aggressive sales.
 TOTO’s strategy
(1) Promoting water-saving toilet bowls
(2) Promoting sales of washlets, a priority commodity
Shipments of washlets surged at
the year-on-year rate of 15% in
1H. Promoting sales of washlets
further in 2H through campaigns,
etc.
TOTO products won first and second place in
a washing power evaluation test conducted by
a Chinese architectural decoration association
on 83 domestic and imported toilet bowls at
the end of September.
21
October, 2009
The Chinese economy is recovering. However, competition in the Chinese market for
bathroom products is intensifying, given aggressive sales efforts by European companies
and other factors.
In this environment, TOTO is continuing to promote sales of its water-saving toilet
bowls and washlets, where it excels.
A Chinese architectural design association conducted a washing power evaluation test on
water-saving toilet bowls in September 2009. TOTO’s products won first and second
places in the test. We will step up efforts to communicate to distributors and customers
the excellent reputation that TOTO’s technological capabilities enjoy.
Thanks to stronger promotional activities, washlet shipments also grew at an impressive
year-on-year rate of 15% in the first half.
21
Overseas Businesses: Europe
 Marketing strategies
(1) Developing distribution networks for
high-end products
 Establishing a classy brand image for
TOTO by taking advantage of
showrooms for high-end products
- Distributors contracted or under
negotiation in Europe total 200.
- We are expanding our sales networks
steadily.
A Neorest Suite display example
at a German showroom for distributors
(2) Activities to install products in high-end facilities in key cities focused on sales bases
 Successfully introducing TOTO to facilities used by high-end consumers
- Steady results according to the plan to supply products to 50 high-grade sites in
Europe by the end of 2010
Long-term strategies for establishing the brand
and achieving growth are making steady progress.
22
October, 2009
Our basic strategies in Europe are to develop distribution networks for high-end markets
and to provide our products to well-known facilities in key cities such as Paris and London.
We are developing our distribution networks at a steady pace. We have contracted or are in
negotiation with 200 distributors.
We are also displaying TOTO products in order of release at our showrooms for
distributors in Europe.
Precise points for product improvements for European consumers have begun to be
identified in the course of communicating with local distributors. We are delaying product
releases in Europe to ensure broader acceptance of our products by modifying
specifications and other aspects.
We are aiming to supply our products to 50 high-grade sites by the end of 2010. The
number of such sites being supplied with TOTO products, including hotels and restaurants,
has been steadily increasing.
22
Contents
1．Financial Result for First half of FY2009
2．FY2009 Full Year Financial Plan
3．First half Results and Second half Measures
2．Progress of V Plan 2017 (Long term Plan)
Reference ; New housing starts forecast
23
October, 2009
23
V Plan: Reinforcing the Foundations: Progress (1)
Plant restructuring
Implementing “production organization reforms” to strengthen operations in a
changing market
 Transfer of Nakatsu Plant to a Group company (Apr. 2010)
Nakatsu Plant
Shiga Plant
Scheduled for
transfer to TOTO
SANITECHNO
in Apr. 10
Transferred to
TOTO
SANITECHNO
in Apr. 09
Improving manufacturing quality and
cutting manufacturing costs further
 Fittings Plant (Apr. 2010 )
Moving some of the lines at Oita Plant to
Kokura No.2 Plant for consolidation
Operating rate: 80% ⇒ 95%
24
Starting in 10 H1
Effect: 500 million yen a year
October, 2009
I would like to start by describing our activities to strengthen the foundations of
our business.
We are undertaking a series of production organization reforms to bolster our
ability to operate in a changing market.
As the first step, we transferred our sanitary ware manufacturing plant in Shiga to
TOTO SANITECHNO, a Group manufacturer, this April. Following this, we will
transfer the Nakatsu Plant to Sani Techno in April 2010.
We will use these transfers to improve manufacturing quality and further reduce
our manufacturing costs.
As we announced in August, we are also preparing to relocate some of the lines
at our fittings plant in Oita to the Kokura No. 2 Plant. This should achieve costs
savings of approximately 500 million yen a year.
24
V Plan: Reinforcing the Foundations: Progress (2)
Reforms to logistics center operations
 Shortening logistics lead times
Changes in logistics conditions: decrease in material volume, trend toward small-lot orders due to reduced
commercial inventories
Previous practice
Two days before
Day before
Shipping day: AM
Material arrival
Shipping day: PM
Material dispatch
Dispatch
Dispatch
Dispatch
Dispatch
Inspection
Inspection
Order changes
Dispatch
Dispatch
Inspection
Inspection
Transportation
Transportation
Material arrival
Inspection
Inspection
Transportation
Transportation
Transportation
Transportation
Material dispatch
After improvement
(1)
(1) Reduced
Reduced lead
lead time
time for
for arrangements
arrangements
Dispatch
Dispatch
(2)
(2) Productivity
Productivity improvement
improvement through
through
waste
waste elimination
elimination at
at logistics
logistics centers
centers
Dispatch
Dispatch
Dispatch
Dispatch
Inspection
Inspection Inspection
Inspection Inspection
Inspection
Transportation
Transportation
Transportation
Transportation
Transportation
Transportation
(3)
(3) Reduced
Reduced workload
workload through
through deadline
deadline
extensions
extensions for
for changes
changes in
in orders
orders
Order changes
Investment:
Investment: 300
300 million
million yen
yen (facility
(facility and
and system
system buildup
buildup from
from 09
09 2H)
2H)
Retirement:
Retirement: 80
80 million
million yen
yen (old
(old facility
facility removal
removal from
from 09
09 2H)
2H)
Starting in Sep. 2010
Effect: 500 million yen a year
25
October, 2009
I would next like to explain the reforms we have made to our logistic center.
Lots for incoming orders are becoming smaller, as a result of a decline in
material volumes and cuts in commercial inventories. Efficiency is falling at
logistics centers that were originally designed for mass shipments.
To date, we have operated our logistics centers in a three-day cycle. They
respond to order changes and other requests between operating periods.
We will change this operating cycle to half a day, and slash lead times. With
these changes, we will eliminate excess space reserved for dispatch preparations.
Moreover, we will eliminate layaway articles and retained cases by extending
hours for accepting order changes while responding to requests for these kinds of
changes until the last minute.
We plan to retire old facilities worth 80 million yen, and invest 300 million yen
in system and facility buildups in connection with these logistics center reforms.
We expect the reforms to reduce our logistics center expenses by approximately
500 million yen a year, starting in September 2010.
25
V Plan: Reinforcing the Foundations: Progress (3)
TOTO IT Innovation Plan
 Strengthening IT divisions
Bring together and strengthen the information and planning functions of the TOTO Group, and outsource system
development and operation entirely to external parties.
TOTO’s IT division
Group company’s
IT division
Group company’s
IT division
Group company’s
IT division
Information and
planning
functions
System
development and
operation
functions
Effect: 900 million yen a year
Strengthening TOTO’s information and planning division
- Restructuring for optimizing systems for all Group companies
- Realizing cross-sectional functions and enhancing governance
Bolstering functions through complete outsourcing to specialist IT companies
- Strengthening development capabilities as the common base for all Group
companies
- Reducing environmental footprint and costs through shared services
- Training IT specialists and using overseas development personnel effectively
(Starting in Apr. 2013)
 Restructuring internal communications systems  Introducing cloud computing to
Complete replacement by systems of the
overseas e-mails
governance-enhancing type
Simultaneous introduction of systems with
cross-sectional functions
- Reducing operating costs with the introduction
of package information-sharing tools
- Replacing mailing systems
- Establishing, teaching and spreading rules
Introducing a cloud computing-type mailing
system at overseas bases
Starting in Apr. 2012
Effect:
200 million yen
a year
- Strengthening capacity to cope
with changes in business
conditions
- Increasing security
- Reducing operating cost
Starting in Apr. 2010
Effect:
50 million yen
a year
26
October, 2009
As the third step, we launched the IT Innovation Plan.
To strengthen our IT divisions, we will bring together the information and
planning functions that have previously been dispersed among Group companies.
At the same time, we will outsource system development and operation entirely
to parties outside the Group.
These measures should produce cost savings of 900 million yen a year.
In an additional move, we will restructure our internal communications systems
to improve governance and introduce cross-sectional functions.
We will also establish systems that enable a speedy response to changes in
business conditions, and we will reduce operating cost by introducing a mailing
system of the cloud computing type to our overseas bases.
26
Overseas Businesses: Achieving Further Growth
Establishing new plants abroad (for sanitary ware)
Europe
 China: Expanding East China No.2 Plant
China
Middle
East
Operational launch : Feb. 2011
Expansion objective : for serving demands in China
India
 Thailand: Establishing a manufacturing subsidiary
Company name
: TOTO Manufacturing Thailand
Operational launch : Jan. 2012
Establishing objective : Production for shipments to Europe,
the Middle East and India
27
October, 2009
We will increase the number of overseas plants, anticipating long-term growth in
other countries.
To begin with, we will expand our East China Plant in Shanghai to meet demand in
China. The expanded plant is scheduled to begin operation in February 2011.
In addition, we will set up a new manufacturing subsidiary in Thailand.
This is a sanitary ware plant designed for exports to growing markets, such as India
and the Middle East. The plant is expected to begin production in January 2012.
This concludes our briefing today.
Thank you very much for your attention.
27
Contents
1．Financial Result for First half of FY2009
2．FY2009 Full Year Financial Plan
3．First half Results and Second half Measures
2．Progress of V Plan 2017 (Long term Plan)
Reference ; New housing starts forecast
28
October, 2009
28
New Housings
◆　New Housing Starts（Calender Year）
Original Forecast
Revised Forecast
0.95 million
0.80 million
-13%
-27%
(YoY)
◆　Demand based on delivery time (Fiscal Year)
1H(result)
0.46 million
-11%
2H(forecast)
0.44 million
-21%
Full year(forecast)
0.90 million
-16%
◆　TOTO's new housing sales (Fiscal Year)
1H(result)
60.3 billion
-19%
2H(forecast)
59.1 billion
-24%
29
Full year(forecast)
119.4 billion
-21%
October, 2009
This presentation material contains forward-looking statements based on assumptions,
estimates and plans as of October 30th, 2009. Actual performance may differ materially
from these forward-looking statements due to risks and undermined factors arising from
changes in the world economy, competition and foreign currency exchange rates.
http://www.toto.co.jp/
30