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Message to Investors

Takashi Nishijima President and Chief Executive Officer

President Nishijima

In the fiscal year ended March 31, 2018 (fiscal year 2017), market conditions in the energy and materials-related sectors remained challenging as companies reported postponements or cancellations of resource development projects. At the same time, a moderate recovery in the global economy has been underway, with crude oil prices bottoming out and signs emerging of a recovery in the balance of supply and demand.

Under these circumstances, the Yokogawa Group has worked to expand orders and sales, improve profitability by bringing down production and engineering costs as well as selling, general and administrative expenses, and make strategic investments in line with its Transformation 2017 (TF2017) mid-term business plan calling for dramatic growth. As a result of these initiatives, the impact of factors such as the depreciation of the yen, and a recovery in sales by Group companies outside Japan, operating results for fiscal year 2017 were up overall, with net sales, operating income, and ordinary income all higher than in the previous year. On the other hand, the profit attributable to owners of parent decreased from the previous year due to the recording of a goodwill impairment loss.

Under the TF2017 plan, the Group pursued the following three transformations with the goal of building a foundation for mid- to long-term growth and improving profitability: (i) focusing on customers, (ii) creating new value, and (iii) becoming a highly efficient global company. As part of its efforts to expand and grow its business, the Group sought to leverage the solid global customer base that it has built up over the years. Although it succeeded in adding more value in those industry sectors where it excels and in improving its balance sheet, more needs to be done to improve profitability. After evaluating the results achieved under the TF2017 plan, in May 2018 the Group announced Transformation 2020 (TF2020), a new mid-term business plan that sets out initiatives that will improve profitability and take its transformation to a new level.

In this dramatically changing business environment, it is not enough to merely continue with the TF2017 transformations that seek to increase the Group's corporate value over the mid- to long-term: we need to fundamentally transform the structure of our businesses. Under TF2020, we will make full use of digital technology to grow our existing businesses and improve their profitability, create new businesses and establish new frontiers for growth, and take measures to dramatically improve the productivity of those organizations that support our business activities. We will make efforts to further expand our business and enhance our corporate value, and thereby fulfill the expectations of all our shareholders. In these endeavors, we request your continued support and understanding.

Takashi Nishijima

June 2018

Takashi Nishijima
President and Chief Executive Officer