To Daifuku’s Shareholders and Investors

To Daifuku's Shareholders and Investors

We would like to begin this message by expressing gratitude to our shareholders and investors for their ongoing support.

1. Operating and financial review

During the first quarter of the fiscal year ending March 31, 2018 (the period from April 1, 2017 to June 30, 2017), the global economy benefited from a moderate recovery in developed nations, while facing concerns stemming from a slowdown in many emerging countries. In China, meanwhile, economic growth rate has been recovering, driven by strong consumer spending. The Japanese economy has seen robust exports mainly to China, and the economic outlook including capital spending remains firm.

The Daifuku Group’s mainstay material handling systems have seen rising needs, mainly due to global logistics innovation accompanying the growth of e-commerce, industry-wide momentum in automatization, as well as robust demand from the semiconductor and flat-panel display (FPD) sectors with the advance of the Internet of Things (IoT) and high-definition panels.

Amid these economic and business conditions, the operating results of the Daifuku Group showed favorable progress. Orders reached a new record high, mainly on the strength of the larger e-commerce distribution centers across the globe, robust capital investment in the semiconductor and FPD sectors, and favorable orders for systems for automobile factories and airports. Sales were positive, underpinned by extensive order backlogs.

Specifically, the Group received orders of 148,575 million yen, up 144.9% from the previous fiscal year, and recorded sales of 85,063 million yen, up 14.9%.

Income surpassed the year-ago figure, reflecting increased earnings strength, mainly from higher sales and cost cutting by the parent company, Daifuku Co., Ltd.

Consequently, the Group posted operating income of 6,665 million yen, up 53.6% from a year earlier, and ordinary income of 7,025 million yen, up 64.1%. Net income attributable to shareholders of the parent company was 5,029 million yen, up 69.7%.

The average exchange rate used for transactions within the Group during the first quarter of the fiscal year under review was 112.82 yen to the U.S. dollar, compared with an exchange rate of 115.07 yen for the same period of the previous fiscal year. As a result, sales declined in value by about 600 million yen compared with the year-ago period; however, there was little impact on operating income. The impact of the stronger yen on orders received during the first quarter of the fiscal year under review reduced the value of orders by about 1,300 million yen, but this was more than offset by the 12,000 million yen impact of foreign currency translation differences on the order backlog at the end of the previous fiscal year, among other factors. Netting these factors, orders were up about 10,700 million yen.

2. Outlook for the fiscal year ending March 31, 2018

Given the initiatives above, Daifuku has made the following earnings forecasts for the fiscal year ending March 31, 2018, with the expectation of sustainable growth.

Daifuku has revised its interim and full-year earnings forecasts for the fiscal year ending March 31, 2018, which were announced on May 11, 2017, as follows. Specifically, sales and income forecasts have been revised upward, based on strong orders. The production volume will reach a new record high, and accordingly the Group will make full use of the advantageous business environment, such as organic collaboration with production sites located worldwide, strengthening of production capacity outside of Japan, and innovative production making use of digital technology.

The interim earnings forecast for the fiscal year ending March 31, 2018 (April 1, 2017 - September 30, 2017)

The interim earnings forecast for the fiscal year ending March 31, 2018 (April 1, 2017 - September 30, 2017)
Orders 260,000 million yen (up 80.7% year on year)
Net sales 187,000 million yen (up 27.0% year on year)
Operating income 15,000 million yen (up 46.9% year on year)
Ordinary income 15,600 million yen (up 52.1% year on year)
Net income attributable to shareholders of the parent company 11,000 million yen (up 55.5% year on year)

The earnings forecast for the fiscal year ending March 31, 2018 (April 1, 2017 - March 31, 2018)

The earnings forecast for the fiscal year ending March 31, 2018 (April 1, 2017 - March 31, 2018)
Orders 440,000 million yen (up 23.4% year on year)
Net sales 395,000 million yen (up 23.1% year on year)
Operating income 30,000 million yen (up 29.9% year on year)
Ordinary income 31,000 million yen (up 30.5% year on year)
Net income attributable to shareholders of the parent company 21,000 million yen (up 25.4% year on year)

*Disclaimer

This forecast represents the judgment of the Company based on information presently available. Actual results may differ materially from forecasts due to various uncertainties, including economic and competitive conditions worldwide as well as various risk factors.

3. Basic policy for dividends

Daifuku regards the return of profits to shareholders as its most important management task and adopts a performance-based policy for dividends from surpluses based on consolidated net income, with the aim of achieving additional profit distribution to shareholders. We appropriate the remaining surplus to internal reserves for future growth.

Under its four-year business plan, Value Innovation 2020, Daifuku aims to achieve a dividend payout ratio of 30% and increase its corporate value through investment in growth.

Given the favorable results, Daifuku has revised its interim dividend to 20 yen per share, an increase of 5 yen. And the Company will pay a year-end dividend of 32 yen per share, making an annual dividend of 52 yen per share, a new record high.

We respectfully ask our shareholders and investors for their continued support.

August 2017
Masaki Hojo, President and CEO
Daifuku Co., Ltd.