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 three quarters of the fiscal year ending March 31, 2018 (the period from April 1, 2017 to December 31, 2017), the global economy saw signs of recovery gathering momentum in key Western economies and China, as well as in emerging countries. The Japanese economy also benefited from favorable business confidence, led by the fact that machinery orders and exports have recovered to their levels prior to the 2008 global financial crisis.
The Daifuku Group’s mainstay material handling systems have seen rising needs, mainly due to the work-style reforms and productivity revolution initiatives of the Japanese government, worldwide logistics innovation accompanying the growth of e-commerce, 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, sales, and income reached new record highs during the first three quarters of the fiscal year.
Orders were particularly strong, driven by robust capital investment in the semiconductor and FPD sectors in East Asia, as well as active and large investments in e-commerce distribution centers across the globe, together with favorable orders for systems for automobile factories and airports. Daifuku is the unrivaled material handling system provider and integrator, which offers its best solutions to customers in a wide variety of sectors. Its extensive product lineup, ability to provide proposals that promptly respond to customer needs, deploying operations around the world and completing tasks for large projects, as well as its strength in after-sales services are all decisive factors in winning orders.
Sales were positive, underpinned by an extensive order backlog. With continued capital investment and M&A, as well as increased production capacity in cooperation among its production sites worldwide, the Group has been striving to meet rapidly increased demand. As a consequence, it was able to achieve growth in sales.
Specifically, the Group received orders of 387,542 million yen, up 56.9% from the previous fiscal year, and recorded sales of 292,160 million yen, up 30.2%.
Income surpassed the year-ago figure, reflecting significantly increased earnings strength from higher sales and cost cutting by the parent company, Daifuku Co., Ltd. Income at Group companies in East Asia, which handle systems for the semiconductor and FPD sectors, was also strong. Consequently, the Group posted operating income of 27,978 million yen, up 71.6% from a year earlier, and ordinary income of 29,019 million yen, up 74.8%. Net income attributable to shareholders of the parent company was 20,318 million yen, up 66.5%.
The average exchange rate used for transactions within the Group during the first three quarters of the fiscal year under review was 111.80 yen to the U.S. dollar, compared with an exchange rate of 108.85 yen for the same period of the previous fiscal year. As a result, sales increased in value by about 4,100 million yen, compared with the year-ago period, and operating income increased in value by about 300 million yen. The impact of exchange rates on orders received during the first three quarters of the fiscal year under review increased the value of orders by about 4,800 million yen, and the impact of foreign currency translation differences on the order backlog at the end of the previous fiscal year, among other factors, increased the value of orders by about 17,400 million yen.
2. Outlook for the fiscal year ending March 31, 2018
Daifuku Co., Ltd. has revised its full-year earnings forecast for the fiscal year ending March 31, 2018, which was announced on November 10, 2017, on the basis of recent performance trends, as follows.
During the fiscal year ending March 31, 2018, orders for systems for semiconductor and FPD factories in particular have been strong, and the forecast of orders received and sales recorded during the term has increased every quarter. Sales of systems for these sectors during the first three quarters of the fiscal year under review rose by more than 60% compared with the year-earlier period. In addition to increased production volume, an efficient use of physical and human assets in Japan, countries in North America, China, Taiwan, South Korea, and Singapore contributed to increased profitability. Meanwhile, sales of lucrative service business are increasing on a Group-wide basis. Accordingly, the Company decided to revise the full-year earnings forecast.
The earnings forecast for the fiscal year ending March 31, 2018 (April 1, 2017 - March 31, 2018)
|Orders||490,000 million yen||(up 37.4% year on year)|
|Net sales||410,000 million yen||(up 27.8% year on year)|
|Operating income||39,000 million yen||(up 68.8% year on year)|
|Ordinary income||40,000 million yen||(up 68.3% year on year)|
|Net income attributable to shareholders of the parent company||27,000 million yen||(up 61.2% year on year)|
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 medium-term 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 also revised its year-end dividend forecast for the fiscal year ending March 31, 2018, announced on the same day, an increase of 3 yen per share, to 40 yen. Accordingly, the annual dividend per share is projected to be 65 yen, a new record high.
We respectfully ask our shareholders and investors for their continued support.
Hiroshi Geshiro, President and CEO
Daifuku Co., Ltd.