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 half of the fiscal year ending March 31, 2018 (the period from April 1, 2017 to September 30, 2017), the global economy saw signs of recovery gathering momentum in major nations, such as the West and China, while facing concerns stemming from a slowdown in emerging countries. The Japanese economy benefited from a moderate recovery, led by favorable business confidence along with increased capital investment.

The Daifuku Group’s mainstay material handling systems have seen rising needs, mainly due to 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, sales, and income reached new record highs during the first half of the fiscal year.

Orders were particularly strong, driven by robust capital investment in the semiconductor and FPD sectors in the Asian region, as well as strong needs and projects of increasing scale from 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 these growing 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.

Specifically, the Group received orders of 266,718 million yen, up 85.4% from the previous fiscal year, and recorded sales of 184,154 million yen, up 25.1%.

Income surpassed the year-ago figure, reflecting significantly increased earnings strength, mainly from higher sales and cost cutting by the parent company, Daifuku Co., Ltd. Consequently, the Group posted operating income of 16,711 million yen, up 63.7% from a year earlier, and ordinary income of 17,437 million yen, up 70.1%. Net income attributable to shareholders of the parent company was 12,233 million yen, up 73.0%.

The average exchange rate used for transactions within the Group during the first half of the fiscal year under review was 112.12 yen to the U.S. dollar, compared with an exchange rate of 111.81 yen for the same period of the previous fiscal year. As a result, sales increased 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 above on orders received during the first half of the fiscal year under review increased the value of orders by about 300 million yen, and the impact of foreign currency translation differences on the order backlog at the end of the previous fiscal year and, among other factors, increased the value of orders by about 14,500 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 August 8, 2017 as follows. The Group’s results for the first half of the fiscal year under review were favorable; in particular, all income items surpassed the figures announced on August 8, 2017. Sales and income are projected to increase during the second half of the fiscal year under review, backed by favorable orders from FPD and semiconductor factories in the Asian regions and distributors in Japan. In terms of profits, significantly increased production volumes for the worldwide market at the Group’s mainstay Shiga Works, along with improved productivity, are contributing to the improved performance of not only Daifuku Co., Ltd. but the overall Daifuku Group.

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 490,000 million yen (up 37.4% year on year)
Net sales 410,000 million yen (up 27.8% year on year)
Operating income 37,000 million yen (up 60.2% year on year)
Ordinary income 38,000 million yen (up 59.9% year on year)
Net income attributable to shareholders of the parent company 26,000 million yen (up 55.3% 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 forecast for the fiscal year ending March 31, 2018 to 25 yen per share, an increase of 5 yen, based on a resolution made at the Board of Directors meeting held on November 10, 2017. In addition, the Company has revised its year-end dividend forecast to 37 yen per share, an increase of 5 yen. Accordingly, the annual dividend per share is projected to be 62 yen, a new record high.

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

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