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 three quarters of the fiscal year (the period from April 1, 2018 to December 31, 2018), the global economy benefited from an expansion in the U.S. and generally firm trends in Japan as well as in European and emerging nations. Meanwhile, a trade conflict between the U.S. and China, a slowdown in economic growth in China, and other issues are creating uncertainty about the future.

The Daifuku Group’s mainstay material handling systems continued to enjoy robust investment, bolstered by demand from a broad range of industries, including e-commerce and other distribution sectors, semiconductors, flat-panel displays (FPDs), automobiles, and airports.

Amid these economic and business conditions, the operating results of the Daifuku Group showed favorable progress. Sales and income reached new record highs during the first three quarters of the fiscal year.

Orders remained strong, driven by large orders from the semiconductor sector in East Asia and the U.S., as well as from pharmaceutical wholesalers and distributors including e-commerce in Japan. In systems for airports, which non-Japanese subsidiaries have been handling, large orders were posted in North America. In addition, the Group received the first-ever order from an airport in Japan, where demand for equipment upgrades is rising in preparation for the 2020 Tokyo Summer Olympics.

Sales were positive with enhanced production capacity in anticipation of robust demand.

Specifically, the Group received orders of 374,688 million yen, down 3.3% from a year earlier, and recorded sales of 330,655 million yen, up 13.2%.

In terms of profits, operating income easily surpassed the year-ago figure, reflecting increased earnings strength from higher sales and cost cutting by the parent company Daifuku Co., Ltd., while also benefiting from the strong performance of an East Asian subsidiary that handles systems for the semiconductor and FPD sectors. In addition, with the transfer of shares of Knapp AG, which was an equity-method affiliate in Austria, during the first quarter, Daifuku posted extraordinary income from a gain on the sale of shares in affiliates of 6,948 million yen (balance of consolidated book value).

Consequently, the Group posted operating income of 38,108 million yen, up 36.2% from a year earlier, and ordinary income of 39,033 million yen, up 34.5%. Net income attributable to shareholders of the parent company was 32,696 million yen, up 60.9%.

2. Outlook for the fiscal year ending March 31, 2019

Daifuku has revised its consolidated full-year earnings forecasts for the fiscal year ending March 31, 2019, which were announced on February 8, 2019, as follows.

The earnings forecast for the fiscal year ending March 31, 2019 (April 1, 2018 - March 31, 2019)

The earnings forecast for the fiscal year ending March 31, 2019 (April 1, 2018 - March 31, 2019)
Previous forecast Current forecast Rate of change
Net sales 470 billion yen 460 billion yen down 2.1%
Operating income 52.0 billion yen 53.0 billion yen up 1.9%
Ordinary income 52.9 billion yen 54.2 billion yen up 2.5%
Net income attributable to shareholders of the parent company 35.0 billion yen 37.0 billion yen up 5.7%

The above forecast values are our projections based on information available at the time of this release and contain various uncertainties. Actual results may differ materially from forecast values due to factors such as changes in the business performance of the Company.

The Company has also revised its consolidated full-year orders forecast of 530,000 million yen to 515,000 million yen, down 2.8% for the fiscal year ending March 31, 2019, based on the project progress of systems for manufacturers and distributors outside of Japan.

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.

With respect to dividends for the fiscal year ending March 31, 2019, the Company has revised its year-end dividend to 55 yen per share, an increase of 5 yen, and plans to pay an annual dividend of 85 yen, taking into consideration the basic policy described above and the favorable results for the first half of the fiscal year ending March 31, 2019.

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

February 2019
Hiroshi Geshiro, President and CEO