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 fiscal year ending March 31, 2018 (the period from April 1, 2017 to March 31, 2018), the global economy saw signs of recovery gathering momentum in key Western economies and in China, as well as in emerging countries. The Japanese economy also continued to expand moderately, mainly on the strength of solid capital investment driven by strong corporate earnings.
The Daifuku Group’s mainstay material handling systems experienced an increase in the introduction of large and sophisticated automated systems in distribution centers along with the rapid expansion of the e-commerce market, and continued to enjoy investments in systems at new factories of semiconductors and flat-panel display (FPD) and organic light-emitting diode (OLED) panels associated with the advance of the Internet of Things (IoT) and artificial intelligence (AI), as well as high-definition panels.
Amid these economic and business conditions, the operating results of the Daifuku Group achieved new record highs in terms of orders, sales and income during the fiscal year under review.
Orders were particularly strong, driven by robust capital investment in the semiconductor and FPD sectors in East Asia, as well as large and active 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 optimum solutions to customers across a broad array 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 the high level of orders. With increased production capacity due to continued capital investment and increased supply capacity to meet rapidly increasing demand in cooperation among Group companies worldwide, the Group was able to achieve growth in sales.
As a consequence, the Group received orders of 487,976 million yen, up 36.9% from the previous fiscal year and recorded sales of 404,925 million yen, up 26.2%.
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 handles systems for the semiconductor and FPD sectors, was also strong.
Consequently, the Group posted operating income of 39,924 million yen, up 72.8% from a year earlier, and ordinary income of 41,105 million yen, up 73.0%. Net income attributable to shareholders of the parent company was 29,008 million yen, up 73.2%. ROE rose from 12.6% in the previous fiscal year, to 17.7%. This reflected an improvement in both the return on sales and the total asset turnover (from 5.2% to 7.2% and from 1.07 to 1.20, respectively).
The fiscal year under review is the first year of Value Innovation 2020, the four-year medium-term business plan with the fiscal year ending March 31, 2021 as the final year. The progress rate in targets for the final year was very high, as described below. In particular, income achieved the target value.
The biggest management initiative during the fiscal year under review was financing with a capital increase through a public offering of shares, or the enhancement of shareholders’ equity, for the first time in 45 years. The Company raised 22,465 million yen from the market and will use the proceeds to increase production capacity in Japan and the United States, the renewal of software and the construction of a headquarters administration building, among other things. With this, the Company will secure the supply capacity it needs to meet robust demand and aim to increase profitability with economies of scale at factories in the United States.
The Company provides investors with investment opportunities such as this and rewards them for their investment by preventing earnings per share from diluting through the increased earnings strength to enable the share price to rise, as well as by increasing dividends. The issuer rating given by Rating and Investment Information, Inc. was raised from “A” (A minus) to “A” (single A) in October 2017, reflecting the increased earnings strength and the enhanced shareholders’ equity in recent years, and the Company has set its sights on further improvements in the future.
2. Outlook for the fiscal year ending March 31, 2019
Given the initiatives above, Daifuku has made the following earnings forecasts for the fiscal year ending March 31, 2019, with the expectation of sustainable growth.
The earnings forecast for the fiscal year ending March 31, 2019 (April 1, 2018 - March 31, 2019)
|Orders||490 billion yen||(up 0.4% year-on-year)|
|Net sales||460 billion yen||(up 13.6% year-on-year)|
|Operating income||46.0 billion yen||(up 15.2% year-on-year)|
|Ordinary income||46.7 billion yen||(up 13.6% year-on-year)|
|Net income attributable to shareholders of the parent company||31.5 billion yen||(up 8.6% year-on-year)|
This forecast is based on the following economy and business environments.
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.
For the fiscal year ended March 31, 2018, Daifuku paid an interim dividend of 25 yen per share, and the Board of Directors passed a resolution to pay a year-end dividend of 45 yen per share at a meeting held on May 11, 2018, for an annual dividend of 70 yen per share.
With respect to dividends for the fiscal year ending March 31, 2019, the Company plans to pay an annual dividend of 75 yen (an interim dividend of 25 yen per share and a year-end dividend of 50 yen), taking into consideration the earnings forecast for the fiscal year ending March 31, 2019 and the basic policy described above.
We respectfully ask our shareholders and investors for their continued support.
Hiroshi Geshiro, President and CEO
Daifuku Co., Ltd.