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photo: Motonobu Furuya, President & CEO, Corporate Officer

Turning the automobile industry's structural reform into an opportunity to take a leap forward and lay the basis for a 100-year company

Motonobu Furuya, President & CEO, Corporate Officer

  • Born in 1955 in Yamanashi Prefecture. Graduated from the Department of Sociology, Hitotsubashi University.
  • Joined the Company in 1998. After experiencing General Manager of General Affairs, and General Manager in charge of Sales Coordination, elected as a director in 1999. Appointed as a representative director and Vice President in 2001.
  • Took office of President and CEO, a representative director in April 2002.

Identifying development in the next decade and beyond

Recently the global trend toward the abolition of internal-combustion engine has received a lot of media coverage. China has introduced regulations to maintain electric vehicle production and sales ratio at a certain level as early as from 2018. European countries also announced their policy prohibiting vehicles powered only by internal combustion in and after 2030. The fact behind a series of these moves is that we are required to address the environmental issues. Toward the reduction of greenhouse gas emissions, electrification of vehicles has undoubtedly become a megatrend. However, as exemplified by the fact that the enforcement of such regulations in Germany is scheduled in 2030, it doesn't mean that gasoline- and diesel-powered vehicles will disappear immediately. In my view, further technological breakthrough and development of charging facility and other infrastructures are required for electric vehicles to become a mainstay of automobiles, and it will take about 10 to 15 years. Meanwhile, in emerging markets, vehicle sales volume is expected to continue to rise for some time, and the composition ratio of gasoline-powered vehicles will remain high. Along with this, the downsizing trend—making vehicles high-powered with turbocharger while keeping displacement at low levels—will surely gain momentum to comply with environmental regulations. As I see it, demand for precision-forged dies of the Net-Shape Business will remain strong for at least the next 10 years or so, and the ratio of gasoline-powered vehicles equipped with turbocharger, in which our Assembly Business is involved, will increase. In light of the above, I understand that responding to these trends in an appropriate manner and acquiring solid ability through steadily accumulated achievements are the primary mission I should fulfill to prepare for future developments.

Regulatory status on vehicles around the world

Table: Regulatory status on vehicles around the world

The source: various news documents (2017.11)

Laying the basis for Nichidai to become a 100-year company

My second mission is to draw a vision of further ahead. There's no doubt that the trend toward electric vehicles is irreversible. Finished car manufacturers across the world have already steered drastically in the direction of research and development of electric vehicles thinking 10 years ahead. How should Nichidai face a new automobile world that will arrive in time? Firstly, we need to propose new products leveraged by our core precision forging technology, and pursue the potential of technology to the utmost limit. Innovative technological development requires a spirit of challenge to keep challenging by trial and error, without being afraid of making mistakes. Each one of our employees will be urged to drastically re-form his/her consciousness. Nichidai must remain essential to the automobile industry even in 2050. To that end, what kind of values are we going to offer from now? Being fully aware of a possibility that our core business may not exist, a new image of Nichidai should be built. I have been resolutely prepared as a vision can never be created on the extension of the current picture. What we should tackle over the next decade is, first of all, creating a rock-solid foundation and cultivating the seeds of an ever-changing flexible corporate entity. Knowing that it's my responsibility to take, I will pass the torch to the next generation and strive for creating an environment to transform Nichidai into a 100-year company.

New vehicle sales volume required
for CO2 reduction

(Millions)

Graph: New vehicle sales volume required for CO2 reduction

* Global sales of new passenger cars based on the scenario assuming the global warming kept below 2°C

Source: "Mobility Revolution 2030" by Deloitte Tohmatsu Consulting

Building on the momentum of the first half year results of which exceeded plan, we will aim to achieve record-high sales on a full year basis.

During the first half year of FY March 2018 (from April 1, 2017 to September 30, 2017, hereinafter referred to as the first half year), we posted growth in both sales and profits, supported by year-on-year sales growth recorded by all business segments, in particular, strong performance of the Assembly Business. Although the future business environment is unpredictable as indicated by decelerating emerging economies and so on, we will surely capture demand for dies, order of which is expected to increase in the second half year, and aim to achieve sales as initially planned.

Q Please tell us about the earnings in the first half year and the management environment surrounding Nichidai.
A We posted growth in both sales and profits, due mainly to the increase in sales recorded by the Assembly Business and recognition of foreign exchange gains.

During the first half year, the Japanese automobile market, or our primary customer industry, saw higher sales volume compare to the same period last year, due mainly to higher levels of sales volume in the United States, China and other major markets, as well as recovering sales of light vehicles in the domestic market. As a result, production volume of the Japanese automobile manufacturers continued to rise at home and abroad. Reflecting the increase in sales of the Assembly Business and recognition of foreign exchange gains, the Nichidai Group achieved growth in both sales and profits. Amid these situations, sales of the first half year totaled 7,378 million yen (up 8.7% year-on-year). Operating income amounted to 326 million yen (up 85.8% year-on-year) and ordinary income was 338 million yen (up 171.1% year-on-year). Net income attributable to owners of the parent came to 216 million yen (up 234.1% year-on-year).

During the consolidated analysis of
change in sales

(Millions of yen)

Figure: During the consolidated analysis of change in sales

* Rounded down to the nearest million yen

Q What is the situation in the second half year?
A As initially forecasted, we aim to achieve record-high sales of 14,700 million yen on a full year basis.

Photo: Motonobu Furuya, President & CEO, Corporate Officer

As for the automobile industry in the second half year, the Japanese automobile industry is expected to remain strong both in the domestic and overseas markets. Production volume is also likely to stay healthy. Under these circumstances, the Forging Die Division of the Net-Shape Business will surely capture demand for dies, which is expected to increase, and aim to achieve sales exceeding the first half year. The Assembly Business will ensure to meet the demand for turbocharger parts for gasoline-powered vehicles. Regarding the Filter Business, we forecast earnings as initially planned both at home and abroad. Taking into consideration the status of each business segment mentioned above, as initially expected, we forecast consolidated sales of 14,700 million yen (up 3.9% year-on-year), operating income of 740 million yen (up 15.3% year-on-year), ordinary income of 720 million yen (up 11.8% year-on-year), and net income attributable to owners of the parent will rise to 440 million yen (up 3.6% year-on-year).

Full-year outlook

(Millions of yen)

Table: Full-year outlook

* Rounded down to the nearest million yen

Q What about dividends for this fiscal year?
A We plan to pay a year-end dividend of 8 yen, as initially forecasted.

Nichidai views returning profits to shareholders as one of its important management tasks, and its basic policy is to make stable and continuous distributions of dividends while ensuring internal reserve necessary for future business development and enhancement of management practices. To this end, we determine the amount of dividend taking account of the business environment, trend of our earnings, dividend ratio and other indices as well. As to the interim dividend of this fiscal year, we will pay 8 yen according to the initial forecast. We also plan to pay year-end dividend of 8 yen, as initially forecasted, totaling 16 yen for the full year.

Amid the EV fad, the automobile industry is now entering a phase of major change.

With such change over a long period in mind, Nichidai has appropriately understood the situation of the automobile industry at the time and worked on the Medium-term Management Strategy, which is designed to improve our performance. In that process, we have achieved progress, such as steady overseas operation, acquisition of new customers in the Filter Business and introduction of IoT in the Assembly Business as part of QDC improvement.

We ask our shareholders to understand our current situation and expect future developments.

Full-year forecast of sales by business segment

(Millions of yen)

Table: Full-year forecast of sales by business segment

Dividends per share

(Yen)

Graph: Dividends per share

Net-Shape Business

Graph: Net sales composition / Net sales / Ordinary income / Profit rate

* Rounded down to the nearest million yen

Performance summary of the first half year

Despite the turnaround of sales in the domestic market in the second quarter onward, sales of the Forging Die Division remained almost the same level as the previous year. Meanwhile, the Precision-forged Products Division experienced higher sales than the previous year, due to an increase in overseas production. As a result of these developments, overall segment sales of the Net-Shape Business amounted to 3,344 million yen (up 0.3% year-on-year). Ordinary income rose to 96 million yen (up 78.6% year-on-year) due partly to the recognition of foreign exchange gains.

Full-year outlook

The Japanese automobile industry is expected to remain strong in the second half year in Japan and in major overseas markets as well. Reflecting such trend, order receipt has been recovering since the second quarter. The Forging Die Division will see sales exceeding the first half year, and the Precision-forged Products Division will secure sales almost as planned. Consequently, we forecast full-year sales of 6,900 million yen (up 1.2% year-on-year).

Assembly Business

Graph: Net sales composition / Net sales / Ordinary income / Profit rate

* Rounded down to the nearest million yen

Performance summary of the first half year

Entering the second quarter, sales of turbocharger parts for gasoline-powered vehicles were on the decrease, but remained high. Consequently, sales of the Assembly Business totaled 3,051 million yen (up 21.9% year-on-year). The increase in sales pushed up ordinary income to 164 million yen (ordinary loss of 17 million yen in the same period last year).

Full-year outlook

In the second half year, we expect the demand for turbocharger parts for gasoline-powered vehicles will soften. On a full-year basis, however, we forecast sales of 5,800 million yen as initially planned (up 7.6% year-on-year).

Filter Business

Graph: Net sales composition / Net sales / Ordinary income / Profit rate

* Rounded down to the nearest million yen

Performance summary of the first half year

Despite a temporary decline in large-size seawater strainers, strong performance of filters for the pharmaceutical industry resulted in higher segment sales than the previous year. Consequently, sales of the Filter Business totaled 982 million yen (up 3.0% year-on-year). Meanwhile, ordinary income fell to 78 million yen (down 11.1% year-on-year).

Full-year outlook

Regarding domestic performance, large-size seawater strainers will recover and filters for the pharmaceutical industry are likely to remain healthy. Overseas, production volume of THAI SINTERED MESH CO., LTD. is expected to be almost equivalent to the first half year. Consequently, we forecast segment sales of 2,000 million yen (up 2.9% year-on-year).

* Explanation regarding appropriate use of business forecasts and other special instructions
The above forecasts of operating results are based on the information available at the time this document was released, and actual operating results may differ from these forecasts due to various factors.
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