Message from the President

Having achieved the highest ever sales and profits on a full-year basis, we will lay out a new framework to be prepared for the coming age of reform.

Updated June 24, 2019

Photo: Motonobu Furuya President & CEO, Corporate Officer

Under brisk market conditions, our sales hit an all-time high.

In the fiscal year ended March 31, 2019 (from April 1, 2018 to March 31, 2019, hereinafter the "fiscal year under review"), all of our Group's three businesses—Net-Shape, Assembly and Filter—posted record-setting sales, causing consolidated sales to exceed 17,000 million yen for the first time. Although the future business environment is unpredictable due to abrupt slowdown of the Chinese market and other factors, we aim to continue growing steadily with a new framework laid out to be prepared for changes.

During the fiscal year under review, the Japanese automobile manufacturers, or our primary customer industry, performed well in the domestic market. Overseas, major markets such as the United States and Europe remained at high levels. In Asia, the year under review saw things have changed. While ASEAN and Thai markets were healthy, the Chinese market, which had been growing continuously, experienced a year-on-year decline for the first time.

Amid such business environment, all of our Group's three businesses posted record-high sales: The Net-Shape Business performed strongly, new models of VG turbocharger parts contributed to sales of the Assembly Business and the Filter Business enjoyed special demand. Regarding profit, we recorded substantial profit growth, thanks to the increased sales registered by the Forging Die Division of the Net-Shape Business and strong sales of scroll-forged goods.

As a consequence of the above, consolidated sales for the fiscal year under review rose to 17,416 million yen (up 14.2% year-on-year). Operating income surged to 1,387 million yen (up 83.8% year-on-year) and ordinary income jumped to 1,417 million yen (up 82.0% year-on-year). Net income attributable to owners of the parent climbed to 968 million yen (up 85.4% year-on-year). These results for the year under review were over our revised plan announced on October 2018, setting new record highs.

Incorporating deceleration of the global economy, we forecast sales of 15,500 million yen for the next fiscal year.

As for the next fiscal year, we see the deceleration of the Chinese economy due to the US-China trade conflict as a cause of concern. In 2018, the Chinese automobile market, which had been in constant growth since 2000, saw a lower number of units sold than the previous year for the first time. As no-deal Brexit has become a concern, factors that may exert unfavorable effects on the global economy are also increasing in Europe. Meanwhile, there is only a little special demand that leads to sales growth as we had in the fiscal year under review, making the business environment surrounding our Group extremely unclear.

Taking into consideration these changes to the economic conditions, we forecast consolidated sales of 15,500 million yen (down 11.0% year-on-year) for the next fiscal year. On the income front, we forecast operating income of 1,000 million yen (down 27.9% year-on-year), ordinary income of 1,000 million yen (down 29.4% year-on-year), and net income attributable to owners of the parent will come to 660 million yen (down 31.8% year-on-year).

We are striving to capture new demand while implementing our New Medium-term Management Strategy.

During the fiscal year under review, we were swamped with more order receipts than initially expected at job sites of all the three businesses. Even under such circumstances, we have been steadfastly moving forward with our New Medium-term Management Strategy, which has Three Challenges as its core, and have produced results.

In the Net-Shape Business, our sales strategy optimized for each customer successfully led to more order receipts than initially planned. We also succeeded in receiving orders for dies in a new field of parts. These are parts that are indispensable even when more electric vehicles are on roads. In the Assembly Business, we launched automated line and enhanced traceability to increase our competitiveness. Finally, in the Filter Business, we focused on the healthcare-related field and strived to develop new demands.

During the consolidated analysis of change in sales (Millions of yen)

Graph: During the consolidated analysis of change in sales

* Rounded down to the nearest million yen

Full-year outlook (Millions of yen)

Graph: Full-year outlook

* Rounded down to the nearest million yen

We will respond to radical changes to the automobile industry anticipated in the coming new age.

At our general meeting of shareholders held in June 21, two director corporate officers were newly appointed. Entering a new era of Reiwa, under the business environment more rapid changes are anticipated, we will strengthen our management setup and push ahead further with our New Medium-term Management Strategy.

The most remarkable change happened in the 30 years of the Heisei era I think is the rapid growth of China, and going forward, it is certain that the world will plunge into an age of two tops: The United States and China. In Japan, which lies at a stone's throw from China, I regard what stance we will adopt as a critical theme for us.

The Chinese automobile market went through growth spurt; its production quantity, which was 2 million units per year in 20 years ago, has now reached nearly 30 million units. Although it has temporarily been slowing down due to the US-China trade conflict since the second half of last year, China will surely remain as growth driver.

Another point to note is China's national commitment to the next-generation technology for automobiles called CASE (Connected, Autonomous, Shared and Electric). My recognition of the beginning of Reiwa is a fresh start of the automobile industry that will take on new dimensions. We should pay attention to the speed of the change as well. I predict that the changes we had in the 30-year Heisei will happen within 10 years in the Reiwa era.

While a radical change poses a risk for existing businesses, it can be a great chance for those who proactively take on new challenges. We will raise the level of our unique business model, which was started in the era of Showa and established in Heisei, to an even more robust framework and keep evolving in the era of Reiwa.

We ask our shareholders to understand the NICHIDAI Group's initiatives and expect future development.

The year-end forecast dividend is 15yen including special dividends, for a full-year dividend of 25yen.

NICHIDAI considers returning its profit to its shareholders as its important business issue and is working toward constantly paying them stock dividends while securing internal reserves required for its future business development and stronger management culture.

The Company determines the dividend amount in view of the business environment, trend of operating results, dividend payout ratio and other indices. Regarding year-end dividend for the year under review, considering that we achieved all-time high consolidated sales, we plan to pay 15 yen per share: 10 yen according to the initial plan plus 5 yen as special dividend. This will make a full-year dividend of 25 yen.

As for the next fiscal year, we forecast a full-year dividend of 20 yen per share, consisting of a 10-yen interim dividend and a 10-yen year-end dividend.

1 Dividends per share (Yen)

Graph: 1 Dividends per share

Net-Shape Business

Graph: Net sales composition ratio

Graph: Net sales, Ordinary income/Income ratio

* Rounded down to the nearest million yen

Overview of the fiscal year under review

The Forging Die Division enjoyed increase in sales at home and abroad because orders from key customers stayed firm. Also in the Precision-forged Products Division, both domestic and overseas bases registered sales growth of scroll-forged goods. As a consequence, overall segment sales amounted to 8,332 million yen (up 16.2% year-on-year). The increase in sales boosted ordinary income to 837 million yen (up 102.4% year-on-year).

Outlook for the next fiscal year

Sales of the Forging Die Division are expected to decrease as large-volume orders received in the fiscal year under review from key customers will settle down. In the Precision-forged Products Division, orders for scroll-forged goods will decrease. In light of such circumstances, we forecast full-year sales of 7,840 million yen (down 5.9% year-on-year).

Assembly Business

Graph: Net sales composition ratio

Graph: Net sales, Ordinary income/Income ratio

* Rounded down to the nearest million yen

Overview of the fiscal year under review

Production of new models of VG turbocharger parts launched in the previous year contributed to sales growth, covering a decline in WG turbocharger parts that are gradually decreasing. Consequently, sales increased to 6,471 million yen (up 9.4% year-on-year). Ordinary income surged to 346 million yen (up 151.2% year-on-year).

Outlook for the next fiscal year

Continued from the fiscal year under review, WG turbocharger parts are likely to decrease in the next fiscal year. Additionally, VG turbocharger parts will also decrease adversely affected by the stagnation exhibited in the automobile industry as a whole. In consideration of such situation, full-year sales are forecasted to be 5,440 million yen (down 15.9% year-on-year).

Filter Business

Graph: Net sales composition ratio

Graph: Net sales, Ordinary income/Income ratio

* Rounded down to the nearest million yen

Overview of the fiscal year under review

Special demand for the electric power industry in the first quarter, coupled with strong domestic and overseas sales for healthcare products and solid sales of large-size seawater strainer and other products, pushed up sales. As a result, segment sales rose to 2,611 million yen (up 20.8% year-on-year). Ordinary income also increased to 233 million yen (up 2.7% year-on-year).

Outlook for the next fiscal year

Sales are likely to decline in the next fiscal year. While sales for healthcare products are likely to grow steadily, we cannot expect special demand as we had in the fiscal year under review. Consequently, we forecast full-year sales of 2,220 million yen (down 15.0% 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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