Message from the President

Having achieved record-high first half year sales, we seek further growth through our Medium-term Management Plan.

Updated December 3, 2018

Photo: Motonobu Furuya President & CEO, Corporate Officer

Introduction

Our deepest sympathies go out to all those affected by the natural disasters.

In the first half of the fiscal year ending March 2019 (from April 1, 2018 to September 30, 2018, hereinafter the "first half year"), we experienced a lot of natural disasters of earthquakes, heavy rains and typhoons throughout Japan, which caused extensive damage to a wide area. We would like to offer our heartfelt sympathy to the people affected by the natural disasters. Fortunately, these natural disasters did not inflict great damage on the Group's businesses, and we were able to continue with stable business operation. Benefited from the stable global automobile market and many other positive factors to the market conditions, all of our businesses recorded growth in both sales and profits, with record-setting consolidated sales posted in the first half year. As for the future business environment, despite increasing uncertainty of the global economy under the impact of the US-China trade conflict and slowdown in growth of the global automobile market, we will push ahead with the measures specified under our Medium-term Management Plan, which started from this fiscal year, to firmly establish a foundation for further growth.

Business environment and performance of the first half year

Global automobile production quantity remained stable, posting record-setting sales in the first half year.

The Japanese automobile market, our primary customer industry, kept domestic sales at the same level as the previous year. Overseas, while growth rate is falling, sales maintained high levels in the Chinese market.

Furthermore, buoyed by the continuously growing ASEAN and Indian markets, the automobile production quantity remained stable worldwide. Under such business environment, all of our Group's three businesses posted year-on-year growth in sales, achieving record-high consolidated sales for the first half year. Regarding profit, we recorded substantial profit growth, thanks to the strong performance of the Net-Shape Business.

As a consequence of the above, consolidated sales amounted to 8,400 million yen (up 13.9% year-on-year). Operating income surged to 652 million yen (up 100.0% year-on-year) and ordinary income jumped to 666 million yen (up 96.6% year-on-year). Net income attributable to owners of the parent came to 440 million yen (up 103.4% year-on-year). As these results of the first half year were well over our initial plan on profit levels, we announced an upward revision on October 17, 2018.

Results for the second quarter cumulative (Millions of yen)

Graph: Results for the second quarter cumulative

* Rounded down to the nearest million yen

Full-year business environment and outlook

Despite some uncertainty about the future, we forecast record-high sales.

Looking ahead to the second half year, decelerating trend of the Chinese automobile market, which has been increasingly visible since the second quarter, is likely to continue. In the global automobile market as a whole, growth rate is slowing down as well. Meanwhile, the global economy is getting influenced by the trend of International politics. As described above, there's a heightened sense of uncertainty about the business environment surrounding our Group. Taking into consideration these changes to the economic conditions, as well as the earnings of the first half year, our full-year earnings forecast was also revised on October 17, 2018, with consolidated sales reaching at an all-time high of 16,220 million yen (up 6.4% year-on-year). On the income front, we have revised operating income to 1,173 million yen (up 55.3% year-on-year), ordinary income to 1,187 million yen (up 52.5% year-on-year), and net income attributable to owners of the parent to 790 million yen (up 51.2% year-on-year).

Full-year outlook (Millions of yen)

Graph: 通期計画

* Rounded down to the nearest million yen

Dividends

We paid an interim dividend of 10 yen and plan to pay a year-end dividend of 10 yen.

During the first half year, the NICHIDAI Group maintained solid performance with record-high sales. Remarkable growth compared with the initial plan was also registered on profit levels. As an interim dividend, we paid 10 yen per share according to the initial plan. For a year-end dividend, we also plan to pay 10 yen per share as initially planned, because increase in both sales and profits is expected with consolidated sales of the 16,000 million-level in sight. This will make a full-year dividend of 20 yen, an increase of 2 yen from a year earlier.

1Dividends per share (Yen)

Graph: 1Dividends per share

Future strategy

While accommodating environmental changes, we will build a foundation for the next generation through our New Medium-term Management Plan.

What's most notable about the future development of the automobile market, or our Group's primary customer industry, is the trend of electrification. As the development activities get revitalized, move toward alliance gets accelerated in the automobile industry; this is one of the moves eyeing the future that are now being developed into a new wave. On the other hand, in some regions, firm demand for gasoline-powered and diesel-powered cars is expected to continue for a while. Although the business environment surrounding the Company, including the future outlook of the world economy, is in flux, the NICHIDAI Group will steadfastly capture existing demand and promote new activities to respond to future environmental changes. Our New Medium-term Management Plan, which started in the current fiscal year, has just got off the ground, but we are steadily implementing measures targeting the next stage. In addition to the global strategies and technological development strategies, which have been promoted since before, we will push forward with human resource-related measures that will lay the foundation for these strategies. We will ensure this approach lead to the creation of the foundation for the next generation.

We ask our shareholders to understand the NICHIDAI Group's initiatives.

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 first half year

The Forging Die Division enjoyed solid demand from key users in Japan. The Precision-forged Products Division registered sales significantly exceeding the previous year, supported by increased sales of scroll forged goods at our domestic and overseas bases. As a consequence, overall segment sales amounted to 3,983 million yen (up 19.1% year-on-year). The increase in sales boosted ordinary income to 388 million yen (up 303.8% year-on-year).

Full-year outlook

The Forging Die Division expects key users in Japan to maintain healthy demand. The Precision-forged Products Division will step up efforts so as to continue contributing to the Company's profit. In light of such circumstances, we forecast full-year sales forecast of 7,660 million yen (up 6.8% 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 first half year

Sales of VG turbocharger parts remained at the same level as the previous year, despite the change of model configuration along with the start of new model production. Consequently, sales rose to 3,127 million yen (up 2.5% year-on-year). Ordinary income came to 165 million yen (up 1.0% year-on-year).

Full-year outlook

NICHIDAI is focused on the development of highly value-added VG turbocharger parts, taking advantage of its technical strength. For the second half year, since new models of VG turbocharger parts production of which started the current fiscal year are expected to contribute to sales, full-year sales are forecasted to be 6,130 million yen (up 3.6% 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 first half year

Special demand for the electric power industry in the first quarter, strong sales for healthcare products at home and abroad and other factors pushed up sales. As a result, segment sales rose to 1,288 million yen (up 31.2% year-on-year) Ordinary income also increased to 111 million yen (up 42.4% year-on-year).

Full-year outlook

For the second half year, sales of maritime large-size seawater strainers are likely to grow. Consequently, we forecast our performance will remain at the same level as the first half year, with sales amounting to 2,430 million yen (up 12.4% year-on-year).

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