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Messages from Management

Status of Business

We would like to take this opportunity to express our heartfelt gratitude for your continued support and encouragement. In the following, we present a report of our performance results during the fiscal year 2018 (term ended March 2019).

Business developments and results

 Looking back on the global economy during the fiscal year under review, the U.S. economy remained firm owing to fiscal policy measures among others, and monetary easing and tax break were taken as the fiscal policy measures to respond to counteract economic slowdown in China. In Europe, the economy slowed down further as was affected by political turmoil such as Brexit issues.

 Meanwhile, the Japanese economy remained firm for the time being, although business confidence was somewhat subdued in the second half of the fiscal year due to the effect of U.S.-China trade friction and global economic slowdown.

 Under such conditions, with regard to the electronics industry, the mainstay area of business of the Hakuto Group (the “Group”), the car electronics subsegment continued to be stable due to such factors as the spread of EV and the enhancement of self-driving technology and driving safety improvement equipment, while there were some subsegments where sluggishness was seen in demand for smartphones and capital investment in the Chinese manufacturing sector. On the other hand, with regard to chemicals business, demand for polymerization inhibitors and catalysts in oil refining and petrochemical industries remained firm and demand for cosmetics bases increased. As a result, overall business conditions were favorable.

 Under such circumstances, consolidated net sales for the fiscal year under review amounted to ¥140,123 million, a 1.0% year-on-year increase. Regarding profit and loss, gross profit increased 2.0% to ¥18,667 million; selling, general and administrative expenses increased 3.2% to ¥15,024 million; operating income decreased 2.6% to ¥3,642 million; ordinary profit decreased 5.1% to ¥3,580 million; and net income attributable to owners of parent decreased 24.8% to ¥2,473 million.

 

 The following is a breakdown of business performance by segment for the fiscal year.

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Electronic Components Business

 In the electronic components segment, while demand for vehicle-mounted products increased in the semiconductor devices subsegment, however, sales of the products mainly for industrial equipment in Chinese market slowed for the second half of the fiscal year, and sales of connectors for equipment for consumer and industrial use were weak.

 As a result, sales in this segment for the fiscal year under review increased 0.3% year-on-year to ¥107,668 million, and segment income decreased 6.6% year-on-year to ¥1,331 million.

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Electronic and Electric Equipment Business

 In the electronic and electric equipment segment, demand for vacuum devices was solid throughout the year, and demand for exposure apparatus for PCBs of smartphones was expanded during the first half of the fiscal year under review, but sales of vapor deposition equipment for manufacture of smartphone lenses in the China region was weak.

 As a result, sales in this segment for the fiscal year under review increased 1.9% year-on-year to ¥21,544 million, and segment income increased 13.0% year-on-year to ¥1,418 million.

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Industrial Chemicals Business

 In the industrial chemicals segment, sales of papermaking chemicals were sluggish in the paper and pulp subsegment due to the global declining trend in papermaking demand driven by the spread of digital media, while sales of polymerization inhibitors and catalysts were firms in the petrochemical subsegment reflecting robust consumption. In the cosmetics subsegment, sales of base materials for cosmetics by a subsidiary remained strong.

 As a result, sales in this segment for the fiscal year under review increased 6.3% year-on-year to ¥10,886 million, and segment income increased 3.0% year-on-year to ¥932 million.

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Others Business

 Other business segment consists mainly of general operation and logistics management operations of Hakuto on a consignment basis, as well as agency business for insurance companies. Sales in this segment for the fiscal year under review increased 1.1% year-on-year to ¥688 million, and segment income decreased 38.5% year-on-year to ¥16 million.

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Outlook of the Next Fiscal Year

 With regard to the outlook for the next fiscal year, there are concerns over a slowdown in the global economy, but adjustments have been made to overcome various issues among major countries, and although the economic environment remained uncertain, recovery in capital investment is also expected from the second half of 2019.

 In the electronic components business, the Group will focus on expanding sales of products in the areas where expansion of technological innovation is expected, such as vehicle-mounted products field including development of advanced driver assistance system (ADAS), IoT, and 5G communications. In the electronic and electric equipment business, the Group will remain committed to obtaining orders from the semiconductor manufacturing related field which is advancing in miniaturization, and to obtaining orders from the Asian market, mainly in Greater China, for PCBs manufacturing equipment. In the industrial chemicals business, the Group will continue to strengthen sales of polymerization inhibitors for monomers in Asian markets, while also focusing on the sales of environment-conscious products including those in new field.

 In consideration of such business conditions, Hakuto forecasts consolidated results of operations for the fiscal year ending March 31, 2020 as follows: net sales to increase 14.2% year-on-year to ¥160,000 million, operating income to increase 9.8% to ¥4,000 million, ordinary profit to increase 11.7% to ¥4,000 million, and net income attributable to owners of parent to increase 13.2% to ¥2,800 million.

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Issues facing Hakuto

 The Group established the 5-year medium-term management plan “E&C +2020” in the beginning of FY2016 and has been working to address management issues such as the enhancement of earnings base and active challenges into new markets and new business opportunities, aiming to achieve sustainable growth and improvement of medium- to long-term corporate value.

 The Group will address the following issues to realize both business expansion and secure stable earnings at the same time toward the last year of Hakuto’s medium-term management plan in 2020, to achieve our targets.

 

1) Strengthening sales strategies for each business segment

The Group will implement various measures including organizational structure reform and concentration of management resources in the areas with high profitability and growth potential under the strategy aiming to rapidly expand the sales of high value-added products in highly active markets while promoting the balanced growth of all business segments, which is the strength of the Group.
More specifically, in the electronic components business, the Group has established the Chubu Region Automotive Devices Division for the purpose of promoting sales of semiconductor devices automotive-related companies in the Chubu region, as part of efforts to expand further into vehicle-mounted products markets. In the electronic and electric equipment business, the Group will prioritize house-brand products related to the manufacture of PCB and laser processing and device and equipment used in the manufacturing of semiconductors. In the industrial chemicals business, the Group will work to expand sales of environment-conscious products and products related to environmental protection, such as odor control.

 

2) Accelerating the development of new business

As a specialized trading company with high technology, we will focus on expansion into higher value-added new businesses and the development of new products to trade. In the electronics business, the Group will promote, among others, EMS business such as module business, business management solution business targeting a wide variety of industries such as apparel and logistics, and medical equipment business such as diagnostic imaging devices for the detection of breast cancer. In the industrial chemicals business, the Group will continue to actively take on challenges in new field including the development of products related to building materials with the application of research technology and in-house cosmetics products
In addition, the Group will aim to expand business and improve profit in an efficient manner utilizing such means as M&A and business transfer.

 

3) Strengthening overseas business

By strengthening the network of overseas locations, the Group will strive to steadily capitalize on business opportunities related to consumption demand and capital investment demand in the Greater China and Southeast Asia, which continue to achieve relatively high economic growth. In particular, for local business in the Greater China whose market size and growth expectations are high, we have established sections in charge of the promotion of business in the Greater China for semiconductor devices business, electronic components business, and electronic and electric equipment businesses respectively.
For global supply chains such as those in automotive-related industries, the Group will strive to enhance customer and supplier confidence and increase transaction volume through a flexible global support system, making the most of the functions of Group locations in the U.S. and Europe.

 

4) Promoting management that contributes to growth

With regard to business management, we will work to strengthen consolidated business management through the introduction of subsystems that are designed to utilize the core system database as more strategic business data, which has already been deployed in Hakuto and major overseas locations of the Group, advancement of inventory management, trade receivable management, and foreign exchange risk management, and business process efficiency improvements including the introduction of RPA.
The Group will also promote healthy management in respect for employees’ work-life balance. As a result of the active efforts we have made so far, Hakuto has been recognized by the METI as one of the White 500 certified health and productivity management organizations.
As for compliance management, the Group will continue to operate a group-wide employee education program to raise the consciousness about compliance among employees and endeavor to strengthen internal control, aiming to ensure healthy corporate growth.

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