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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 2017 (term ended March 2018).

Business developments and results

 Looking back on the global economy during the fiscal year under review, the current economic condition was on the stable upswing as the U.S. policy interest rate had steadily been raised on the back of the favorable business sentiment based on such factors as the effect of major tax reduction. In the Asian region, although U.S.-China economic friction was a concern, China had maintained the domestic political stability and is expected to realize steadfast economic growth.

 On the other hand, in Japan, the moderate economic expansion had continued and corporate performance is expected to be strong going forward as well. The economy is also anticipated to be further stimulated by 2020 Tokyo Olympic and Paralympic Games.

 Under such conditions, with regard to the electronics industry, the mainstay area of business of the Hakuto Group (the “Group”), robust demand for semiconductors continued in such developments as progress of switch to electronics in the automobile-related subsegment, full-fledged penetration of products for Internet of Things (IoT), and larger-capacity and further sophistication of data centers and smartphones. On the other hand, with regard to chemicals business, while there is a continued trend towards industry reorganization in the Japanese oil market which is consequently shrinking, demand for petrochemical products in the Asian region remained strong.

 Under such circumstances, consolidated net sales for the fiscal year under review amounted to ¥137,578 million, a 7.8% year-on-year increase. Regarding profit and loss, gross profit increased 10.4% to ¥18,209 million. Selling, general and administrative expenses increased 0.5% to ¥14,499 million, operating income increased 79.3% to ¥3,710 million, ordinary profit increased 88.0% to ¥3,740 million and net income attributable to owners of parent increased 71.2% to ¥3,259 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, the performance remained strong thanks to the progress of switch to electronics in the automobile-related subsegment such as the advanced driver assistance system (ADAS) and powertrains and demand for investment in overseas plants and equipment in the industrial equipment-related subsegment. The sales for use in products such as laptop computers and tablets in the subsegment related to information and communications equipment and air conditioners, refrigerators, etc. in the subsegment related to equipment for consumer use and household appliances remained strong.

 As a result, sales in this segment for the fiscal year under review increased 7.8% year-on-year to ¥106,223 million, and segment income increased 214.0% year-on-year to ¥1,404 million.

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Electronic and Electric Equipment Business

 In the electronic and electric equipment segment, the sales of exposure apparatus for PCBs grew mainly for Taiwanese corporations related to manufacture of smartphones. In the China region, demand for vapor deposition equipment for manufacture of smartphone lenses remained strong.

 As a result, sales in this segment for the fiscal year under review increased 9.9% year-on-year to ¥21,085 million, and segment income increased 54.9% year-on-year to ¥1,246 million.

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Industrial Chemicals Business

 In the industrial chemicals segment, the sales of polymerization inhibitors, amines for acid gas adsorption, etc. in the petrochemicals subsegment, dyes and craping aids supported by demand for paperboards and paper for home use in the paper and pulp subsegment and cosmetics bases and OEM products in the cosmetics subsegment remained strong.

 As a result, sales in this segment for the fiscal year under review increased 4.3% year-on-year to ¥10,247 million, and segment income increased 4.3% year-on-year to ¥904 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 0.5% year-on-year to ¥680 million, and segment income increased 43.3% year-on-year to ¥27 million.

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Outlook of the Next Fiscal Year

 In the next fiscal year, the world economy is expected to remain on a trend toward moderate expansion going forward, continuing the solid performance so far, although concerns over instability of foreign exchange markets exist as a tense atmosphere has been more heightened than ever in the global landscape as seen in the increasing nationalism of major powers, the expansion of scale of Middle East issues and other developments.

 In the electronic components business, the Group intends to achieve further growth in the area of vehicle-mounted products where a rapid commercialization is being made in self-driving and environment technologies. In the electronic and electric equipment business, the Group intends to further increase sales of PCB manufacturing equipment in the Asian markets and make full-fledged efforts for sales of exposure apparatus for semiconductor packages. Furthermore, in the industrial chemicals business, the Group intends to strengthen sales of polymerization inhibitors for monomers in the vibrant Asian petrochemical markets.

 In consideration of such business conditions, Hakuto forecasts consolidated results of operations for the fiscal year ending March 31, 2019 as follows: net sales to increase 7.6% year-on-year to ¥148,000 million, operating income to increase 21.3% to ¥4,500 million, ordinary profit to increase 25.7% to ¥4,700 million, and net income attributable to owners of parent to increase 4.3% to ¥3,400 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 started to address management issues such as the enhancement of earnings base and active challenges into new markets and new business opportunities in the first year of the medium-term plan, aiming to achieve sustainable growth and improvement of medium-to long-term corporate value.

 The Group intends to continue to address the issues stated below in FY2018, the halfway point of the medium-term plan, in order to realize both the sustained growth of the sales and the secure stability of the profit.

 

1) Strengthening sales strategies for each business segment

The Group will try to implement reinforcement measures including review of the organizational structure in order 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.
Specifically, it is intended to adopt a highly dedicated organizational structure for growth markets such as vehicle-mounted products markets in part of the electronic component business. At the same time, in the electronic and electric equipment business and industrial chemicals business, it is intended to make growth compatible with stability by such means as focusing on strengthening the efforts for medical-related and other new fields and expanding the sales of house-brand products and in-house products.

 

2) Accelerating the development of new business

Against the backdrop of the overseas transfer of manufacturing bases and population decline, a slowing or shrinking trend in growth continued in the domestic markets. As a decline in profitability due to a further intensification of competition is expected in existing business areas, it has become imperative to develop new business.
Accordingly, it is intended to proactively embark on business in new areas, for instance, production management software for production lines, housing-related areas such as the smart house business and medical devices in the electronics business and environment-related areas such as maintenance of crude oil storage tanks utilizing the three-layer separation technology and cosmetics-related areas in the industrial chemicals business, without being constrained by existing business areas. In addition, acquisition of diversified new businesses and earlier achievement of business expansion and improved earnings will be pursued through such means as M&As.

 

3) Strengthening overseas business

The Group will strive to accurately understand the trends such as surging consumer demand in the Greater China economy that continues to expand and grow and establishment of global supply chains in the automobile and other industries that may have significant impact on its overseas business and make efforts to further strengthen its overseas business through such means as implementing product strategies specific to growth areas in the regions in Asia and constructing the support system responding to the globalization of customers in Europe and the U.S.

 

4) Promoting management that contributes to growth

With regard to business management, it is intended to strengthen consolidated business management through such means as efficiency improvement for inventory control utilizing the core system introduced in Hakuto and major overseas operation bases and exchange rate risk management. In addition, the Group will work to improve the level of management and control by creating and maintaining rules and operational manuals in and fully disseminate compliance to each of the Group companies. In terms of the human resources policy, the Group aims for enhancement of its global personnel development program and healthy management in respect for employees’ work-life balance.

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