Q: Please tell us about your financial results for the FY2017.

Yuki:
Net sales of 42.2 billion yen and operating income of 8.4 billion yen were both record highs.

This is the first time in our company's history that sales exceeded 40 billion yen. The factors behind the strong performance are the steady increase in sales in the automotive market, which is the company's mainstay, and the industrial equipment market, which the company aims to establish as its second pillar. 

By market, in the automotive market, while sales in the car electronics field are expanding due to advances in ADAS (advanced driver assistance systems) and electrification, sales for safety systems (in-vehicle cameras and radars) in particular are up 150% year-on-year. Sales in the car electronics field surpassed those in the AVN (audio visual navigation) field for the first time. In addition, the industrial equipment market remained strong due to increased demand for FA equipment, mainly in China. Sales in the industrial equipment field were 2.2 billion yen (composition ratio of 5.3%), showing steady growth of 136.8% year-on-year.

Looking at sales by region, sales increased in Japan due to strong sales in the car electronics field, centered on safety, and in the industrial equipment field. In China and South Korea, sales of both car electronics and industrial equipment increased. In Europe, sales increased in the automotive market, driven by safety-related products in car electronics. In the U.S. automotive market, sales of both AVN and car electronics increased.

In April 2018, we opened the Nantong Factory in Jiangsuzhou, China, as our fifth production site.

Q: Please tell us about the outlook for the FY2018.

Yuki:
Sales and profits are expected to increase to 45.5 billion yen (up 3.2 billion yen year-on-year) and operating income of 8.9 billion yen (up 0.5 billion yen year-on-year).

As for sales, we plan to expand mainly in the automotive market. In the car electronics field, which is the main field of the automotive market, safety systems such as in-vehicle cameras and radars continue to drive sales. And for powertrains, our three-dimensional Floating Board to Board Connector "Z-Move structure ™" is installed, in addition to DCDC converters, we anticipate an increase in sales of inverters and other products. In the industrial equipment market, sales are expected to expand due to increased demand for FA equipment in Japan, where labor shortages are accelerating, as well as in China and South Korea.

We will work to increase operating income through cost reduction activities through automation and streamlining, and improvement of the cost rate by increasing the in-house production of key processes. The operating profit margin is expected to drop 0.3 percentage points (19.6%), as expenses related to the Nantong factory in China will be included in operating income from this fiscal year.

In terms of investment, we plan to invest 7.5 billion yen (up 22.5% year-on-year) to develop new products, strengthen cost competitiveness, and respond to increased production, as stated in the medium-term management plan. The investment in new product development is aimed at the speedy development of new products that anticipate needs in collaboration with the marketing and engineering departments for the growing automotive market. In addition, in order to strengthen cost competitiveness, we will aggressively invest in streamlining with the aim of reducing costs, and promote an increase in the ratio of in-house production of key processes (molding, pressing, and plating). In response to increased production, we will invest in the smooth start-up of production at the Nantong factory in China.

*For the FY2018, exchange rates are assumed to be 1 USD = 105.00 yen, 1 euro = 125.00 yen, and 1 yuan = 16.50 yen.

Q: Please tell us about the progress of the medium-term management plan.

Yuki:

Both net sales and operating profit margin are progressing at a level that exceeds the figures in the medium-term management plan announced in May 2017. In the first year of the plan, the FY2017, sales were 42.2 billion yen (2.2 billion yen higher than planned). ), and we are within reach of our target of ¥50 billion in net sales for the FY2019. In addition, the operating profit margin was 19.9% in FY2017 (planned 18.0%) and is expected to be 19.6% (planned 19.0%) in FY2018, aiming to achieve 20.0% in FY2019. 

To achieve our medium-term management plan, we will expand the fields of safety, powertrain, infotainment, switches, clusters, etc. in the automotive market, while working to expand the field of FA-related equipment in the industrial equipment market.

*The medium-term management plan assumes exchange rates of 1 USD = 110.00 yen, 1 euro = 120.00 yen, and 1 yuan = 15.8 yen.

Q: Please tell us about the infrastructure development for achieving the long-term vision.

Yuki:

In order to achieve our long-term vision of 100 billion yen in sales, we will need to improve manufacturing as represented by the electrification and autonomous driving of the automobile industry, changes in the telecommunications market due to the advent of 5G, and trends such as Society 5.0 and Industry 4.0. We must embrace change and turn it into an opportunity.

The Group will develop products by strengthening marketing and extracting customer issues, while promoting solution-proposing sales, “capturing the growing market (automotive market)” and “establishing the second pillar (for industrial equipment). 

In order to capture the growing market (automotive market), we are working on the development of new products for electric powertrain systems and safety applications, which are increasing with electrification and automation. In the field of electric powertrains, orders for products other than DCDC converters are also increasing, and we plan to show a high rate of growth in the future. In terms of safety systems, radar products already account for the largest sales volume in the car electronics field, and we are working to increase marketing, sales, engineering, and production engineering personnel for products for in-vehicle cameras.

In order to establish the second pillar (for industrial equipment), in addition to conventional efforts such as strengthening sales expansion of Automation Connector and increasing orders in the FA-related market, we will start projects for "communications" and "robots/AI." We will strive to acquire global big customers by improving our ability to make proposals to customers through promotion and open innovation.

In addition to the Nantong Plant in China, we plan to start construction of a new plant in Mexico (León City, Guanajuato) in 2019 as a measure to strengthen production capacity toward sales of 100 billion yen. At these two factories, we will promote smart factories that make full use of IoT to achieve productivity of 400% (compared to conventional factories).

We are also working to improve our management foundation, and will strengthen governance by transitioning to a company with an audit and supervisory committee, and strengthen human resource development by promoting diversity management and work style reform.

Q: Lastly, please give a message to shareholders.

Yuki:
The Company recognizes that stable return of profits to shareholders is an important management policy, and its basic policy is to pay dividends in consideration of performance, the business environment, and the strengthening of its financial position over the medium to long term. Our basic policy on retained earnings is to use them effectively to enhance our cost competitiveness, strengthen our technological development and manufacturing systems to meet market needs, and further develop our global strategy in order to respond to anticipated changes in the business environment.

Based on this basic policy, the dividend per share for the FY2017 has been revised upward from the planned dividend of 45 yen to 50 yen. We plan to pay a dividend of 60 yen for the FY2018, and aim for a dividend payout ratio of 30% in the medium-term management plan.

We would like to ask our shareholders for their continued support.