Q: Please tell us about your financial results for the FY2018.

Yuki:
Sales were driven by the car electronics field, and although net sales reached a record high, profits declined.

In the FY2018, sales increased to 42.8 billion yen and operating income decreased to 6.1 billion yen. In the automotive market, which is our main focus, the number of automobiles sold in China has decreased due to trade friction between the United States and China, and automobile sales have slumped due to the introduction of WLTP (Worldwide Harmonized Emissions and Fuel Economy Test Procedures) in Europe. The industrial market was affected by sluggish smartphone sales and reduced investment in FA equipment due to trade friction. Sales increased only 1.4% year on year. In addition, Operating income was down 27.8% from the previous year due to lower capacity utilization resulting from lower sales and a significant decrease in product production at the Nantong plant.

By market, sales in the car AVN (audio/visual/navigation) field declined due to the continued slump in automobile sales in major regions, while sales in the car electronics field reached a new high due to progress in ADAS (advanced driver assistance systems) and electrification. In particular, safety-related applications such as radar and in-vehicle cameras increased 20% year-on-year, and electrification-related applications for powertrains increased 80% year-on-year. On the other hand, in the industrial market, sales decreased slightly due to restrained capital investment due to trade friction.

By product, Board to Board Connector product groups that can leverage our strengths are increasing, mainly for the automotive market, and the sales composition ratio has expanded to 48%.

Q: Please tell us about the outlook for the FY2019.

Yuki:
The car electronics field is expected to grow, and the industrial market is expected to recover.

Sales and profits are expected to increase to ¥45.0 billion (up 5.1% year-on-year) and operating income of ¥8.1 billion (up 33.1% year-on-year).

As for sales, we assume that the deterioration of the external environment from the previous fiscal year will continue through the first half of the year, and we are planning for a recovery in the second half. The car AVN field is expected to be impacted by the decline in automobile sales in China and other countries, but in the car electronics field, we believe that safety and powertrain systems will continue to grow significantly. In the industrial market, sales for inverters and servo amplifiers are expected to recover.

As for operating income, we will focus on cost reduction activities through automation and rationalization. In addition, we plan to invest 7.5 billion yen in capital investment and 1.5 billion yen in research and development expenses for sustainable growth.

*For the FY2019, exchange rates are assumed to be 1 USD = 110.00 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:
The achievement of the initial sales target of 50 billion yen for the FY2019 will be carried over to the next fiscal year.

Due to temporary changes in the external environment, in the FY2018, both net sales and operating profit margin fell below the figures in the medium-term management plan announced in May 2017. As a result, we have decided to carry forward the sales target of 50 billion yen, which was initially targeted for the FY2019, to the FY2020.

Although we have carried over the achievement of the goals of the medium-term management plan, we will proceed with initiatives for the current fiscal year while clarifying the results and issues of the previous fiscal year. In terms of sales, in the car AVN field, the shift to display audio has led to an unexpectedly accelerated decrease in the cost of installing connectors per vehicle. In the automotive (PA25 area * ) market, sales are growing steadily in the safety and powertrain markets, and we will further strengthen our global expansion. In the industrial market, we will work to strengthen global sales expansion and expand our product portfolio with a view to collaboration.

To expand operating income, we will promote thorough cost reductions and design standardization.

As an initiative for growth, we will work on expanding the “Z-Move structure ” lineup, which is a Only One product, and developing products that support high-speed transmission. In addition, in order to strengthen production capacity, we will promote the smart factory construction of the Nantong Factory, which opened in April 2018, and the construction of a new factory in Mexico.

In the previous fiscal year, we transitioned to a “Company with Audit and Supervisory Committee” and established a “Nominating Committee” and a “Compensation Committee” to strengthen our management base. We will further strengthen governance by expanding and utilizing outside directors.

*PA25 area: 5 applications: safety, powertrain, motor, infotainment, and two wheeled vehicle.

Q: Please tell us about your long-term vision of achieving sales of 100 billion yen.

Yuki:
We will clarify the direction of our company and aim to build a global top 10 and brand value.

Under our management philosophy of being a bridge to the future, we aim to become a 100-year company that creates customer value by strengthening our ability to identify customer issues, our product development capabilities, and our sales capabilities. To achieve this, we have set a long-term vision target of 100 billion yen in net sales as the scale of our business to achieve this goal, with a target date of March 31, 2026.

We aim to enter the global top 10 in the connector industry while building brand value.

Q: How do you perceive future market trends and how do you anticipate changes in your portfolio?

Yuki:
PA25 is expanding in the automotive market, and we see it as an area that we should focus on.

In the automotive market, which is our main focus, we believe that while major technological innovations such as electrification and autonomous driving are progressing, connectors will become more commoditized. Along with these developments, we expect the PA25 area to expand rapidly around the FY2022.

50% of our sales of 100 billion yen are expected to come from the car electronics field, such as the PA25 area.

We are promoting "strengthening sales power", "expanding development power", and "strengthening manufacturing power and cost competitiveness" in order to speedily create value for global customers. 

Q: Finally, 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. Our basic policy is to make effective use of this information in order to expand our business.
Based on this basic policy, we set the dividend per share for the FY2018 at 60 yen. In the medium-term management plan, we aim for a dividend payout ratio of 30%, and we plan to pay a dividend of 70 yen for the FY2019 (an increase of 10 yen from the forecast for the FY2018, a dividend payout ratio of 27%). We would like to ask our shareholders for their continued support.