We would like to express our sincere gratitude to our shareholders and investors for their continued support. This is our FY 2021 financial report (from April 1, 2021 to March 31, 2022).
During the reporting period, countries around the world took a wide range of measures in response to the two-year long corona pandemic to normalize economic activities. From the second quarter onward, the world economy faced many emerging challenges, including long-term component and parts shortages such as chip shortage, raw material shortage and price hikes, rising shipping costs, supply chain disruptions due to container shortage and other factors, in addition to the worsening situation in Ukraine. This resulted in downturns not only in the automotive market, which is the Group’s key focus area, but also in the markets for the home appliances and other products.
Even in the challenging business environment, the Group achieved record-high sales, mainly driven by the expansion of the EV powertrain market, steady growth in the industrial market and the weakening yen. Sales in the automotive market increased approximately 17% from the prior year level despite the severe impact of automobile production cutbacks mainly in Europe and the U.S. due to supply shortages of semiconductors and other components. Particularly, sales in the powertrain market increased approximately 90% from the prior year level. As a result of strong demand for xEV and new business wins through offering our unique anti-vibration solutions for powertrain equipment, the sales increase became the driving force for revenue growth. In the consumer market, sales increased, driven by the growing sales of game consoles and office automation equipment which was used by a rising number of people working from home, although they were partly affected by the supply shortages of components such as semiconductors. In the industrial market, sales increased as a result of higher demand for factory automation equipment in China and new installations for 5G base stations. Thus, net sales increased 20.1% year over year to 43,863 million yen.
Despite a rise in fixed cost recovery through sales increase and cost saving efforts such as the promotion of in-house production, the worsening effects of soaring raw material and shipping costs, and rising distribution costs due to supply chain disruptions and other factors affected our profits. Nevertheless, operating income grew 55.9% year over year to 4,520 million yen, ordinary income improved 62.9% year over year to 4,838 million yen, and net income attributable to parent increased 82.7% year over year to 3,913 million yen.
Next, we would like to present our outlook for the near future.
(1) Market Environment
In the automotive market, which is our key focus area, we expect that the global auto production will remain unchanged from the previous year level because the continuation of tightening chip supply, the global supply chain mess caused by the Ukraine crisis and the COVID-19 policies in China and other countries, and other negative factors may delay the production recovery. Besides, xEV sales are expected to grow as xEV adoption is accelerated worldwide and global automakers focus their efforts on xEV production.
We expect that China’s demand for energy-saving industrial equipment such as PLCs, sensors, inverters and robots, as well as telecommunications market demand with the arrival of 5G will continue to grow steadily.
(2) Key Issues
・Further rise in raw material and shipping costs
Profitability could worsen due to negative factors such as soaring prices of raw materials including gold, copper, and resins, as well as surging shipping costs.
・Decline in the plants’ capacity utilization and supply chain disruptions
The Company could face production plants shutdowns, raw materials in short supply, and extended shipping time due to geopolitical risks caused by policy responses to COVID-19 around the world and Russia’s invasion of Ukraine.
・Fluctuations in global auto production
Continuing difficulties in component and material procurement, Russia’s invasion of Ukraine, as well as lockdown policies in response to the corona pandemic in China and other countries could affect car production and supply chain management in the world automotive industry, which would result in serious production decline.
(3) FY2022 Outlook
Although the global situations remain uncertain, we will continuously strive to increase sales by capturing the growth of the xEV market, which is higher than initially expected. Although it will take time to meet the profit targets in the medium-term management due to negative factors such as soaring raw material and shipping costs, we will focus our company-wide efforts on the three strategic measures to improve profitability. These are:
1. Improve profitability
(1) Review our pricing strategy and improve gross profit margin
(2) Promote cost reduction of our flagship product lines
(3) Increase plant productivity, reform the product distribution system, and take firm control of production, inventory and shipping
2. BCP Management
(1) Build a multi-plant production system: increase the ratios of production capacity and local production for local consumption
(2) Secure stable supply of raw materials to the Group’s production bases
3. Visualize and improve SCM through the ERP renewal
In our FY2022 outlook, we thus forecast consolidated net sales of 51.5 billion yen (up 17.4% versus the prior year period), consolidated operating income of 6.16 billion yen (up 36.3% versus the prior year period), consolidated ordinary income of 6.2 billion yen (up 28.1% versus the prior year period) and net income attributable to parent of 4.5 billion yen (up 15% versus the prior year period). The assumed currency exchange rates are 130 JPY/USD and 135 JPY/EUR.
We thank our our shareholders and investors for their continued support and understanding.
Sadao Sato, Chairman
Hitoshi Suzuki, President and CEO