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Management Information

President's Message

Status of Consolidated Cumulative Second Quarter

The global economy during the six months ended September 30, 2017 saw mild economic growth supported by firm capital investments and personal spending in the U.S.A. The European economy also trended towards recovery. The Chinese economy continues to maintain a high growth rate thanks to the effects of economic stimulation measures by the government. In Japan, capital investments were firm among an improving hiring environment as the Japanese economy trended towards a mild recovery.

The market environment impacting the Nippon Chemi-Con Group continued to see firm demand in automobile-related markets. At the same time, gaming device markets, industrial robots and other equipment-related markets also trended favorably.

Amid such an operating environment, beginning in April 2017 the Nippon Chemi-Con Group started our 8th Medium-term Management Plan, which outlines the "Establishment of a Robust Management Platform through Business Structure Transformation toward the 90th Anniversary: Deepening Management Innovation". With the start of this plan, we have transitioned into implementing measures aimed at increasing our corporate value. Specifically, we are targeting the automotive electronics market, which is forecast to see growth driven by growing use of electronics in vehicles and advancements in automated driving, and the industrial equipment market, which is expected to see market expansion due to the automation of facility equipment. We are implementing sales growth activities that are aligned to the needs of our customers. To address quality and further strengthen our quality control structure, we established a new Innovative Quality Advancement Dept. within the Quality Assurance Headquarters to more deeply analyze quality issues and implement improvements. On April 1, 2017, we conducted the reorganization of subsidiaries by merging our consolidated subsidiary Chemi-Con Fukushima Corp. with Fukushima Electrolytic Industry Corp. and by merging Chemi-Con Yamagata Corp. with Chemi-Con Yonezawa Corp. These mergers aim to enhance our cost competitiveness by organizing an integrated production structure, and reduce costs by promoting optimization in indirect departments.

In the area of product development, we developed numerous new products for the automotive electronics market, the industrial equipment market, and the communications infrastructure market. These products achieve size reductions, higher capacity, and more advanced functions compared to previous products. For industrial robots and other industrial equipment markets, we applied Nippon Chemi-Con's expertise in materials technology to develop the KHE Series, a snap-in type aluminum electrolytic capacitor that is smaller than previous products. For the MHS Series, the surface mount-type aluminum electrolytic capacitor for mobile phone base stations and other communications infrastructure markets we began selling in 2016, we enhanced the lineup by developing products that deliver higher capacity.

As a result, consolidated earnings for the six months ended September 30, 2017 resulted in net sales of 63,087 million yen (up 10.6% YoY), operating income of 2,610million yen (up 501.7% YoY), ordinary income of 2,524 million yen (six months ended September 30, 2016 resulted in ordinary income of 6 million yen), and profit attributable to owners of parent of 1,921 million yen (six months ended September 30, 2016 resulted in losses attributable to owners of parent of 1,485 million yen).

Status by Business Segment

The status by business segment during the six months ended September 30, 2017 is as follows.

  1. Capacitors (57,266 million yen, 90.8% of total sales)
    In China and the Asia region, demand for home appliances and automobile-related demand increased, which resulted in segment net sales that increased YoY by 10.3%.
  2. Mechanical Parts and Other Parts (1,477 million yen, 2.3% of total sales)
    Segment net sales increased 8.4% YoY thanks to increased CMOS camera modules sales.
  3. Capacitor Materials (3,282 million yen, 5.2% of total sales)
    Segment net sales increased 10.2% YoY thanks to increased demand for electrode foils for aluminum electrolytic capacitors.
  4. Other Products (1,061 million yen, 1.7% of total sales)
    Segment net sales increased 28.7% YoY thanks to increased sales of resale products.

Full-Year Outlook

Looking ahead, the Nippon Chemi-Con Group anticipates our operating environment will remain one that requires caution. While we expect the U.S.A. economy will remain firm, the overall global economy including Japan faces causes for concern such as increasing geopolitical risks and the Brexit issue.

Our Group will continue to implement the core strategies outlined in our 8th Medium-term Management Plan as we work to enhance our management platform. Specifically, we will link sales management systems and production management systems to ensure appropriate inventory management. At the same time, we will enhance our financial structure by reducing lead times at production plants and reducing works in process inventory in order to improve our inventory turnover rate. We will strengthen initiatives aimed at improving profitability, including enhancing our ability to respond to currency risks by reevaluating our sales and purchasing currencies, and by ensuring our domestic mother plants provide full support towards increasing the competitiveness of our overseas production plants. For sales, we will position products other than aluminum electrolytic capacitors as core products. This includes products such as electric double-layer capacitors, CMOS camera modules, multi-layer ceramic capacitors, and amorphous choke coils. We will conduct sales activities in Japan and overseas based on partnerships between the sales and technology departments that will enhance our proposal capabilities.

The Nippon Chemi-Con Group is being investigated by competition law authorities in various countries in relation to our aluminum electrolytic capacitor transactions. In October of this year, the U.S. Department of Justice filed a lawsuit in the U.S. District Court for the Northern District of California against Nippon Chemi-Con Corporation claiming a violation of U.S. antitrust laws and alleging that Nippon Chemi-Con engaged in a price cartel and pricing collusion for electrolytic capacitors. Nippon Chemi-Con intends to take appropriate measures, including refuting these charges in official court proceedings.

Our full-year consolidated earnings forecast for FY2017 (year ending March 2018) is net sales of 128,000 million yen (up 10.0% YoY), operating income of 6,200 million yen (up 85.7% YoY), ordinary income of 5,500 million yen (up 174.6% YoY), and profit attributable to owners of parent of 4,300 million yen (up 411.8% YoY). Furthermore, our currency rate assumption for the second half is 110 yen/1 USD.

December 2017
Ikuo Uchiyama, Presidentt