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Management Information

President's Message

Overview of Consolidated Cumulative Second Quarter

The global economy during the six months ended September 30, 2018 saw economic growth in the U.S.A. supported by personal spending and capital investments. The European economy also trended towards recovery. The Chinese economy maintained stable growth despite signs of economic slowdown. In Japan, the economy trended towards a mild recovery as capital investments and consumer spending were firm, and the employment environment continued to improve.

Looking at the market environment impacting the Nippon Chemi-Con Group, the industrial robot and other equipment-related markets saw firm domestic demand while automotive-related markets and the air conditioner market were also firm.

Amid such an operating environment, our Group began the second year of our 8th Medium-term Management Plan. Our basic strategy for FY2018 is to "Proactively implement new reforms, viewing the 4th industrial revolution as a growth opportunity - Generating profits by effective use of management resources (people, things, money and information) ". Under this strategy, we continued implementing measures aimed at increasing our corporate value. For sales, the sales department and technology department partnered to conduct aggressive proposal-based sales and increase sales by generating new demand. We also worked to improve profitability by implementing pricing corrections for existing products. For quality, we advanced the development of production facilities that detect and prevent errors with an impact on quality. By acquiring operating status data from production facilities, we will eliminate the generation and distribution of nonconforming products during the production process.

In the area of product development, we developed the GQB Series and the MXB Series for the automotive electronics market, a strategic market for our products. The GQB Series, a line of radial lead type aluminum electrolytic capacitors, and the MXB Series, a line of surface mount type aluminum electrolytic capacitors, are designed for use in the high-temperature environment of the engine room and improve temperature resistance up to 150°C. We also succeeded in the development of the HSF Series, a line of radial lead type conductive polymer hybrid aluminum electrolytic capacitors. HSF Series feature high temperature resistant and long product life and guarantee up to 2,000 hours at 150°C.

As a result, cumulative consolidated second quarter earnings were net sales of 72,172 million yen (up 14.4% YoY), operating income of 3,130 million yen (up 19.9% YoY), and ordinary income of 3,103 million yen (up 23.0% YoY). Furthermore, losses attributable to owners of parent were 108 million yen (previous fiscal year was profit attributable to owners of parent of 1,921 million yen) on having recorded extraordinary losses related to Antitrust laws.

Status by Division

Status by division for the six months ended September 30, 2018 is as follows.

  1. Capacitors (64,490 million yen, 89.4% of total sales)
    In China and the Asia region, demand related to home appliances and automobile-related products increased, resulting in division net sales increasing by 12.6% YoY.
  2. Mechanical Parts and Other Parts (1,921 million yen, 2.6% of total sales)
    Division net sales increased 30.0% YoY thanks to increased CMOS camera module sales.
  3. Capacitor Materials (3,815 million yen, 5.3% of total sales)
    Division net sales increased 16.2% YoY thanks to increased demand for electrode foils for aluminum electrolytic capacitors.
  4. Other Products (1,945 million yen, 2.7% of total sales)
    Division net sales increased 83.3% YoY thanks to increased sales of resale products.

Full-year outlook

Looking ahead, we expect our operating environment will remain one that requires caution. Although we expect the economy in the U.S.A. to continue on a trend of economic growth thanks to capital investments and consumer spending and the Chinese economy remains firm overall, there are concerns that trade friction caused by US customs policies could drag down the global economy.

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. For quality, the Innovative Quality Advancement Dept. will lead initiatives to identify problems in all processes, from order receipt and production to shipment and transport, to detect and prevent problems before quality errors occur. Through these initiatives, we will prevent quality risks in advance and improve customer satisfaction. We also will continue promoting cash flow management and a healthy financial structure by conducting capital investments focused on investment efficacy. Specifically, we will make investment decisions using capital costs as a judgment criteria. We will improve investment efficacy by monitoring each investment to validate and assess investment efficacy.

In September of this year, the Korea Fair Trade Commission reached a decision involving claims of a violation of Korea's Fair Trade Act in relation to our electrolytic capacitor manufacturing and sales. Their decision includes a corrective action order, a fine of 4,211 million won, and criminal charges. We will carefully examine the official decision of the Korea Fair Trade Commission as soon as we receive it and respond accordingly. In May 2018, we determined to enter into a plea agreement including an agreement to pay a fine with the U.S. Department of Justice on the alleged violation of U.S. Antitrust laws in relation to the price cartel and bid rigging regarding electrolytic capacitors. In October 2018, the amount of the fine to be paid under the plea agreement was determined to be 60 million U.S. dollar upon approval by the U.S. District Court for the Northern District of California.

Our full-year consolidated earnings forecast for Fiscal Year Ending March 2019 (FY2018) is net sales of 144,000 million yen (up 8.0% YoY), operating income of 7,500 million yen (up 28.9% YoY), ordinary income of 7,000 million yen (up 58.5% YoY), and profit attributable to owners of parent of 2,800 million yen (previous fiscal year resulted in losses attributable to owners of parent of 16,056 million yen). Furthermore, our currency rate assumption is 110 yen/1 USD.

December 2018
Ikuo Uchiyama, President