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Status of the Consolidated First Half of Fiscal Year Ending March 2025

Norio Kamiyama, Representative Director and President

Overseeing the global economy during the consolidated cumulative first six months of the fiscal year ending March 2025, the US economy was on the track to recovery due mainly to the firm consumer spending and capital investment. On the other hand, however, the economic recovery in Europe showed a real slow pace primarily stemming from the lasting slump in manufacturing although there were some visible signs of recovery. The Chinese economy endured decelerating under background of the continuing slump in real estate and sluggish consumer spending. The Japanese economy remained, in general, under the impression of taking on the track to poor recovery owing to weak manufacturing activities. This was partly owing to the impacts caused by certain automakers' suspension of their manufacturing and shipment.

Looking at the market environment influencing the Nippon Chemi-Con Group, the automotive markets remained weak due to decelerated sales of electric vehicles (EVs) and inventory adjustment. Meanwhile, Industrial Equipment markets saw customers' continued inventory adjustment amid anticipated restraint in corporate capital investments due to slowdown in the Chinese economy. On the other hand, ICT markets turned upward thanks to gradual recovery in the number of PCs shipped, along with a steep recovery in AI servers for data centers including increasing capital investment by major IT corporations for their data centers.

Amid this operating environment, the Nippon Chemi-Con Group steadily advanced the policies outlined in our 10th Medium-term Management Plan. Our sales efforts emphasized working to increase sales of high value-added products to the vehicle electronics market and the ICT market, while ceasing to produce unprofitable products, thereby leading to improvement in our profitability. We completed the construction of a new manufacturing wing at the Chemi-Con East Japan Corp. Miyagi Plant to increase production of conductive polymer hybrid aluminum electrolytic capacitor. The new lines started production in October. Moreover, our TAIWAN CHEMI-CON CORPORATION expanded manufacturing lines for conductive polymer hybrid aluminum electrolytic capacitor to reinforce production of highly profitable products.

Our product development efforts included the development of optimum products designed for automobiles and telecommunication infrastructure. These high-reliable products or chip-type conductive polymer aluminum solid capacitor "PXY Series" have succeeded in deterring the leakage current occurring in heat stress during the soldering process and suppressing the current variations. To meet robust demand for large-capacity products, we also added large-sized products to our existing chip-type conductive polymer hybrid aluminum electrolytic capacitors "HXK Series".

As a result of the efforts mentioned above, consolidated earnings for the cumulative first six months of the fiscal year ending March 2025 were net sales of 59,914 million yen (down 25.4% YoY), operating income of 1,850 million yen (down 63.9% YoY), ordinary income of 298 million yen (down 94.4% YoY). Profit attributable to owners of parent were 78 million yen (previous fiscal year was net losses attributable to owners of parent of 22,781 million yen).

Under the harsh business environments, when future market trends are taken into consideration, it is with sincere regret that we have decided to forego issuing an interim dividend for the consolidated fiscal year ending March 2025. We offer our deepest apologies to our shareholders.

Status by Product Group

Our consolidated performances by product group for the first six months of the fiscal year ending March 2025 are as follows:

  1. Capacitors (54,898 million yen, 91.6% of total sales)
    Net sales of the product group decreased by 27.4% YoY due to decreased demand for Industrial Equipment.
  2. Mechanical Parts and Other Parts (1,712 million yen, 2.9% of total sales)
    Net sales of the product group decreased by 8.5% YoY due to decreased demand for inductors (coils)
  3. Capacitor Materials (2,750 million yen, 4.6% of total sales)
    Net sales of the product group increased by 28.4% YoY due to increased demand for electrode foils used in aluminum electrolytic capacitors.
  4. Other Products (553 million yen, 0.9% of total sales)
    Net sales of the product group decreased by 20.1% YoY due to decreased demand for resale products.

Full-year Outlook

Looking ahead, the Japanese economy is projected to trend towards a mild recovery due to a recovery in consumer spending under the improving employment and income environments. However, the global economy on the whole is still accompanied with risks of economic downturn, including geopolitical risks around Ukraine and the Middle-East, and risk stemming from the lingering depression in real estate in China. We project the operating environments surrounding the Nippon Chemi-Con Group will remain unpredictable.

For the smooth implementation of the Group's 10th Medium-term Management Plan, we are determined to continue expanding sales of high-value-added products and improving our productivity. As a part of executing the plan, Singapore Chemi-Con (Pte.) Ltd. set up a branch in India in the second half of fiscal 2024. The branch will strive to increase sales in growing markets centering on automobiles, electric power infrastructure, and home appliances in India. Based on our Smart Factory Framework, we are also promoting automation of selecting products by appearance and expanding introduction of automated guided vehicles (AGVs) to cut labor costs.

We forecast that our consolidated full-year earnings for the fiscal year ending March 2025 are net sales of 133,000 million yen (down 11.8% YoY), operating income of 7,200 million yen (down 23.6% YoY), ordinary income of 5,900 million yen (down 25.4% YoY), and 4,000 million yen in profit attributable to owners of parent (previous FY was 21,291 million yen in loss attributable to owners of parent). The assumed exchange rate is US $1 = JPY145 for the second half of fiscal year ending March 2025.

December 5, 2024

Norio Kamiyama
Representative Director and President