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Overview of Fiscal Year Ended March 2021

Norio Kamiyama, President

In the fiscal year ended March 2021, the COVID-19 pandemic resulted in severe recession of the global economy. However, in the U.S.A., the economy saw gradual recovery as economic activities were resumed due to the ease of restrictions from infection prevention measures, and improvements in personal consumption and capital investments were seen. In Japan and Europe, economic recovery was mild due to the impact of restrictions on economic activities implemented to stop a resurgence in the number of infected people. Furthermore, China, which quickly overcame the impact of the pandemic, has seen rapid economic recovery such as increased capital investments due to economic stimulation measures by the government.

The market environment surrounding the Nippon Chemi-Con Group saw firm demand in ICT-related markets due to the widespread adoption of remote work and people spending more time at home leading to demand for notebook PCs and home video game consoles. Demand for products related to 5G communication base stations was also strong. While we did see a significant decrease in demand in the automotive electronics market and industrial equipment market due to the impact of the COVID-19 pandemic, the markets did trend towards recovery during the second half of the fiscal year from improvement in global economic conditions.

Amid this operating environment, the Nippon Chemi-Con Group applied the policies outlined in the Group's 9th Medium-term Management Plan launched in April 2020 and has implemented product planning reforms and structural reforms.

While the full benefits of product planning reforms will not be evident until fiscal year 2021 and beyond, the Group engaged in product development with a focus on developing and expanding sales of high-value added, highly profitable products. Nippon Chemi-Con expanded its line of hybrid products with the development of the HXF Series, a conductive polymer hybrid aluminum electrolytic capacitor that contributes to size reductions and extended service life for circuit units such as in DC-DC converters and inverters. We also developed the KXQ Series, a radial lead type aluminum electrolytic capacitor that provides higher capacitance and reliability than conventional products for on-board chargers installed in electric vehicles and plug-in hybrid vehicles.

As part of structural reforms, Nippon Chemi-Con engaged in human resource optimization by implementing an early retirement program and improved workflow efficiency by reorganizing domestic production sites. The Group also worked to optimize the balance between in-house production and external procurement of electrode foils for aluminum electrolytic capacitors. This will enable the Nippon Chemi-Con Group to maximize the production capacity of existing facilities while also improving the Group's capital efficiency by limiting new capital investments.

In September 2020, Nippon Chemi-Con issued equity warrants to improve the Group's financial strength and secure future investments in highly profitable products.

Under these circumstances, consolidated results for the fiscal year ended March 2021 was a net sales of 110,788 million yen (down 3.3% YoY), an operating income of 2,971 million yen (previous FY was operating losses of 2,891 million yen), and an ordinary income of 2,091 million yen (previous FY was ordinary losses of 4,245 million yen). Furthermore, profit attributable to owners of parent was 2,038 million yen (previous FY was 5,926 million yen in losses attributable to owners of parent).

It is with regret that we have decided to forego the year-end dividend for the fiscal year ended March 2021. We would like to express our sincere apologies to our shareholders.

Status by Product Group

The consolidated fiscal year status by product group is as follows.

  1. Capacitors (101,218 million yen, 91.4% of total sales)
    Net sales decreased by 3.2% YoY due to lower demand in the automotive electronics and industrial equipment-related markets.
  2. Mechanical Parts and Other Parts (2,621 million yen, 2.4% of total sales)
    Net sales decreased by 22.7% YoY due to a decline in sales of CMOS camera modules.
  3. Capacitor Materials (4,903 million yen, 4.4% of total sales)
    Net sales increased by 10.3% YoY due to increased demand for aluminum electrolytic capacitor electrode foils.
  4. Other Products (2,044 million yen, 1.8% of total sales)
    Net sales decreased by 6.2% YoY due to decreased demand for resale products.

Outlook for Fiscal Year Ending March 2022

Our outlook for the future is that the impact of the COVID-19 pandemic will ease gradually, resulting in a recovery trend for the global economy. At the same time, we project that the operating environment influencing the Nippon Chemi-Con Group will continue to require caution due to a number of concerns such as a decline in personal consumption from stagnation in economic activities, a global supply shortage of semiconductors, and a reignition of the US-China trade friction.

Amid such an operating environment, we will steadily implement key policies aimed at generating profits and achieving the goals of our 9th Medium-term Management Plan. We will clarify our growth strategy and improve our profit structure by continuing with product planning reforms and structural reforms throughout fiscal year 2021.

For product planning reforms, Nippon Chemi-Con will achieve results by strengthening its product planning capabilities and accelerating the launch of products on growing markets. The Nippon Chemi-Con Group will increase production capacity and engage in aggressive sales promotion activities of conductive polymer and hybrid products toward the automotive electronics, ICT, and industrial equipment markets which the Group positions as principal strategic markets. At the same time, we will establish a structure that accelerates the launch of new products by improving workflow efficiency, from planning to supplying. We will improve profitability by replacing existing products with new high-value added, highly profitable products and increasing the net sales ratio of new products. Furthermore, the Group will improve its ability to respond to geographic risks by enhancing sales strategies by region and reducing the disparity between sales regions and markets.

For structural reforms, the Nippon Chemi-Con Group will engage in full-scale structural reforms to achieve results that will extend beyond the temporary benefits gained in fiscal year 2020. For manufacturing processes, the Group will break free of its high-cost structure by controlling fixed costs and improving productivity through initiatives such as adopting smart factory technology in production sites. In fiscal year 2021, the Group will automate human judgment and operation as much as possible by automating a portion of quality control processes. This will improve production efficiency and prevent the occurrence of defective products. We will also focus on supply chain management reforms. The Group will improve capital efficiency by reducing lead time required for manufacturing and logistics, from foil production to the shipment to warehouses of sales offices and reducing inventory. Furthermore, we will improve back-office productivity by visualizing staff workflows, eliminating inefficient tasks and focusing on value-added tasks.

The forecast of consolidated results for the fiscal year ending March 2022 (FY2021) is a net sales of 122,000 million yen (up 10.1% YoY), an operating income of 6,200 million yen (up 108.7% YoY), an ordinary income of 5,400 million yen (up 158.1% YoY), and 4,200 million in profit attributable to owners of parent (up 106.0% YoY). The assumed currency rate is 1US$=105 yen.

June 2021
Norio Kamiyama, President