Financial Results for the Quarter ended Sep 30, PDF

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Financial Results for the Quarter ended Sep 30, 2016 KITO CORPORATION TSE 1st Section: 6409 November 14, FY2016 Q2 Summary 1. Market Environment Market trends ahead remains harder to read due to
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Financial Results for the Quarter ended Sep 30, 2016 KITO CORPORATION TSE 1st Section: 6409 November 14, FY2016 Q2 Summary 1. Market Environment Market trends ahead remains harder to read due to likely slowing of the world economy, sluggish equipment investment in the energy industry, and a generally stagnant Chinese economy. 2. Business Results Japan leads the overall results with firm demand related to investments in the infrastructure sector. (JPY in million) 2016 Apr-Sep YoY Change Forecast Fcst/Results Sales 22,695 (12.1)% 22,700 +/- 0.0 % Operating Income 1,437 (4.5) % 1, % Net Income * 364 (35.9) % 450 (19.1)% * Net income attributable to owners of parent Forex Rate Q2 Average Rate (USD/JPY) Overall summary 1) Sales were as we estimated thanks to brisk domestic demand. 2) Promote the Mid-Term Business Plan for greater efficiency in daily work, better financial health and higher profit. 3) An uncertain trend in exchange rates and changes in the external environment to be closely monitored. 4) The forecasts for incomes are yet to be determined at this time, due to the difficulty of making reasonable assumptions of M&A related cost. 2 1 FY2016 2nd Quarter Financial Results 2 FY2016 Forecast 3 Reference 3 FY2016 2nd Quarter Financial Highlights JPY in million FY2015 Q2 (Apr-Sep) FY2016 Q2 (Apr-Sep) Note: Exchange Rate (FY2015-Q2 - FY2016-Q2) : USD/JPY CAD/JPY EUR/JPY RMB/JPY * Due to the steep rise in the value of the yen at the end of the first quarter, the company posted foreign exchange losses of 282 million yen. ** The assessed net value of PWB Anchor, which Kito recently acquired, was greater than the takeover cost, and the company posted gains from emergence of negative goodwill. *** 1,070 million yen includes corporate tax adjustment of 843 million. YoY Change Sales 25,809 22,695 (12.1)% Operating Income 1,505 1,437 (4.5)% Op Income / Sales 6.3% 5.8% Forex Loss *282 1, Ordinary Income / Sales 4.6% 4.2% Ordinary Income Extraordinary Income **489 Income Taxes ***1,070 Net Income Net Income / Sales EBITDA % % Op Income + Depreciation 2,596 2,444 (19.6)% (35.9)% 4 Net Sales and Operating Margin - While domestic operations were solid, the shift in FX rates led to a decrease in sales - Stable demand in Japanese market support overall profit (JPY in million) Sales Op Margin 18,000 17,099 16,285 25% 16,000 14,000 12,000 10,000 8,430 9,969 14,468 12,122 13,686 13, % 10,323 12,372 20% 15% 8,000 6,000 4,000 2, % 5.8% 6.8% 9.1% 4.4% 7.1% 10.0% 5.4% 7.1% 10% 5% 0 Op Income Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q , ,371 2, % FY2014 Net Sales 49,968 Op Income 3,395 FY2015 Net Sales 55,821 Op Income 5,221 FY2016 Forecast Net Sales 53,000 Op Income - 5 Net Sales by Region Globally diversified portfolio with non-japanese sales exceeding 70% JPY in million FY2014 Q2 FY2015 Q2 FY2016 Q2 YoY Change % share % share % share Amount Change % Change Total 18, % 25, % 22, % (3,113) (12.1)% Japan 5, % 5, % 5, % % Americas 6, % 12, % 10, % (1,967) (15.3)% China 4, % 4, % 2, % (1,597) (38.4)% Asia 1, % 2, % 1, % (125) (6.0)% Europe % % % (170) (20.3)% Others % % * % % * Including PWB Anchor of Australia, which was consolidated in Sep quarter ** Note: Exchange rate (FY2015-Q1 - FY2016-Q1) : USD/JPY CAD/JPY EUR/JPY RMB/JPY % from Non-JP markets 16.1% 3.3% 1.4% 8.1% FY 2015 Q2 49.8% 21.4% Japan Americas China Asia Europe Others 73.6% from Non-JP markets 11.3% 3.0% 2.8% 8.6% FY 2016 Q2 48.0% 26.4% 6 Net Sales by Region (Japan) - Demand related to the energy and infrastructure industries became evident. - Private-sector equipment investment has been strong despite general caution across industries. 4,500 4,000 3,781 4,027 JPY in million 3,500 3,000 2,500 2,256 2,926 2,738 2,501 3,018 3,144 2,748 3,236 2,000 1,500 1, Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY2014: 11,702 FY2015: 12,692 FY2016 Forecast: 12,700 7 Net Sales by Region (Americas) The graph shows the total of sales in the US, Canada and Latin America (converted to USD in thousand) - Softening demand among energy-related concerns - Cautious mood in private-sector investment USD in thousand 80,000 70,000 71,443 69,291 67,513 60,000 50,000 50,538 55,000 59,258 48,513 54,873 40,000 30,000 28,837 31,587 20,000 10,000 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY2014: 201,158 FY2015: 232,308 FY2016 Forecast: 238,000 8 Net Sales by Region (China) Fiscal year of China starts in January and ends in December - Implementing cost-reduction measures amid continuing economic weakness and softening demand - Fully progressing of manufacturing a new Wire-Rope Hoist for the global market 160,000 RMB in thousand 140, , ,000 80, , , , , , ,813 99,153 86,841 73,829 76,252 60,000 40,000 20,000 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY2014: 508,836 FY2015: 422,730 FY2016 Forecast: 369,000 9 Net Sales by Region (Asia) The fiscal year of Thailand and Korea begins in January and ends in December - More careful profit management brought positive results in Thailand, where demand was slow. - We wrote a large order for clean-room cranes in South Korea. 3,000 2,579 JPY in million 2,500 2,176 2,000 1,500 1, ,014 1, ,141 1, , Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY2014: 5,676 FY2015: 5,321 FY2016 Forecast: 5,000 10 Operating Income Comparison Decrease in Sales Volume 625 Currency Impact on Sales Volume Decrease in SGA 528 M&A Related Expense 120 JPY in million 1, Increase in Sales Price ,437 Currency Impact on Inventory Valuation FY2015 Apr-Sep Op Income FY2016 Apr-Sep Op Income 11 FY2016 2nd Quarter Consolidated Balance Sheet JPY in million Mar 2016 Jun 2016 Change JPY in million Mar 2016 Jun 2016 Change Current assets 37,599 34,620 (2,978) Cash 8,529 7,372 (1,156) Current liabilities 15,072 20,537 5,465 Accounts payable 5,301 6, Accounts receivable 11,761 9,337 (2,423) Short-term debt 4,595 9,804 5,209 Inventories 13,852 15,923 2,070 Others 3,456 1,987 (1,468) Fixed assets 23,040 21,853 (1,187) Tangible fixed assets 11,901 11,416 (484) Others 5,175 4,709 (465) Fixed liabilities 19,527 17,509 (2,017) Long-term debt 14,687 13,044 (1,643) Others 4,839 4,465 (374) Intangible fixed assets 7,896 7,353 (543) Total net assets 26,040 18,426 (7,614) Investment & other assets 3,242 3,083 (159) Total assets 60,639 56,474 (4,165) Total liabilities and net assets 60,639 56,474 (4,165) 12 Consolidated Cash Flows JPY in million Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Effect of exchange rate changes on cash and cash equivalents Net increase (decrease) in cash and cash equivalent Cash and cash equivalents at end of period Apr- Sep 2015 Apr-Sep 2016 Change 1, (905) (744) (791) (47) (1,470) (928) 542 (45) (410) (365) (381) (1,157) (775) 9,395 7,364 (2,031) Major Items for Apr-Sep 2016 [Cash flows from operating activities] Income before income taxes: 1,449 Decrease in account receivable 1,680 Increase in inventories (2,656) Payment of income tax (665) [Cash flows from investing activities] Payment for the acquisition of tangible fixed assets (519) Payment for the acquisition of intangible fixed assets [Cash flows from financing activities] (462) Increase in short term debt 6,728 Payment of long term debt (1,459) Purchase of treasury stock (5,462) 13 1 FY2016 2nd Quarter Financial Results 2 FY2016 Forecast 3 Reference 14 FY2016 Forecast Japan Market Initiatives - Gentle economic recovery will continue, with growth in private-sector investment. - Demand among infrastructure concerns, including in the construction and civil-engineering sectors, is expected to grow. - Expanding product offerings with new wire-rope hoists and other new products. - Strengthen sales networks among crane-builders. Americas Market - Demand will be firm in a broader industrial mix. - Slower demand is expected in the energy sector. Initiatives - Strengthen competitive market positions with broader product offerings. - Expand local manufacturing for optimal supply-chain support. 15 FY2016 Forecast China Market Initiatives - Slowing continues, reducing overall demand. - Expand local production of global products. - Focus on cost- and profit-management to ensure high margins. Asia Market Initiatives - Slowing Chinese economy affects entire Asia region, reducing equipment investment. - Enhance service and maintenance business for crane users, and hoist sales. - Improve profitability by consolidating production. 16 FY2016 Forecast / Net Sales by Region JPY in million FY2015 (ended Mar 2016) FY2016 FCST (ending Mar 2017) YoY Change % Share % Share Amount % Total 55, % 53, % (2,821) (5.1%) Japan 12, % 12, % 7 0.0% Americas 27, % 25, % (2,909) (10.4%) China 7, % 6, % (1,318) (17.8%) Asia 5, % 5, % (321) (6.0%) Europe 1, % 2, % % Others % 1, % 1, % Note Exchange Rate FY 2015 ended March 2016 FY 2016 ending March 2017 : USD/JPY CAD/JPY EUR/JPY RMB/JPY % 4.5% 3.4% 1.2% Japan 9.5% 9.4% 22.7% Americas 24.0% China 13.3% FY2015 Asia 11.5% 77.3 % from Non-JP markets 50.0% Europe Others 76.0 % from Non-JP markets FY2016 FCST 47.2% 17 FY2016 Forecast Sales forecast for FY 2016 remains unchanged due to continuing firm demand. Forecasts for incomes are under reviewing, with M&A related cost considered. JPY in million Net Sales JPY in million Operating Income OP margin 60,000 50,000 40,000 55,821 53,000 6,000 5,000 4,000 Op Income Op Margin 5, % Under reviews 30,000 20,000 25,809 22,695 3,000 2,000 1, % 1, % 10,000 1, st Half FY2015 Full Year FY2016 FCST FY2015 FY2016 FCST 1st Half Full Year 1st Half Full Year 1st Half Full Year 18 Updates Dissolution of Business and Capital Alliance with KONECRANES on Sep Purchased back of own shares from KONECRANES, 22% of total issued shares - Participated in the bidding process for STAHL CraneSystems GmbH, a subsidiary of KONECRANES - Revisions of FY 2016 target in incomes and dividends, announced on Nov.14 - Sales forecast remains unchanged at JPY 53 billion. Firm demands are expected in the 2nd half of FY Forecasts for operating income, ordinary income, and net income are yet to be determined at this time, with M&A related cost of STAHL considered 19 1 FY2016 2nd Quarter Financial Results 2 FY2016 Forecast 3 Reference 20 Key figures (JPY in million) 60,000 50,000 40,000 30,000 20,000 Sales 33,282 35,501 41,855 49,968 55,808 Op Income and Op Margin (JPY 6,000in million) Op Income 5,000 4,000 3,000 2,000 Op Margin 4,006 2, % 1, % 5,221 3, % 6.8% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% ROE 12.3% 6.3% 4.3% 8.9% 10.1% 10,000 0 Asia, 9.5% China, 13.3% Europe 3.3% Americas 50.0% Japan 22.7% Others, 1.2% 1, % FY2011 FY2012 FY2013 FY2014 FY2015 FY2011 FY2012 FY2013 FY2014 FY2015 Sales by Region in FY % 0.0% FY2011 FY2012 FY2013 FY2014 FY2015 FY2011 FY2012 FY2013 FY2014 FY2015 Sales from Non JP 67.1% 67.1% 72.2% 76.6% 77.3% Average Fx Rate USD CAD EUR RMB Capex (JPY in million) 1,145 1,520 2,440 1,408 2,013 Depreciation (JPY in million) ,311 1,814 21 Quarterly Sales and Operating Margin 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 (JPY in million) 6,591 8,413 7, % 5.7% 10, % Sales 7,430 8,575 8, % 7.1% 11, % Op Margin 12.7% 7,996 9,661 10, % 8.4% 8.0% 14, % 8,430 9, % 14, % 17, % 12, % 13,726 13, % 7.1% 16, % 14.4% 2, % Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Op (117) Income FY 2011 Sales 33,282 Op Income 1, FY 2012 Sales 35,501 Op Income 2,510 1, , , FY 2013 Sales 41,855 Op Income 4,006 FY 2014 Sales 49,968 Op Income 3, ,371 2,345 FY2015 Sales 55,821 Op Income 5,221 22 Sales by Regions JPY in million 60,000 55,821 50,000 40,000 49,968 41,855 33,282 35,501 EU and Others Asia China 30,000 20,000 10,000 EU and Others Asia China Americas Japan Americas Japan 0 FY2011 FY2012 FY2013 FY2014 FY2015 EU and Otehrs 2,127 2,035 2,424 2,500 2,479 Asia 3,608 4,626 6,168 5,676 5,321 China 7,745 6,994 8,604 8,198 7,418 Americas 8,851 10,163 13,034 21,888 27,909 Japan 10,949 11,679 11,625 11,702 12,692 23 New Mid-Term Plan FY2016 FY2020 (Apr 2016 Mar 2021) 24 Key Directives to Achieve Goals We have set three Key Directives to achieve the MTP goals. 1)Our top priority is to Enhance the Customer s Experience 2)To make that happen, we will Create a Highly Efficient and Functional Organization 3)We actively Invest in People, who make up this organization Management Goals FY2020 ending Mar Invest in People KITO Spirit Enhance Customer Experience Phase2 Leverage Platform to Grow Create Efficient Organization FY2016 ending Mar Phase1 Create Strong Platform 25 Management Goals Goals Financial Target 1 Return to a high margin business structure 16.0 EBITDA 2 Growth through product portfolio expansion Approximately Double Evolve into a globally integrated enterprise 0.0 FY2015 ended Mar FY2020 ending Mar (JPY in billion) 26 Slogan 27
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