Message for Shareholders and Investors
During the six months ended June 30, 2018 (from January 1, 2018 to June 30, 2018), the world economy continued to recover moderately on the whole, including solid capital investment and personal consumption in the United States and improvement in the employment situation in Europe, although it is necessary to pay close attention to trade friction due to protectionist policy trends in the United States and the effects of fluctuations in financial and capital markets.
During the six months ended June 30, 2018, the group accelerated new business development in the growth areas of the dental market and the retail market. DGSHAPE Corporation expanded the 3D business with an emphasis on the dental market, under its mission of offering solutions responding to the latest trends in digitalization. In the retail market, we also introduced UV printers to retailers providing in-store decorative services for smartphone cases and home appliances, etc., in addition to small-scale plants engaging in creating original products. As a result of our activities thus far, possibilities have become visible for business expansion aimed at a wide range of industries providing in-store services, and we will position these industries as our new target customers as we provide new businesses utilizing printer, 3D products, software, etc. Meanwhile, in our conventional mainstay sign market, the market has matured and competition has become increasingly fierce as major companies have entered the market, and we made efforts to recover sales of printers with ongoing promotional campaigns in each region. As a result of these initiatives, sales for the six months ended June 30, 2018 were slightly below the same period of the previous term, decreasing by 2.0% to 20,973 million yen, due to sluggish sales of printers mainly for the sign market despite factors including increased sales of 3D products owing to the expansion of the dental market and benefits from the weaker yen. Cost of sales improved 1.0% compared with the same period of the previous term. Selling, general and administrative expenses were lower than the same period of the previous term, due to lower personnel expenses and advertising and promotion expenses. As a result, operating profit increased by 30.1% compared with the same period of the previous term to 1,781 million yen, and ordinary profit increased by 19.5% compared with the same period of the previous term to 1,627 million yen. In addition, profit attributable to owners of parent was 1,042 million yen (loss attributable to owners of parent was 32 million yen in the same period of the previous term) due to loss on sales and retirement of non-current assets, including the disposal of software assets, being recorded as extraordinary losses.
As stated above, we actively conducted business operations in order to promote accelerating new business developments in growing markets, mainly resulting in expansion of the 3D business such as for the dental market and 3D monozukuri market. Sales for the fiscal year ended December 31, 2017 decreased by 1.2% over the previous term to 43,573 million yen, due to lower sales of printers in the sign market, despite benefits from a weaker yen in addition to growth of 3D products associated with expansion of the 3D business. Regarding costs, cost of sales rose by 1.0% from the previous term due to the effects of factors such as the drop in unit sales price. Selling, general and administrative expenses were lower than in the previous term due to factors such as lower labor costs; however, the ratio to sales was flat compared to the previous term. As a result, operating profit decreased by 11.6% compared with the previous term to 3,853 million yen, and ordinary profit decreased by 7.3% compared with the previous term to 3,804 million yen. Profit attributable to owners of parent decreased by 29.1% compared with the previous term to 1,918 million yen due to the settlement package of a patent infringement case in the United States being recorded as extraordinary losses and other factors.
Regarding the outlook for the next fiscal year, sales are expected to be flat from the previous fiscal year, since the group will make efforts to expand the retail market where we create original products and the 3D business with an emphasis on the dental market, while the mainstay sign markets for printers will continue to be exposed to intensified competition. In regard to profits, operating profit and ordinary profit are expected to decrease due to increases in R&D expenses for strengthening technical capabilities and expenses for expanding businesses in growing markets. Profit attributable to owners of parent for the next fiscal year is expected to increase since a settlement package of a patent infringement case in the United States was recorded under extraordinary losses in the current term, which was a major negative factor.
We believe in prioritizing profit returns for shareholders, and therefore we will work to maintain the stability of those returns in light of our performance. In terms of actual policy, we will aim for a dividend payout ratio of 30% by reviewing policies and returning profits based on performance, while also taking into account the future of our business development. In terms of dividends in the FY2018, interim payout is 25 yen per share and year-end payout is expected to be 30 yen per share based on the above basic polity.
We look forward to your continued support and guidance as we move forward together.