Message for Shareholders and Investors

Message for Shareholders and Investors

During the six months ended June 30, 2017 (from January 1, 2017 to June 30, 2017), the world economy was on a moderate recovery trend overall in developed countries such as the United States, Europe, and Japan. However, the outlook remains uncertain due to various factors causing a risk of economic decline, such as a deceleration in growth in emerging markets mainly in China, Brazil, and Russia, heightened geopolitical risks in various areas, the United Kingdom’s exit from the European Union (EU), and policies of a new administration in the United States.

Amid such conditions, the group formulated a five-year medium-term business plan beginning in FY 2016, and started implementation from the previous term. The medium-term business plan emphasizes “GrowthOne: Sustainable growth through innovation” as the basic policy, and by working toward the three major issues of (1) accelerating new business developments in growing markets, (2) transforming to a solutions provider, and (3) transforming into an innovation-focused group, we aim to create a high value-added market and achieve sustainable growth.

During the six months ended June 30, 2017, DGSHAPE Corporation, which is engaged in the group’s 3D business such as 3D milling machines for the 3D monozukuri market and dental milling machines in the dental (dental medical) market, started business operations in April, strengthening activities to expand the 3D business with an emphasis on the dental market. As for the printer business, we focused on expansion in the retail market where we create original products, etc., in addition to our conventional mainstay sign (advertising and sign production) market.

As stated above, we actively conducted business operations in order to promote “accelerating new business developments in growing markets,” one of the major issues in the medium-term business plan. However, sales for the six months ended June 30, 2017 decreased by 6.0% over the same period of the previous term to 21,411 million yen, due to factors such as significantly lower sales of printers. Cost of sales rose by 4.1% from the same period of the previous term due to the effects of factors such as the drop in unit sales price and lower production volume. Selling, general and administrative expenses were lower than in the same period of the previous term, though the ratio to sales increased by 1.2% compared to the same period of the previous term. As a result, operating income decreased by 48.7% compared with the same period of the previous term to 1,369 million yen, and ordinary income decreased by 42.9% compared with the same period of the previous term to 1,361 million yen. Loss attributable to owners of parent was 32 million yen due to the settlement package of a patent infringement case in the United States being recorded as extraordinary losses.

The Company has plans to strive for the recovery of printer sales, such as implementing measures to expand sales in the sign market, as well as accelerating the expansion of the retail market, a major market for UV printers. On the other hand, DGSHAPE Corporation is working on accelerating sales of machine tools starting from the second quarter of the fiscal year, especially that of dental milling machines.

As stated above, the Company shall strive to improve its profitability through the recovery of sales. However, due to the drastic effects up until the end of the first half of the fiscal year, both net sales and income are revised downward. In addition, after accounting for extraordinary losses, we expect profit attributable to owners of parent will be less in line with the initial forecast as well.

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 FY2017, both interim and year-end payouts are expected to be 25 yen per share based on the above basic polity.

We look forward to your continued support and guidance as we move forward together.

September 2017

Hidenori Fujioka
Hidenori Fujioka