Message for Shareholders and Investors
During the fiscal year ended December 31, 2017, despite concerns over impacts of heightened geopolitical risks in various areas, the United Kingdom’s exit from the European Union (EU), and policy trends in the United States, the world economy was on a moderate recovery trend mainly in developed countries such as the United States, Europe, and Japan. The market in China also steadily increased. The emerging markets including Brazil and Russia also showed a trend of economic upturn. The group formulated a five-year medium-term business plan beginning in FY 2016, and has been implementing the plan since 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 fiscal year under review, the group has promoted “accelerating new business developments in growing markets,” one of the major issues in the medium-term business plan. In April 2017, DGSHAPE Corporation, which engages 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 and has been promoting activities to expand the 3D business with an emphasis on the newly growing 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. The group has also made efforts to recover sales of printers such as improving price competitiveness and conducting aggressive promotion activities in various areas in order to respond to the increasingly competitive environment.
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.
As for the future economic outlook, while there are concerns such as heightened geopolitical risks in various areas and policy trends in the United States, the economic recovery is expected to continue mainly in developed countries. 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 FY2017, both interim payout is 25 yen per share and year-end payout is expected to be 35 yen per share based on the above basic polity.
We look forward to your continued support and guidance as we move forward together.