Shinagawa Refra Co., Ltd · TSE:5351
Shinagawa Refra — Shinagawa Refractories — FY2017 Earnings Presentation
51 slides from Shinagawa Refra's earnings presentation, Jun 15, 2018
Slide 1: Shinagawa Update: Results for Fiscal Year Ended March 2018
Securities Code Number: 5351 Shinagawa Update Results for Fiscal Year Ended March 2018 June 15, 2018 ― Supporting the World’s Key Industries Through Technologies ― Shinagawa Refractories Presentation of Results for Fiscal Year Ended March 2018 0
Slide 2: Table of Contents
Table of Contents I. Overview of 1. Consolidated Financial Highlights for Fiscal Year Ended 5. Balance Sheets (Consolidated) March 2018 Financial 2. Net Sales by Business Segment 6. Cash Flows (Consolidated) 7. Financial Targets & Strategies Results 3. Operating Income by Business Segment (Segment P
Slide 3: I. Overview of Financial Results for 2017
I. Overview of Financial Results for 2017 (Fiscal Year ended March 2018) Shinagawa Refractories Presentation of Results for Fiscal Year Ended March 2018 2
Slide 4: Consolidated Financial Highlights for Fiscal Year Ended March 2018
1. Consolidated Financial Highlights for Fiscal Year Ended March 2018 (Unit: million JPY) FY 2016 FY 2017 YoY Results Results Net Sales 103,722 102,749 - 0.9% Operating Income 6,344 6,049 - 4.7% Ordinary Income 6,365 6,322 - 0.7% （ROS） （6.1％） （6.2％） （+ 0.1pt） Profit attributable to owners of parent
Slide 5: Net Sales by Business Segment
2. Net Sales by Business Segment (Unit: million JPY) FY 2016 FY 2017 YoY Results Results Refractories and related products 75,293 72.6 79,830 77.7 + 6.0% Furnace construction and engineering 26,108 25.2 20,823 20.3 - 20.2% Real estate and other businesses 2,320 2.2 2,095 2.0 - 9.7% Total 103,722 100
Slide 6: Operating Income by Business Segment
3. Operating Income by Business Segment (Unit: million JPY) FY 2016 FY 2017 YoY Results Results Refractories and related products 5,663 75.6 5,528 77.3 - 2.4% Furnace construction and engineering 707 9.4 561 7.8 - 20.7% Real estate and other businesses 1,121 15.0 1,058 14.8 - 5.6% Total 7,493 100.0
Slide 7: Factors Behind Changes in Operating Income
4. Factors Behind Changes in Operating Income (Year-on-Year Comparison) (Unit: 100 million JPY) Negative factors Positive factors - 25 ＋22 Change in total -3 63 60 Impact from changes in foreign exchange Change in rates product mix, -2 -5 Contribution by Group companies ＋11 Sales expansion & Cost re
Slide 8: Balance Sheets (Consolidated)
5. Balance Sheets (Consolidated) (Unit: million JPY) FY 2016 FY 2017 Change ・ Merchandise and finished goods: +1,191 ・ Work in process: +2,449 Current assets 64,690 66,141 + 1,451 ・ Raw materials and supplies: +1,672 ・ Securities: -4,200 Fixed assets 41,817 41,194 - 623 ・ Machinery, equipment and ve
Slide 9: Cash Flows (Consolidated)
6. Cash Flows (Consolidated) (Unit: million JPY) [Main contents of cash flows from operating activities] FY 2016 FY 2017 Change Cash flows from ・Income before income taxes : 6,152 operating activities 5,459 1,578 - 3,881 ・Depreciation : 2,330 ・Decrease (increase) in inventories : -5,387 Cash flows f
Slide 10: Financial Targets & Strategies: Shareholder Returns
7. Financial Targets & Strategies 1 Shareholder Returns Dividend per share (JPY) 80 1. Increased fiscal year-end dividend per 80 share from 35 JPY to 45 JPY 70 60 [Actual dividend payout for the fiscal year 60 ended March 2018] (Dividend per share) ● Interim dividend: 35.0 JPY＊ ● Year-end dividend:
Slide 11: Investment for Future Growth
7. Financial Targets & Strategy 2 Investment for Future Growth ● In the Third Medium-term Management Plan, we implemented a total capital expenditure of 8.0 billion JPY (consolidated) New Press for manufacturing SN Plates Investments FY 2015 and New Drying Furnace for Main New Press for manufacturin
Slide 12: Review of Third Medium-term Management Plan
8. Review of Third Medium-term Management Plan Net sales 売上高（億円） (billion JPY) ROS（％） Third Medium-term Management Plan 140 goals 14.0 Goals for final year of the Third Medium- Factors behind term Management Shortfall in Sales 120 12.0 110 Plan (FY 2017) 104 103 98 ● Less than expected 100 10.0 【Net
Slide 13: II. Business Strategies
II. Business Strategies Shinagawa Refractories Presentation of Results for Fiscal Year Ended March 2018 12
Slide 14: Fourth Medium-Term Management Plan: Quantum Leap
1. Fourth Medium-Term Management Plan Optimal production system and Goals of The Fourth Medium-term strong product competitiveness have been established through Management Plan The First to The Third Medium- term Management plan “Quantum Leap” Shinagawa Refractories Co., Ltd. was established as a re
Slide 15: Business Environment (1/2)
2. Business Environment (1/2) １ World Economy From recovery to accelerated growth ● 【USA】 Strong economy supported by expansionary fiscal policy ● 【Europe】 Continued growth supported by accommodative monetary policy ● 【Emerging markets】 Continued strong economic growth ２ Japanese Economy Continued s
Slide 16: Business Environment (2/2)
2. Business Environment (2/2) ３ Steelmaking Industry Increasing demand globally ● Japan: High level of steel demand continues with domestic economic recovery ● World: Gradual increase in steel demand with accelerated economic growth Reduced availability and Increasing Increasing Soaring costs of Ste
Slide 17: Raw Materials Procurement (1/2)
2. Business Environment: Raw Materials Procurement (1/2) Optimal Raw Materials Procurement ・Further diversification of suppliers’ portfolio to reduce high dependence on China ・Aiming for long term price stability Increasing in the number of Establishing stable supply suppliers in China sources outsi
Slide 18: Raw Materials Procurement (2/2)
2. Business Environment: Raw Materials Procurement (2/2) 【Establishing stable supply sources outside of China】 【India & Middle East】 【Americas】 ●Chromium ore 【China】 ●Magnesite ●Flake graphite ●Magnesite ●Flake graphite ●Magnesite etc. ●Flake graphite ●Dolomite ●Bauxite etc. ●Bauxite etc. (India, Pa
Slide 19: Fourth Medium-term Management Plan: Goals (1/2)
3. Fourth Medium-term Management Plan: Goals (1/2) Net Sales ROS（%) (billion JPY) Goals 140 14.0 Goals for final year of the Fourth Action Plans 123 Medium-term 120 115 12.0 Management Plan ●Expand refractory sales 104 103 (FY 2020) ・New Market 98 ・”Shinagawa Solution” 100 10.0 8.0 【Net sales】 ●Cost
Slide 20: Action Plans for Sales Growth
3. Fourth Medium-term Management Plan: Goals (2/2) Action Plans for Sales Growth Domestic Sales: +14 billion JPY ・Market Dominance at Steel markets: BOF & EOF ・Further Market Penetration at Cement & Lime markets ・New Market Development: Specialty steels, Non-ferrous and Glasses ・Large-scale Construc
Slide 21: Priority Areas of Focus for Quantum Leap
4. Fourth Medium-term Management Plan: Area of Focus Priority Area of Focus for “Quantum Leap” 1 Completion of Production Facilities Upgrade 2 Achieving Highest Level of Product Competitiveness 3 Capturing Opportunities in New Growing Market 4 Strengthening HR Infrastructure 5 Safe & Comfortable Wor
Slide 22: Completion of Production Facilities Upgrade
5. Area of Focus 1: Completion of Production Facilities Upgrade Completion of Production Facilities Upgrade Third Medium-term Fourth Medium-term Management Plan Management Plan Total Capex 8.0 billion JPY Total Capex 8.0 billion JPY (consolidated) (consolidated) Introducing Cutting-edge Shinagawa In
Slide 23: Product Competitiveness: Product Development (1/2)
5. Priority Measure 2: Achieving Highest Level of Product Competitiveness (Product Development) 1/2 Keywords for Product • Prolonging service life Development • Consumption reduction Process • Installation time Benefits reduction • Maintenance downtime reduction Product Development • Reactivity betw
Slide 24: New Strategic Products
5. Priority Measure 2: Achieving Highest Level of Product Competitiveness (Product Development) 2/2 Achieving Highest Level of Product Competitiveness and Marketability New Strategic Products Long Nozzles with a longer useable 25 Results of actual use of long nozzle that does not require preheating
Slide 25: Domestic Business Expansion
5. Priority Measure 2: Achieving Highest Level of Product Competitiveness (Domestic Business Development) 1/3 Achieving Highest Level of Product Competitiveness and Marketability Domestic Business Expansion Sales Goal = 100 billion JPY in FY 2020 ● Sales expansion by fully pursuing Unit: 100 billion
Slide 26: Steel and Non-Ferrous Industries
5. Priority Measure 2: Achieving Highest Level of Product Competitiveness (Domestic Business Development) 2/3 Achieving Highest Level of Product Competitiveness and Marketability Domestic Business Expansion (1) : Steel and Non-Ferrous Industries Target: Further customer satisfaction improvement Expa
Slide 27: Cement and Other Industries
5. Priority Measure 2: Achieving Highest Level of Product Competitiveness (Domestic Business Development) 3/3 Achieving Highest Level of Product Competitiveness and Marketability Domestic Business Expansion (2) : Cement and other Industries Target: New Market Development with Shinagawa’s Advanced Te
Slide 28: Overseas Business Expansion
5. Priority Measure 3: Capturing Opportunities in New Growing Market (Exports & Overseas Businesses) 1/4 Growth Strategy: Export and Overseas Business Expansion Overseas Business Expansion Sales Goal = 23 billion JPY in FY 2020 ＋40％ 23.0 Overseas Sales (Billion JPY) 20.0 16.6 18.0 14.1 14.5 15.0 10.
Slide 29: Export Business Expansion (2/4)
5. Priority Measure 3: Capturing Opportunities in New Growing Market (Exports & Overseas Businesses) 2/4 Export Business Expansion (1) Collaboration with Shinagawa’s Overseas Companies China & Asia Americas Combining Export from Japan Shinagawa Shenyang with Local Production to better Hefeng Shinaga
Slide 30: Export Business Expansion (3/4)
5. Priority Measure 3: Capturing Opportunities in New Growing Market (Exports & Overseas Businesses) 3/4 Export Business Expansion Shinagawa Refractories Presentation of Results for Fiscal Year Ended March 2018 29
Slide 31: Business Expansion in Growing New Markets
5. Priority Measure 3: Capturing Opportunities in New Growing Market (Exports & Overseas Businesses) 4/4 Business Expansion in Growing New Markets (1) 【India】 Early Implementation of Tap Hole Clay’s Local India: Annual Crude Production 170 Steel Production 150 To Date: Secured business through expor
Slide 32: Construction Business
5. Priority Measure 3: Capturing Opportunities in New Growing Market (Construction Business) Introducing Optimal Installation System as Shinagawa Group Installation at Furnace/Kiln Incinerators/Various Construction Installation Inside of Industrial Furnaces Steel Plants Departemnt Engineering Shinag
Slide 33: FY2018 Management Plan: Financial Targets
6. FY2018 Management Plan: Financial Targets (Unit: million JPY) FY 2017 FY 2018 YoY Results Forecast Net Sales 102,749 100.0 115,000 100.0 ＋11.9% Operating Income 6,049 5.9 7,400 6.4 ＋22.3% Ordinary Income 6,322 6.2 7,500 6.5 ＋18.6% Profit attributable to owners of parent 3,419 3.3 4,500 3.9 ＋31.6%
Slide 34: III. Supplementary Notes
III. Supplementary Notes Shinagawa Refractories Presentation of Results for Fiscal Year Ended March 2018 33
Slide 35: History
1. History [Established in 1875] [Established in 1938] Shinagawa Refractories Co., Ltd. JFE Refractories Corporation (First private company in Japan to (Operated as a subsidiary of the Kawasaki Steel manufacture fire bricks) Corporation Group since 1944) Increasing market presence and establishing r
Slide 36: Mission Statement
2. Mission Statement Mission Statement of Shinagawa Refractories With our core philosophy of respecting the basics “Be BASIC,” Shinagawa Refractories is committed to contributing to the industrial development and the creation of affluent societies through providing high quality refractory products a
Slide 37: Changes in Net Sales and Ordinary Income Over Past Years
3. Changes in Net Sales and Ordinary Income During Past 12 Years (Consolidated Basis) (Million yen) (Million yen) 120,000 Net sales Ordinary income 12,000 Merged on October 1, 2009 103,722 103,038 102,749 101,070 99,204 100,188 100,000 Consolidated financial results for the fiscal year ended March 2
Slide 38: Roles of the Refractory Industry
4. What are the roles of the "Refractory Industry"? ● Many varieties of materials used in public infrastructure such as iron and steel, nonferrous metals, cement, glass are manufactured in furnaces at extremely high temperature with refractory lining. ● The refractory industry provides foundational
Slide 39: Major Products 1/2
5. Major Products 1/2 Refractories are industrial materials that can resist ultra-high temperatures in Refractories excess of 1,500 degrees Celsius. Approximately 80% of refractory production is consumed by the steel industry. Shaped refractories Monolithic refractories Mold powder Shaped refractori
Slide 40: Major Products 2/2
5. Major Products 2/2 Ceramic fiber Advanced ceramics Lightweight Ceramic material with a broad range of characteristics material featuring including excellent electrical insulation properties, abrasion low thermal resistance, corrosion resistance, chemical stability, conductivity and mechanical str
Slide 41: Key Features and Strengths
6. Key Features and Strengths Leading company of ultra-high 1 temperature technologies Solid customer base with highly-advanced 2 capabilities 3 Global business expansion Shinagawa Refractories Presentation of Results for Fiscal Year Ended March 2018 40
Slide 42: Ultra-High Temperature Technology: Two Technologies
7. Key Features and Strengths (1) Ultra-High Temperature Technology (i) Two Technologies Leading company of ultra-high temperature technology Solid technology development and commercialization capabilities supported by two technologies ●Furnace design ●Refractories Advanced ●Engineering services Ref
Slide 43: Customer-Oriented Technological Response
7. Key Features and Strengths (1) Ultra-High Temperature Technology (ii) Customer-Oriented Technological Response Work closely with customers at all times backed up by technologies and long track records of four divisions covering design, manufacturing, furnace construction, and development. Technic
Slide 44: Development Capability to Meet Customer Needs
7. Key Features and Strengths (1) Ultra-High Temperature Technology (iii) Development Capability to Meet Customer Needs With world-class research facilities, the Research Center focuses on the development of products to meet the exact needs of customers EDS analysis data (color map) Elements present
Slide 45: Solid Customer Base
8. Key Features and Strengths (2) Solid Customer Base Solid customer base with highly-advanced technological capabilities Meeting the exact needs of customers in various industries including the Japanese steelmaking industry, known for their best steelmaking technology in the world Ultra-high temper
Slide 46: Global Business Expansion
9. Key Features and Strengths (3) Global Business Expansion Global business expansion Starting from our launch into China in 1997, the Company has continued to expand overseas, establishing production bases in Australia and the U.S. ■ Overseas net sales and market share (consolidated) [China] Ente
Slide 47: Expansion of Overseas Business Locations
10. Current Status of the Expansion of Overseas Business Locations Expanding overseas business locations in China, Oceania, and the Americas with a focus on areas close to the production sites of our customers Liaoning Shinagawa Hefeng Shenyang Shinagawa Metallurgy Materials Co., Ltd. Metallurgical
Slide 48: Domestic and Overseas Production System
11. Domestic and Overseas Production System [Overseas] [Japan] Developing a stable supply system Promoting the redevelopment of a reliable by establishing the Group’s supply system with enhanced efficiency manufacturing sites closer to and effectiveness customers in order to customer needs responsiv
Slide 49: Global Procurement System
12. Global Procurement System Amid such circumstances, the Company The Company depends on foreign sources for developed a balanced procurement system to approximately 60% of refractory materials, 80% source materials from production centers in five or more of which (approximately 50% of the total ge
Slide 50: Disclaimer
Disclaimer This document is intended to provide information on the results for the fiscal year ended March 2018 (April 2017 – March 2018) and is not intended to solicit investment in securities issued by the Company. The document was prepared based on data available as of June 15, 2018. Opinions, fo
Slide 51: Presentation Material
Securities Code Number: 5351 Presentation Material Results for Fiscal Year Ended March 2018 June 15, 2018 ― Supporting the World’s Key Industries Through Technologies ― Shinagawa Refractories Presentation of Results for Fiscal Year Ended March 2018 50
Shinagawa Refractories — FY2017 Earnings Presentation on 6ix