Fiscal Year Ended March 31, 2021
Financial Results Briefing Session Materials
June 7, 2021
Nikko Co., Ltd.
(Tokyo Stock Exchange Code: 6306)
Masaru Tsuji, Representative Director and President
Hiroshi Fujii, Managing Director and General Manager, Administrative Division
□In this briefing material, AP denotes asphalt plants in our business, and BP, concrete plants.
Nikko President Masaru Tsuji will explain the progress made in the Medium-Term Management Plan and strengthening of governance, and Hiroshi Fujii, Managing Director and General Manager of Administrative Division, will explain the business results and the forecast for the current fiscal year.
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Contents
FY 2019-2021 | |
Review of Medium-Term Management Plan | P. 3-16 |
and Action Plan | |
Shareholder Returns, Governance | pp.18-20 |
Enhancement, Information Disclosure | |
FY 2019 Financial Results Briefing Materials | |
FY 2020 Financial Results | pp.22-32 |
FY 2021 Outlook | pp.34-36 |
Business Climate and Management Strategy | pp.38-49 |
Reference Materials | pp.51-54 |
Company Information | pp.56-59 |
*Last-digit of the figures of changes in this document may differ from those in the Quarterly Securities Report due to the treatment of fractions less than unit
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Basic Policy
Long-term(10-year) Basic Policy, looking into the future
Long-term Basic Policies | Results for FY 2019 (1st year) | Results for FY 2020 (2nd year) | |||||||||||||
1. Strengthen revenue base in Japan | Operating margin in Japan | Operating margin in Japan | |||||||||||||
Improve profitability by boosting product appeal by raising | |||||||||||||||
FY 2018 4.5% ->FY 2019 6.0% | FY 2019 6.0% ->FY 2020 6.5% | ||||||||||||||
the level of all divisions of sales, service, engineering, and | |||||||||||||||
(MS profit margin improved 2.1pt) | (MS profit margin improved 0.2pt) | ||||||||||||||
manufacturing (Operating margin of 10%) | |||||||||||||||
2. Establish overseas sales | (Thailand) | ||||||||||||||
As a manufacturer, establish new overseas bases to | (Thailand) | May 2020: Decided to establish an AP manufacturing | |||||||||||||
company | |||||||||||||||
promote Nikko products, one of the best ones in the world, in | Feb. 2020: Established AP sales and maintenance | ||||||||||||||
Nikko NilKhosol Co., Ltd. | |||||||||||||||
the ASEAN region (doubling overseas sales to 9.0 billion yen | company | ||||||||||||||
Oct. 2020: Nikko Asia (Thailand) Co., Ltd. began | |||||||||||||||
Nikko Asia (Thailand) Co., Ltd. | |||||||||||||||
from the current 4.5 billion yen) | full-scale operations | ||||||||||||||
AP: received orders for 2 units | |||||||||||||||
3. Promote new businesses (incl. M&As) | • | Mobile plant business | FY 2019 500 mil. yen | ||||||||||||
Invest management resources | in expansion of | new | • | Mobile plant business | FY 2018 90 mil. yen | ||||||||||
-> FY 2019 500 mil. yen | -> FY 2020 1,070 mil. yen | ||||||||||||||
businesses and develop new pillar products in the industrial | |||||||||||||||
• | Waterproof boards | FY 2018 210 mil. yen | • | Waterproof boards | FY 2019 810 mil. yen | ||||||||||
and construction machinery fields | (generating 10.0 | billion | -> FY 2019 810 mil. Yen | -> FY 2020 900 mil. Yen | |||||||||||
yen in net sales from new businesses) | |||||||||||||||
4. Put work-style reform into practice | • Enhanced web conferencing system to enable quick | • | Initiatives in FY 2019 are continuing | ||||||||||||
Boost operation efficiency and significantly improve labor | information sharing without constraints of time and place | • | Remote maintenance contract rate | ||||||||||||
productivity | • Identified the problems with telecommuting and | End of Jan. 2020: 46% -> End of Aug.: 67% | |||||||||||||
dispersed working system | -> End of May: 73.8% | ||||||||||||||
(To centralize office work and utilize IoT and AI) | |||||||||||||||
• Dramatically improved production efficiency by | • | Prepared materials and movies for webinars (the | |||||||||||||
introducing production facilities based on latest | |||||||||||||||
maintenance division has shot 30 movies) | |||||||||||||||
technology through investments in facility upgrade at | |||||||||||||||
(Began seminars in FY 2021) | |||||||||||||||
manufacturing divisions (fiber laser, etc.) | |||||||||||||||
5. Make ROE a KPI | Market capFY 2018-end 19.25 bil. yen | Market cap | FY 2020-end | 29.24 bil. yen | |||||||||||
Aim to achieve a market capitalization of at least 50.0 billion | -> FY 2019-end 24.36 bil. yen | ROE | FY 2020-end | 6.8% | |||||||||||
yen and an ROE of at least 8% | ROEFY 2018-end 4.4% ->FY 2019-end5.2% | Dividend payout ratio for FY 2020 60.5% | |||||||||||||
Also aim for a dividend payout ratio of at least 60% so as to | Dividend payout ratio forecast for FY 2019 97.6% | Share buyback completed on Sept. 17 | |||||||||||||
enhance shareholder returns. | (treasury stock purchased: 616,700 shares or | ||||||||||||||
399,960,700 yen) | |||||||||||||||
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We launched the three-yearMedium-Term Management Plan in 2019.
The year 2019 was our 100th anniversary. We formulated the Medium-Term Management Plan as part of the long-term10-year basic policies that take the future image into account, and the current fiscal year is the final fiscal year of the medium-term plan.
I am going to explain it including the results for fiscal year 2019.
Review of the Long-term(10-year) Basic Policies
□1. Strengthen revenue base in Japan
Our plan is to achieve 10% in operating margin in 10 years.
In fiscal year 2019, the first fiscal year under the plan, operating income rose to 6% compared with 4.5% in fiscal year 2018 and we were able to push it up to 6.5% in fiscal year 2020.
□2. Establish overseas sales
We have been operating in China for 20 years and currently we are also focusing on the ASEAN region.
We aim to double overseas sales to 9.0 billion yen from the current 4.5 billion yen.
In 2019, we made a foray into the ASEAN region and established Nikko Asia (Thailand) Co., Ltd., a company that would serve as the base for AP sales and maintenance service, in order to grab a large market share. However, Japanese staff members were unable to go to Thailand due to the novel coronavirus pandemic, and they were able to start full-scale sales activities in Thailand only in October 2020. The company has received orders for two APs and is in the process of shipping. Though the start was delayed by half a year, we have had a good start. In Thailand also
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our sales activities are again a little sluggish due to the impact of the coronavirus and we have to endure the difficulties for the time being.
In June last year, we also established Nikko NilKhosol Co., Ltd., a local production subsidiary, and are building a plant.
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□3. Promote new businesses (including M&A)
We will invest management resources for expanding new businesses and nurture products that will become new pillars of the industrial and construction machinery fields.
We are aiming for 10.0 billion yen in net sales in this field in 10 years.
As we make efforts, there were two noteworthy developments.
Mobile Plant Business-related Nikko offers Kleemann crushers by Wirtgen Group, which has a world-class lineup of machinery for road construction. Sales of the products, which were short of 100 million yen three years ago, reached 500 million yen two years ago, and doubled to 1.07 billion yen in fiscal year 2020.
Another one is waterproof boards. They are in the limelight as a product necessary for coping with damages from flood disasters such as the recent guerilla rainstorms. Sales of waterproof boards, whose scale was 200 million yen in fiscal year 2018, rose to 810 million yen in fiscal year 2019 and to 900 million yen in fiscal year 2020, and they are still showing an upward trend.
□4. Put work-style reform into practice
It is an attempt to improve our operational productivity and economic efficiency by centralizing administrative works and utilizing IoT and AI as we try to improve operating efficiency as well as productivity. It was very useful as an item for avoiding infection risks of the coronavirus.
We implemented measures such as telecommuting and dispersed working system as well as online conferences. In addition, the result shows that the improvement in productivity through a major capital investment in plant facilities has helped the work-style reform.
In the remote maintenance business, in which we manage customer plants from our center and provide maintenance, the sign-up rate, which was 46% in January 2020, grew to 67% by the end of August and to 74% as of the end of May this year, partly boosted by the impact of the coronavirus.
We will further enhance the contents and increase operations that can be done remotely. We will also enhance teaching materials such as movies for webinar workshops. Through these initiatives, we will improve the efficiency of workshops for customers and also our own operating efficiency.
□5. Make ROE a KPI
We aim to achieve market capitalization of at least 50.0 billion yen and ROE of at least 8% in 10 years. Another one is the message to our shareholders. We aim for a dividend payout ratio of minimum 60% and will enhance shareholder returns. Our market capitalization, which was 19.25 billion yen as of the end of fiscal year 2018, increased to 24.3 billion yen at the end of 2019 and to 29.2 billion yen as of the end of fiscal year 2020.
ROE has also been showing an increasing trend from 4% in 2018 to 5.2% as of the end of fiscal year 2019, and 6.8% at the end of fiscal year 2020.
Payout ratio in fiscal year 2019 was 97.6% including the 100th anniversary commemorative dividend and it was 60.5% in fiscal year 2020. We will make efforts to maintain the payout ratio of 60% or higher during the Medium-Term Management Plan period.
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Medium-Term Management Plan Sales and Operating Income Plan
Numerical Plan and Results for | (million yen) | ||||||||
the Medium-Term Management Plan | |||||||||
1st year | 2nd year | 3rd year | |||||||
7.1% | 7.9% | ||||||||
6.4% | 5.9% | ||||||||
5,000 | 5.8% | 6.1% | |||||||
50,000 | |||||||||
4,000 | 37,866 | 38,000 | 39,000 | ||||||
35,700 | 35,151 | 36,500 | 40,000 | ||||||
3,000 | 3,000 | 30,000 | |||||||
2,600 | |||||||||
2,300 | 2,053 | 2,302 | 2,300 | ||||||
2,000 | 20,000 | ||||||||
1,000 | 10,000 | ||||||||
0 | 0 | ||||||||
year 1st | 2019 FY | year 2nd | 2020 FY | year 3rd | 2021 FY | ||||
Operating income | plan term-Medium of | results | planterm-Medium of | results | plan term-Medium of | forecast | |||
Net sales | Operating margin | ||||||||
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□Net sales have achieved the numerical goal set forth by the medium-term plan and we believe that we have received passing marks, but our efforts with respect to operating income appeared to be insufficient.
However, this result (not achieving operating income goal) was not because we did nothing, as we were emphasizing on expansion of the business scale. We also made a large amount of capital investment, which resulted in this balance.
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