CEO Message

Dear shareholders and investors,

Thank you for your continued support of the Nissha Group.

Operating Results for the Fiscal Year Ended December 2019

Regarding the global economy in the fiscal year ended December 31, 2019, the recovery was gradual on the whole. On the other hand, due to the US-China trade friction and concerns over the UK’s withdrawal from the EU, etc., uncertainty over the future widened and the speed of recovery had slowed down. While the United States saw ongoing economic recovery thanks primarily to increased consumer spending, recovery in the European economy was weak. In China, the gradual economic slowdown continued, and in other Asian emerging countries, the economic recovery turned out to be weak. The Japanese economy has continued a gradual recovery overall, although there are some recent weaknesses in export and production.

The Group has been operating the Sixth Medium-term Business Plan (three-year plan), centering on growth by reorganizing and optimizing its business portfolio. We have set the markets of mobility (automotive), medical devices and sustainable packaging materials as our focus markets, in addition to the mainstay consumer electronics (IT), and aim to develop well-balanced business bases and enhance our corporate value by implementing a global-based growth strategy. During the fiscal year ended December 31, 2019, using funds gained from selling non-current assets which are no longer business assets, we conducted efforts such as corporate acquisitions in our focus markets, and steadily made progress in the reorganization of the business portfolio. Regarding the financial results for the fiscal year ended December 31, 2019, demand for the Devices segment fell far below the initial projection, despite demand for our mainstay smartphone turning into an expansion trend in the second half of the year. In the Industrial Materials segment, the operation rate of domestic plants declined, and we still face challenges in improving the profitability of some overseas plants. The Medical Technologies segment experienced robust demand.

As a result, regarding the consolidated financial results for the fiscal year ended December 31, 2019, the net sales were ¥173,189 million (a decrease of 16.5% as compared to the same period of the previous year). EBITDA was ¥5,221 million (a decrease of 69.9% as compared to the same period of the previous year). Operating loss was ¥4,307 million (operating profit of ¥8,080 million in the same period of the previous year). Ordinary loss was ¥4,696 million (ordinary profit of ¥7,380 million in the same period of the previous year). Loss attributable to owners of parent was ¥4,131 million (profit attributable to owners of parent of ¥4,318 million in the same period of the previous year).

Forecast for the Year Ending December 2020

During the next term, the global economy is expected to remain on a moderate recovery trend, despite traces of a sluggish recovery remaining. However, we have to continue keeping an eye on movements revolving around the US-China trade conflicts, the future prospects of the Chinese economy, effects on UK’s withdrawal from the EU, impact from fluctuations in financial and capital markets, and other factors.

During the implementation of the Sixth Medium-term Business Plan (three-year plan) since January 2018, through active efforts in the utilization of M&A, in the market of medical devices, we endeavored to enhance our product design and development capabilities as well as our product line-up, and in the sustainable packaging materials market, we realized the expansion of our market share of metallized paper. Furthermore, we newly established a Mobility Business Unit, which integrates the strengths of the Industrial Materials segment and the Devices segment, and accelerated business development in the mobility (automotive) market, thereby steadily making progress in the reorganization of the business portfolio.

During the next term which is the final year of the Sixth Medium-term Business Plan, we expect to see stable growth in mobility (automotive), medical devices and sustainable packaging materials among our focus markets. On the other hand, in the IT market, we expect market conditions to become severer, because of a decrease in demand due to slowdown in our mainstay smartphone market growth, seasonal variations in demand, and changes in technological trends. In anticipation of this harsh market environment, we have worked to reduce variable expenses and the burden of investments, and also cut down on fixed expenses. As a result, we are now able to control costs flexibly when demand falls, but we need to make further improvements in profitability in order to enhance corporate value. Based on this awareness, we shall implement the Measures to Strengthen Profitability, and construct a foundation for regrowth of net sales and expanding equilibrium.
  Result
FY2019.12 full year
(Jan.-Dec.)
Japanese GAAP
Forecast
FY2020.12 full year
(Jan.-Dec.)
IFRS

Revenue

(Millions of yen)

173,189 166,000

Operating profit

(Millions of yen)

-4,307 -2,000

Ordinary profit

(Millions of yen)

-4,696

Profit before tax

(Millions of yen)

-2,700

Profit attributable to owners of parent

(Millions of yen)

-4,131 -3,500

In Conclusion

Our mission is to use the diverse talents of our people and our core technologies as an engine for growth to create highly competitive, feature-rich products and services that offer value to customers and contribute to better lives for all. Guided by this mission, we are executing our medium-term business plan to achieve a balanced business and improved corporate value.

Once again, I want to thank you, our shareholders and investors, for your support to the Nissha Group as we grow into the future.
February 14, 2020
Junya Suzuki
Chairman of the Board
President and CEO

Junya Suzuki

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