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Message from the President

Report on the business performance in the second quarter of the fiscal year ending March 2018

October 31, 2017
Koji Fujiwara
President & Representative Director
Asahi Yukizai Corporation

 I would like to extend our sincere appreciation of our shareholders’ continued patronage. It is my pleasure to explain our consolidated business results for the first half of fiscal 2017 which we released today, as well as the revision of the business results estimated for the full fiscal year and the current situation of the company.

1. Business performance in the first half of fiscal 2017.

 In the first half of fiscal 2017, Asahi Yukizai’s consolidated business results are as mentioned in the table.

 Sales  ¥21.5 billion  Up 13.7% year-on-year  2.4% above July estimate
 Operating profit  ¥1.15 billion  Up 98.6% year-on-year  35.6% above July estimate
 Ordinary profit  ¥1.29 billion  Up 529.5% year-on-year  43.0% above July estimate
 Net profit for the quarter
 (Note 1)
 ¥0.98 billion  An increase of ¥0.89 billion
 year-on-year
 50.2% above July estimate

 As shown in the table, both sales and profit increased year-on-year and, furthermore, sales and profit were greater than the estimates made in July 2017.

 Major factors that drove increase in sales and profit are as mentioned below.

  1) Sales increased due to continuously strong investment in the electronic industry and brisk domestic production of automobiles and, in addition, subsidiaries located in various places of the world increased their sales to the same industries.
  2) Operating profit rose remarkably due to, in addition to the effect of the sales increase, the continued effect of the supply chain reform including the changes of business flows and material supply system as well as improved profitability of overseas subsidiaries.
  3) Both ordinary profit and net profit (Note 1) registered sharp increases, thanks to the increased operating profit and, in addition, the stable foreign exchange rate trends.

2. We have revised upward the business results forecast for the full fiscal 2017.

 We have revised upward the consolidated business results estimates for the full fiscal year, which had been made at the beginning of the year, as follows, since we expect that the profitability will continue strong in the second half of the year considering the market and foreign exchange situation, implementation of various business measures and endeavor at reducing costs up to the second quarter.

 Sales  ¥48 billion(up 9.1% over the July 2017 estimates) 
 Operating profit  ¥3 billion(up 36.4% over the July 2017 estimates) 
 Ordinary profit  ¥3 billion(up 42.9% over the July 2017 estimates) 
 Net profit for the full year (Note 2)  ¥2.3 billion(up 53.3% over the July 2017 estimates) 

3. About the interim dividend for fiscal 2017 and the revision of estimated year-end dividend.

 Taking into consideration the actual results of consolidated performance up to the second quarter and the estimated performance for the full fiscal 2017, we have increased the amount of dividend per share by ¥1 for the end of the second quarter and by ¥5 for the end of the full year, over the estimates made at the beginning of the fiscal year: The dividend to be paid at the end of the second quarter was revised to ¥4 per share and that at the end of full fiscal year (estimate) to ¥20 per share.

Note: We have implemented a reverse split of shares of the rate of one for five ordinary shares taking effect on October 1, 2017. Consequently, the dividend per share figures are expressed taking into consideration the influence of the reverse split. If the reverse split had not been considered, the dividend per share to be paid at the fiscal year end would be revised from ¥3 to ¥4, and the annual dividend would be ¥8 per share.

4. Business performance in each business segment is as mentioned below.

 In the Valve & Piping Systems business segment, sales of mainstay valve products and Dymatrix products trended strong both in domestic and overseas markets, thanks to, in addition to the expansion of the electronic industry-related demand, firm environment for capital investment. Profit increased in tandem with the sales growth. Referring to the progress made in the mid-term plan, as part of the business flow reform, we made Daiwa Kosan Kabushiki Kaisha into our subsidiary on October 2 by acquiring its shares. We have also concluded the “Basic Agreement Concerning the Determination of Basic Principle and Specific Discussion or Consideration About Making Asahi AV Trading Co., Ltd. Into a Subsidiary and the Merger Between Asahi AV Trading and our Wholly-Owned Subsidiary Asahi AV Japan Corporation” (implementation planned for April 2018).

 Sales in the Resin Business segment grew, since demand for foundry material-related products increased in Japan, China and India. Sales of AGSR®, a consolidation agent used in other civil engineering construction field and those of electronic materials also increased. Concerning profitability, increased sales as well as globalization of material supply systems and the business flow reform turned out to have steady effects, resulting in a sharp increase in profits. Referring to the progress made in the mid-term plan, we promoted the project of increasing direct sales in the Foundry Material business and, in addition, we started construction of a factory in Mexico, which is scheduled to start operation in the first half of fiscal 2018.

 Sales in the Water Treatment and Natural Resources Exploitation businesses picked up, since a large-scale resource development project made a progress as scheduled, and the Maintenance & Management as well as Environmental Pharmaceutical businesses remained strong. Profit, however, decreased, since profitability declined as a result that low-profitability projects were recorded while labor costs increased due to continuous personnel reinforcement. Referring to the progress made in the mid-term plan, in addition to the implementation of improvement of our sales system in anticipation of expanding private demand, we started considering expanding business to enter the geothermal development business section.

 In this way, during the first half of the year, in addition to the favorable economic environments, implementation of the supply chain reform, which was set in the new mid-term plan “ARS2020” as a target, bore fruit to realize the better-than-expected results.

 It is our intention to continue promoting “reform of commodity strategy, expansion of overseas sales, reform of supply chain, innovation of manufacturing and cost reduction throughout the company” to push forward toward achievement of the targets.

 Shareholders are kindly requested to provide unchanged support and guidance to us.

October 31, 2017
Koji Fujiwara
President & Representative Director

Notes: 1. “Net profit for the quarter” refers to the quarterly net profit attributable to the shareholders of the parent.

Notes: 2. “Net profit for the full year” refers to the full-year net profit attributable to the shareholders of the parent.