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Message from the President

Report on the business performance in the third quarter of the fiscal year ending March 2019

Updated on January 31, 2019
Kazuya Nakano
President & Representative Director
ASAHI YUKIZAI CORPORATION

 I would like to extend our sincere appreciation of our shareholders’ continued patronage. It is my pleasure to inform you of our consolidated business results for the third quarter of Fiscal Year 2018 and the current situation of the company that have been announced today.

1. Business performance in the third quarter of Fiscal Year 2018

 The consolidated business results for the third quarter of Fiscal Year 2018 are as follows.

 Sales  ¥41.98 billion  Up 19.8% year-on-year
 Operating profit  ¥2.96 billion  Up 30.0% year-on-year
 Ordinary profit  ¥3.12 billion  Up 26.9% year-on-year
 Net profit (Note 1)  ¥2.97 billion  Up 40.2% year-on-year

 Both sales and profits were up year-on-year (on a consolidated basis).

 The business situation in the third quarter of Fiscal Year 2018 is summarized below.

  1) Sales trended steadily upwards. Among piping materials, although the semiconductor and liquid crystal product industries have entered an adjustment phase, the chemical plant-related sales, in which we have strengths, led the increasing trend while resin products sold well led by those related to the automobile and construction machinery. In addition, domestic and overseas subsidiaries were also in good shape, resulting an increase in the sales. Another factor contributing to the sales growth was that we made Asahi AV Sangyo K.K. our consolidated subsidiary in April 2018.
  2) The operating profit saw an increase as a result of the significant growth in sales of ASAHIAV valves which are higher value-added among piping materials.
  3) The ordinary profit and the quarterly net profit attributable to shareholders of the parent company increased considerably due to the negative goodwill generated as the value of the purchased shares of the aforesaid Asahi AV Sangyo K.K. was lower than its net asset value.

2. Summary of business performance in each business segment

 The situation of activities of each of the business segments is summarized below.

  1) In the Valve & Piping Systems Business segment, while endeavoring at accommodating demand arising from the replacement of metallic piping by resin piping, there has been steady demand for chemical plant-related products in which we have strengths, and there is an increasing demand for valve products which are our main products. In addition, the receiving of orders for large-scale contract work projects also contributed greatly to the increase in sales. Good business conditions are maintained in the United States as well, and the receiving of orders for actuators and special pipes in addition to pipe products remained steady. We strengthened the sales activities with close contact with customers and the promotion activities, and in November we held private exhibitions called "ASAHIAV Specialty Exhibition 2018" in Tokyo and Osaka.
 
  2) In the Resin Business segment, the shortening of the business processes in Japan activated our conversation with customers, resulting in an acceleration of our activities of finding new needs. Meanwhile, although demand for foundry materials trended strong for automobiles and construction machinery, the segment is being adversely affected by the continuing rises in raw material prices. In the civil engineering field, demand for natural ground consolidation materials and water sealing materials is rising for use in the tunnel construction for the Linear Shinkansen Line and the Shin-Tomei Expressway, and we are placing emphasis on accommodating such demand. With regard to the business overseas, the manufacture and sale of phenol resins for casting and resins for electronic materials by our Chinese subsidiary "Asahi Organic Chemicals (Nantong) Co., Ltd." are in good shape.
 
  3) The Water Treatment and Natural Resources Exploitation Business segment saw a decrease in profit due to cost increases such as a rise in outsourcing work cost and materials cost in the water treatment business. Meanwhile, in the environmental cleaning agents business, the receiving of orders from government-related demand remained in good condition, and besides orders from the private sector that we had been striving to acquire theretofore increased. With regard to the maintenance service businesses, in addition to the steady receiving of orders for equipment maintenance, the number of orders received for construction projects such as repair increased toward the end of the fiscal year.

 As summarized above, the third quarter saw the favorable business environment, and the measures we posted in our mid-term management plan “ARS2020” (reform of the product marketing strategy, expansion of overseas sales, supply chain reform, manufacture innovation, and company-wide cost reduction) steadily bore fruit.

 We are determined to continue implementing these measures, aiming at continued growth and achievement of the targets in future.

 We truly hope that shareholders will have expectations for the future growth of the Asahi Yukizai Group, and will provide unchanged support and guidance to us.

January 31, 2019
Kazuya Nakano
President and Representative Director

Notes: 1. “Net profit” Net profit: refers to the current period (third quarter) net profit attributable to shareholders of the parent company