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Message from the President

Report on the business performance in the Fiscal Year ended March 2020

Updated on May 19, 2020
Kazuya Nakano
President & Representative Director
ASAHI YUKIZAI CORPORATION

 I would like to extend our sincere appreciation of our shareholders’ continued patronage.
First I wish to extend my sincere condolences to the bereaved of the people that passed away due to the novel coronavirus (COVID-19) infection. I sincerely hope for early recovery of the people who have contracted the disease.
We have recently released our consolidated business results for the fiscal year on a consolidated basis as well as the current situation of our business segments. We would like to report its summary as follows.

1. Consolidated business performance in the Fiscal Year 2019

Sales 56.58 billion yen An increase of 0.5 billion yen year-on-year (up 0.9%)
Operating profit 4.37 billion yen An increase of 0.14 billion yen year-on-year (up 3.4%)
Ordinary profit 4.39 billion yen An increase of 0.00 billion yen year-on-year (up 0.1%)
Net profit attributable to the parent company 3.14 billion yen A decrease of 0.76 billion yen year-on-year (down 19.6%)

 The situation of business performance for the Fiscal Year 2019 on a consolidated basis is summarized as follows:


  1) Our business environment as a whole trended firm, since investment in semiconductor manufacturing in the Eastern Asia region including Japan was resumed and capital investment trended brisk in Japan, although the adverse effects of the slowdown in automobile sales in China and other nations remained. In these circumstances, as our Group targeted at a continuous growth, we devoted ourselves to strengthen our sales capacity to provide products and services valuable to our clients and, at the same time, we promoted reviewing of the way of manufacturing and distributing.
While the novel coronavirus infection broke out at the outset of 2020, it had limited influence on our business in general for the fiscal year.
  2) We also strove to strengthen our profit foundation: We implemented measures to reduce costs so we promoted reviewing manufacturing system and distribution system in the Valve & Piping Systems segment, and raised production efficiency in the Resin Business segment and, in the Water Treatment Business and Natural Resources Exploitation Business segments, we reviewed our order receiving system.
  3) In consequence, we were able to record all-time high sales, as did in the preceding fiscal year. We also succeeded in reporting increases in both sales and profit (in terms of operating profit) for seven years in a row.
  4) Net profit attributable to the shareholders of the parent company proved to be smaller than in the preceding fiscal year, since the negative goodwill resulting from the acquisition of the Asahi AV Sangyo shares (approximately 700 million yen)* was reported as special profit for the preceding fiscal year.

* In the preceding fiscal year, we reported special profit of approximately 700 million, a total of the profit of 1.06 billion yen arising from the negative goodwill resulting from the acquisition of the Asahi AV Sangyo shares and the loss of approximately 340 million due to its incremental acquisition. “Negative goodwill” refers to the profit that arises from a purchase of a corporation at a price lower than its net assets and is processed in the financial statements as special profit.

2. Summary of business performance in each business segment

 The situation of activities of each business segment is summarized as follows:

  1) With regard to the mainstay products in the Valve & Piping Systems Business segment, we promoted steady sales activities targeting mainly at the expansion of the domain of utilization both domestically and overseas and the increase of our share of the market, based on the basic strategy of expanding the resin valve market by solving the issues concerning anticorrosive products and by replacing of metal piping. Sales of products for general-use facilities were firm in the second half compared with the first half as we succeeded in attracting capital investment in plant construction projects and others. It was, however, not big enough to offset the decline in the first half and, consequently, sales were smaller on a year-on-year basis. Order receipt for Dymatrix products designed for semiconductor manufacturing equipment started recovering during the second quarter: We succeeded in receiving orders continuously in the second half of the fiscal year.
In overseas markets, sales decreased from the preceding fiscal year in spite of the steady trends in the order receipt for infrastructure improvement projects, etc. in the U.S., due to slowing Chinese investment in semiconductor manufacturing, etc. caused by the U.S.-China trade friction as well as the decline in exports to China caused by the novel coronavirus infection.
Profits declined from the preceding fiscal year due to increased depreciation expenses resulting from such factors as enhancement of production capacity and decreased sales.
 
  2) In the Resin Business segment, sales of products for making foundry products decreased due to continued slowdown in automobile production in spite that we promoted such measures as proposal-type business activities aiming at increasing our share of the Japanese market and overseas capital investment to meet the demand expected to increase in the future.
Regarding foaming materials, we received more orders for the on-the-spot foaming heat-insulation materials, as we strove to be helpful to contractors through improving the development of the undiluted solution system and the spraying equipment aiming at raising the construction quality. Sales of consolidation material products for foundation or natural ground, which are used when excavating tunnels, also increased as a result of an increase in high value-added products which are required to have higher consolidation strength and water-tightness. In addition, Rand Wick Co., Ltd., a major heat-insulating construction company which became one of our consolidated subsidiaries in the second quarter, received construction orders steadily.
Sales of functional resins which are mainly used for making electronic materials remained strong, thanks to steady sales of low metal content products to the Japanese domestic photoresist manufacturers which are micronizing their semiconductor products. Overseas, demand in China and Taiwan regained its recovering trend.
Profits marked a significant increase over the preceding fiscal year as a result of the raised production efficiency which we had been promoted since the preceding fiscal year and the stable trends in raw material prices, also helped by the effect of having Rand Wick Co., Ltd. as a consolidated subsidiary.
 
  3) Sales in the Water Treatment Business segment marked a pronounced increase, due to smooth incoming of orders for industrial wastewater treatment facilities in the private sector as well as for water supply and sewerage systems for which bids are made for government offices. In addition, there were projects of desalination plants, whose facilities we took over from Asahi Kasei Corporation. Although the Natural Resources Exploitation Business segment was adversely affected by the decline in the number of new projects for hot spring construction, total sales in the segment were greater than in the preceding fiscal year as we succeeded in receiving an order for a large-scale construction of excavation of a geothermal well. Sales in the environmental pharmaceutical section were smaller than in the preceding fiscal year due to unfavorable results in the projects for which bids are made for government offices. Maintenance section sales surpassed those of the preceding fiscal year, thanks to such factors as that we received orders for new projects and, in addition, we received a new contract for maintenance of a desalination facility.
Although the environmental pharmaceutical and maintenance sections saw a slight decline in profits, total profits were substantially greater than in the preceding fiscal year supported by the steady incoming of orders in the Water Treatment Business and the Natural Resources Exploitation Business segments.

Fiscal Year 2020 started admitting of no prediction, due to the novel coronavirus pandemic. We, however, would like to take it as a turning point, and will further reinforce the activities aiming at continuous growth of our Group and, at the same time, promote the activities based on a hard look at what the society will be like after termination of the coronavirus pandemic. We truly hope that shareholders will have expectations for the future growth of Asahi Yukizai Group, and will provide unchanged support and guidance to us.

May 19, 2020
Kazuya Nakano,
President & Representative Director