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Message from the President

Report on the business performance in the third quarter of the Fiscal Year ending March 2021

Updated on February 12, 2021
Kazuya Nakano
President & Representative Director

I would like to express my sincere appreciation for our shareholders’ continued patronage. Asahi Yukizai Corporation released today the business results for the third quarter of the fiscal year ending March 2021 as well as the business performance by business segment. We would like to report its summary as follows.

1. Consolidated business performance for the third quarter of the Fiscal Year ending March 2021

Sales 38.05 billion yen A decline of 2.86 billion yen year-on-year (down 7.0%)
Operating profit 1.86 billion yen A decline of 1.08 billion yen year-on-year (down 36.8%)
Ordinary profit 1.92 billion yen A decline of 1.03 billion yen year-on-year (down 34.9%)
Quarterly net profit attributable to owners of parent 1.44 billion yen A decline of 0.69 billion yen year-on-year (down 32.5%)

Business performance for the third quarter of the current fiscal year is summarized as follows:

  1) Our business environment remained unpredictable. Domestically, although the return to the ordinary economic activities was groped for while implementing measures to counter the novel coronavirus infection, an increasing trend was seen in the infection once again in the latter half of the current quarter. Automobile production began regaining its recovering trend in the latter half of the second quarter and the third quarter saw the production volume being at the same level as that in the preceding year.
In terms of capital investment, in contrast, demand for replacement of facilities remained slack since, while the construction projects already started were proceeded with as scheduled, regular repairing projects, etc. that had not been started were postponed or reviewed. In the semiconductor-related field, demand remained strong for semiconductors used for 5G products and data centers, etc. Also, the investment in semiconductor manufacturing equipment on the whole stayed strong.
  2) As for business activities in our group companies, most of the sales activities have been done through telephone calls, e-mails and web applications and, furthermore, we introduced face-to-face sales activities within a possible range, to make up for the lack of communication with our customers. At the same time, at our head office and sales offices, we continued encouraging our employees to work from home and, at our factories and warehouses, we requested outsiders to refrain from entering those places in principle, and we continued our business operations by taking infection-preventing measures including always wearing masks, washing hands and gargling.
  3) Although we made our best efforts in sales activities under the above-mentioned business environment, it was not enough to completely recover from the decline in the first half of the fiscal year: Cumulative total of sales turned out to be smaller than in the preceding fiscal year. Operating profit also marked a decline due to, in addition to the sales decrease, the effect of an increase in labor expenses caused by the decrease in the value of pension assets resulting from the stagnant stock prices at the end of March 2020.

2. Business performance by business segment

Business performance by business segment is summarized as follows:

  1) In the Valve and Piping System segment, we adopt the basic strategy to expand the thermoplastic piping material market by developing products to pursue the solution of the issues related to corrosion resistance and the functionality for thermoplastic piping materials, taking advantage of having the plastic valves, our mainstay products, and continue our sales activities focusing on the expansion of the area of their usage in Japan and overseas and better services to our customers.
Sales of such main products as thermoplastic valves for the domestic market remained stagnant and marked a year-on-year decrease: Although we received orders continuously for such large-scale projects as plant construction which had already been started, as in the second quarter, regular maintenance projects, etc. which had not been started were postponed or scaled down.
Demand for the Dymatrix products for semiconductor manufacturing equipment entered an adjustment phase in Korea in anticipation of the 2021 situation but demand in Taiwan and China recovered. We were able to receive orders stably during the current quarter.
As for overseas businesses, sales in the US decreased year-on-year, as order receipt continued stagnant for such reasons as the slow economic recovery, in the face of gradual increase in demand for semiconductor-related products. Meanwhile, sales in China decreased year-on-year in spite of the gradual lifting of restraints on the business activities, which was not enough to lead to a full-fledged recovery in demand, adversely affected by the curbing of investment resulting from the US-China trade conflicts.
Profits also decreased year-on-year due to increased labor costs, in addition to the decline in sales.
  2) In the Resin Business segment, sales of products for foundry materials registered an increase, since, domestically, we made proposals to improve the quality of our customers’ products and enhanced our sales activities to develop new customers and, overseas, took measures to meet the future increase in demand, which resulted in an increase in transactions with new customers. Also, the domestic automobile production, which had dropped due to the novel coronavirus infection, recovered to the previous year’s level and helped sales increase. However, these could not fully make up for the drop in sales in the first half of the fiscal year.
As for foaming material products, sales of on-the-spot heat insulation materials with our CFC-free system increased to surpass the preceding year’s result as we focused on sales promotion emphasizing its easy handling, the raised construction quality of the undiluted solution system and the spraying machine, which resulted in attracting new customers. Sales of solidification materials used for ground and soil reinforcement, which are used in tunneling, recorded a year-on-year decline, in spite that its acceptance on the sites of construction increased as its high solidification strength and high waterproof performance were valued.
With regard to Rand Wick Co., Ltd., which undertakes spraying of heat insurance materials, we concentrated our energy on securing order receipt as there were smaller number of construction projects than in the preceding year.
Sales of functional resins, mainly used for making electronics materials, increased over the preceding year, owing to steady sales of low metal content products to major Japanese photoresist manufacturers working on miniaturization of semiconductors. Overseas sales increased year-on-year, since demand in China picked up as more products for semiconductors or liquid crystal display panels have come to be made domestically.
Profits, however, turned out to be smaller than in the preceding year, as they were not enough to fully recover from the decline in the first half.
  3) Sales from the water treatment business in the Water Treatment & Natural Resources Exploitation Business segment were up from the preceding year as we succeeded in receiving orders for the project for industrial wastewater treatment facilities in the private sector and for public waterworks and sewage facilities which were the governmental bidding matters. Sales, however, were smaller than in the preceding year, due to such factors as the postponement of construction starts and delays in construction progress caused by the expanded novel coronavirus infection.
Sales from the natural resources exploitation business increased year-on-year owing to orders we secured for hot spring facilities construction as well as for geothermal well drilling, and to the steady progress of the construction on the whole.
Sales in the prevention of environmental pollution and purification business division decreased year-on-year due to such factors as the decrease in demand for chemicals used in the private-sector industrial wastewater treatment facilities. Sales in the maintenance and management service business division decreased year-on-year in the face of gradually recovering orders for repair projects.
The profit balance turned into the red due to the delay in performance of a part of the contracted jobs, in addition to the increased fixed expenses.

As the novel coronavirus infection has re-started expanding, such measures have been taken as voluntary restraints on going outdoors, which have begun influencing the business activities. It is likely that we need some more time before the infection to be quieted down. We, however, would take this as a turning point and we shall enhance our business activities for the sustainable growth of our group companies and, at the same time, we shall shift to more IT-enhanced business processes for more efficient business operations.
We would highly appreciate it if our shareholders continue to believe in the growth of Asahi Yukizai Group and extend a continuous support and guidance to us.

February 12, 2021
Kazuya Nakano,
President & Representative Director