To Daifuku's Shareholders and Investors
We would like to begin this message by expressing gratitude to our shareholders and investors for their ongoing support.
1. Operating and financial review
During the first half of the fiscal year ending March 31, 2014 (the period from April 1, 2013 to September 30, 2013), the global economy faced concerns stemming from a slowdown in economic growth in China and other emerging countries, although the economies of major industrialized countries saw signs of recovery. The Japanese economy also staged a moderate recovery.
The material handling and logistics industry continued to confront a difficult business environment with competitive conditions. Nonetheless, customer demand for capital investment in every customer sector has been rebounding.
Amid these conditions, operating results of the Daifuku Group held steady. In systems for manufacturers and distributors, large orders in China, South Korea and Taiwan benefited earnings. In automobile production line systems, large orders in the United States and China also contributed to earnings. Sales remained firm, underpinned by extensive order backlogs for each industry.
Specifically, the Group received orders of 129,391 million yen, increasing 22.0% from a year earlier, and recorded net sales of 111,853 million yen, up 18.5%.
Profits exceeded the forecasts announced on August 9, 2013, mainly attributable to the significant efforts Daifuku Co., Ltd. made in cost cutting, Contec's return to profitability, and the favorable results of subsidiaries outside Japan. Consequently, the Group recorded operating income of 4,591 million yen, an improvement of 57.3% from a year earlier. In addition, ordinary income was 5,050 million yen, an increase of 106.9%, influenced by foreign exchange gains resulting from the depreciation of the yen. Net income was 3,251 million yen, up 156.0%.
On August 15, 2013, the Group agreed to acquire all shares in privately owned Wynright Corporation, a material handling manufacturer headquartered in Illinois, U.S.A., and completed the acquisition of the company on October 1, 2013. In its four-year business plan, Value Innovation 2017, which started in April 2013, the Group aims to achieve sales of 280 billion yen and an operating income ratio of 7% for the fiscal year ending March 31, 2017. This acquisition was to achieve one of the Group's targets, specifically expanding its U.S. market.
In addition, Daifuku decided on September 12, 2013 to issue Japanese yen convertible notes with stock acquisition rights due 2017 with an aggregate principal amount of 15 billion yen, and completed payment on October 2, 2013. The procured capital will be allotted for the acquisition of Wynright, capital investments in Japan, and the repayment of interest-bearing liabilities. The Group aims to meet its financial requirements to achieve the targets in the plan, Value Innovation 2017 and reinforce its financial integrity.
2. Outlook for the fiscal year ending March 31, 2014
Daifuku has revised its full-year earnings forecast for the fiscal year ending March 31, 2014, which was announced on August 9, 2013, as follows:
- Orders received: 260 billion yen (Up 23.2% year on year)
- Net sales: 230 billion yen (Up 13.7% year on year)
- Operating income: 10 billion yen (Up 24.8% year on year)
- Ordinary income: 9.8 billion yen (Up 22.5% year on year)
- Net income: 5.7 billion yen (Up 28.4% year on year)
3. Basic policy for dividends
Daifuku regards the return of profits to shareholders as its most important management task and adopts a performance-based policy for dividends from surpluses based on consolidated net income, with the aim of achieving additional profit distribution to shareholders. We appropriate the remaining surplus to internal reserves for future growth.
Under the new four-year business plan, Daifuku aims for a medium- to long-term dividend payout ratio of 30%, as one of the challenges in sustaining growth in dividends per share.
With respect to dividends for the fiscal year ending March 31, 2014, Daifuku plans to pay an annual dividend of 15 yen per share. With this, we decided to pay an interim dividend of 5 yen per share pursuant to the resolution passed at the Board of Directors meeting on November 12, 2013
We respectfully ask our shareholders and investors for their continued support.
Masaki Hojo, President and CEO
Daifuku Co., Ltd.