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Nagaileben co., Ltd. (JP-7447) Tokyo Stock Exchange First Section ( II )

2019-05-21  提供機構:FISCO  作者:FISCO  點閱次數:1

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◆Business outlook

Despite higher sales, operating profit is forecast to decline in FY8/19 due to special factors

• FY8/19 full-year outlook

(1) Outlook of profit and loss

The forecasts for the FY8/19 full year consolidated results are unchanged from the initial forecast with net sales to increase 2.7% YoY to ¥17,600mn, operating profit to decrease 0.4% to ¥5,242mn, recurring profit to decline 0.6% to ¥5,304mn, and net profit attributable to the owners of the parent company to fall 0.7% to ¥3,650mn. Full-year presumptive conditions are as outlined below. The gross profit margin is forecast to decline due to factors including the impact of exchange rates and the increase in depreciation expenses. In addition, the Company expects transportation expenses to rise and to record a reward-for-retirement amount (¥81mn) following the abolition of the retirement benefits system for directors. Therefore, operating profit is forecast to decrease, it only slightly.

Net sales were sluggish in the 1H, but in the 2H, renewal and new projects are expected in the mainstay healthcare wear, and in addition, the Company intends to further strengthen its value-added strategy for high-end products and high value-added products, and to further grow sales in peripheral markets, such as for patient wear and surgical wear. Therefore, it is forecasting higher sales YoY and once again achieve a record high.

The gross profit margin is forecast to decline slightly YoY, to 46.7% (47.0% in the previous fiscal year). Gross profit is expected to increase ¥159mn, with the anticipated factors being an increase of ¥212mn from the higher sales and a decrease of ¥52mn due to production. Breaking down the decreases due to production, they include a decrease of ¥40mn from the impact of the rise in raw material costs, processing costs and other costs, an increase of ¥11mn from the effects of the exchange rates on costs (¥109.6 to U.S.$1 in FY8/18→¥109.0 to U.S.$1 in FY8/19), an increase of ¥25mn from the rise in the overseas production ratio (49.0% in FY8/18→50.0% in FY8/19), a decrease of ¥30mn from the increase in depreciation expenses alongside the construction of the new plant, and a decrease of ¥14mn on the occurrence of real estate acquisition tax on the construction of the same new plant. However, for the exchange rates, the Company already has in place forward contracts for the portion from January to March 2019, and the actual average rates may be lower than expected.

SG&A expenses are forecast to be ¥2,968mn (up 6.5% YoY), as in addition to the increase from normal business expansion, the Company will record expenses of ¥81mn as the reward-for-retirement amount following the abolition of the retirement benefits system for executives. As a result, operating profit is expected to decrease, if only slightly, to ¥5,242mn (down 0.4%). Due to this, both recurring profit and net profit attributable to the owners of the parent company are also forecast to decrease.

a) Net sales forecasts by item

In net sales by item, healthcare wear is forecast to be ¥10,180mn (up 2.1% YoY), doctors’ wear ¥2,730mn (up 2.2%), utility wear ¥450mn (down 9.8%), patient wear ¥2,170mn (up 10.4%), surgical wear ¥1,700mn (up 3.5%), shoes ¥175mn (down 6.4%), and other products ¥195mn (down 4.5%).

In healthcare wear, sales are forecast to increase, as in addition to promoting new high value-added products, the Company expects more renewal projects in the 2H than in the previous period and to acquire new projects, while it is also forecasting a steady increase in high-end product sales. In doctors’ wear, although mass-produced products are struggling, the Company is aiming to increase sales by focusing on growing sales of high-end prod­ucts. In patient wear, business discussions for new measures are ongoing, and they may be realized in the 2H, so the forecast is for the double-digit increase in sales to continue. Sales of surgical wear are also expected to grow from increasing the capacity of the COMPELPAK laundry sterilization plant and from acquiring new customers.

b) Net sales forecast by region

For net sales by region, the Company forecasts ¥9,270mn in eastern Japan (up 2.3% YoY), ¥1,800mn in central Japan (up 0.3%), ¥6,300mn in western Japan (up 3.8%), and ¥230mn in overseas (up 7.1%).

In eastern Japan, in addition to the renewal projects, the Company expects to acquire new projects. It is working to steadily capture demand for renewal projects through proposing high value-added products, and sales are expected to continue to increase. In central Japan, although sales decreased significantly in the 1H, it expects to acquire renewal projects in 2H, and the full fiscal-year sales are forecast to be basically unchanged YoY. In western Japan, sales are expected to increase, by capturing the projects postponed from previous period, and working to acquire new projects in patient wear. Overseas, conditions are affected by exchange rates, the Company will focus on strengthening the development of its Japanese business model (sales to linen suppliers) in Taiwan to achieve sales growth.

c) Net sales forecasts by product

In the net sales by product, the Company forecasts ¥1,370mn for high-end products (up 7.9% YoY), ¥9,170mn for high value-added products (up 4.7%), ¥6,260mn for value-added products (up 0.1%), and ¥800mn for mass-produced products (down 7.0%).

In high-end products, the Company’s luxury brands, including Bright Days’, 4D+ and Beads Berry, are performing strongly among small-lot users in particular, thus the forecast for high-end products as a whole is for sales to increase. The high value-added products, such as PRO-FUNCTION advanced-performance products have been well- received by the market and their sales are trending favorably, and the Company plans to achieve even higher sales by continuing to promote its strategy of higher quality and value-added products. The forecast is for sales of mass-produced products to decline, but the plan is to transfer their customers to value-added products, including to the products of other companies.

(2) Reorganization and streamlining of domestic plants

To strengthen the production structure going forward, the Company merged two aging plants as a new plant adjacent to its logistics center. This move is designed to improve operation efficiency and facilitate quick response. The project has completed at the end of August 2018 and the depreciation cost expected to be recognized from FY8/19.

◆Medium- to long-term growth strategy

Mid-term Management Plan target aims for operating profit of ¥5,600mn in FY8/21

1. Mid-term Management Plan

The Company announced targets for FY8/21 of net sales of ¥18,600mn and operating profit of ¥5,600mn in its Mid-term Management Plan based on FY8/18 results.

For percentages of total net sales by item, the forecasts are 56% from healthcare (58% in FY8/18), 15% from doctors’ wear (16%), 2% from utility wear (3%), 14% from patient wear (11%), 12% from surgical wear (10%), and 1% from shoes and other products (2%).

The forecast percentages of total net sales by region are 49% from eastern Japan (53%), 11% from central Japan (11%), 38% from western Japan (35%), and 2% from overseas (1%). The forecast percentages of total net sales by product are 9% from high-end products (7%), 54% from high value-added products (51%), 34% from value-added products (37%), and 3% from mass-produced products (5%).

Actively developing advanced-function products and high value-added products

2. Future business strategies

The operating environment surrounding the Company should be favorable for some time. According to data released by the Ministry of Health, Labour and Welfare, the number of nurses in Japan is projected to increase from 1.66 million in 2016 to as many as 2.06 million in 2025. Moreover, the number of care workers is forecast to increase from 1.83 million in 2016 to 2.45 million in 2025. In this operating environment, the Company plans to achieve its medium-term growth by implementing the following strategies.

(1) Marketing strategy to boost sales

a) Aim to increase share by further uncovering demand in the core markets, including the current mainstay markets for nurses and care workers.

b) In addition to the existing mainstay healthcare wear products, further expand the peripheral markets, including patient wear and surgical wear.

c) Actively open up overseas markets. Particularly in Taiwan, the Company is progressing on establishing the same business model as in Japan (not only direct sales to hospitals, but also sales to linen suppliers), and future developments can be expected,

(2) Production strategy to ensure a steady supply

a) By relocating domestic sewing plants, further strengthen rapid responses and the ability to meet requests for small-lot, multiple-product production runs.

b) Strengthen collaborations with materials manufacturers and trading companies, and improve new product development capabilities.

(3) Strategy to stabilize profitability

a) Further promote the shift from domestic production to overseas production.

b) Develop new oversea materials applying special tax measures for EPA and FTA.

c) Secure business profitability by focusing on increasing sales of the high value-added products

◆Shareholder return policy

Pledges a dividend payout ratio of above 50% (non-consolidated basis) and while the forecast is for an annual dividend of ¥60, this may increase depending on the level of profits

The Company’s shareholders’ equity ratio reached 90.8% at the end of FY8/18 1H, and it is financially stable. Additionally, considering the Company’s business conditions, it seems highly unlikely that its profits will rapidly deteriorate, so continued stable earnings are expected. As a result, if its distribution of earnings outside the Company (particularly dividend payments) is low, profits will accumulate in shareholders’ equity each year, and return on equity (ROE) will decline; which is to say, capital efficiency will decline. But in addition to paying dividends commensurate with the growth in profits, the Company actively and comprehensively returns profits to shareholders, including through share buybacks, and as a result has maintained a high ROE (9.8% in FY8/18).

The Company will thus maintain a stable financial position while pursuing solid shareholder returns. In FY8/15, it supplemented the regular dividend of ¥50 per share with an additional ¥50 per share to commemorate its centennial. This raised the total annual dividend to ¥100 per share, for a non-consolidated payout ratio of 107.5%. It also spent ¥1,500mn in repurchasing 1 million shares during the fiscal year, raising the total return ratio (non-consolidated basis) to 153.8%. In FY8/16, it paid an annual dividend of ¥50 for a dividend payout ratio of 52.5% on a non-consolidated basis.

The Company has pledged a dividend payout ratio of above 50% on a non-consolidated basis. In FY8/17, it increased the annual dividend from ¥50 to ¥60, and paid an annual dividend of ¥60 for FY8/18. The Company is also forecasting an annual dividend of ¥60 for FY8/19, which is currently underway. It may further increase the dividend if profits exceed their forecasts.

 

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