(May 2024)
Outline of Medium-Term Management Plan
1. Review of the FY2023 Medium-Term Management Plan
Targets for the fiscal year ended March 2024
| Million yen | Sales ratio | |
|---|---|---|
| Sales | 24,200 | 100.0% |
| Operating Profit | 1,280 | 5.3% |
| Ordinary profit | 1,250 | 5.2% |
| （Parent）Net income | 930 | 3.8% |
Results for the fiscal year ending March 2024
| Million yen | Sales ratio | |
|---|---|---|
| Sales | 24,494 | 100.0% |
| Operating Profit | 1,249 | 5.1% |
| Ordinary profit | 1,414 | 5.8% |
| （Parent）Net income | 929 | 3.8% |
For fiscal 2023, while the global economy was making good progress recovering from the COVID-19 pandemic, growth has been on a slowing trend due to pent-up demand having passed through, and the effects of prolonged high inflation and monetary tightening. While there has been a growing sense of uncertainty as the international situation becomes less stable, consolidated net sales were 24,494 million yen, 294 million yen more than the projected amount of 24,200 million yen, due in part to steady sales of large-scale projects in the Japan and East Asia segments that were awarded in the previous fiscal year.
In the Japan segment, sales of streamlining equipment declined due to sluggish orders for injection molding machines continuing since the second half of 2022. However, sales increased to 16,552 million yen, 316 million yen more than the projected amount of 16,236 million yen, due to sales of large-scale material feeding equipment and LIB-related equipment for electric vehicles (EVs) which were ordered in the previous fiscal year.
In the East Asia segment, despite sluggish orders mainly for streamlining equipment due to tough price competition with competitors, sales increased to 7,012 million yen, 124 million yen more than the projected amount of 6,888 million yen, due to sales of lens-related equipment for smartphones and VR and LIB-related equipment for EVs which were ordered in the previous fiscal year.
In the Southeast Asia segment, the economy has generally been on a recovery trend, although there are variations across countries. However, sales have not yet returned to pre-pandemic levels due to sluggish capital investment by Japanese automakers, which are our key customers, and were 1,884 million yen, 190 million yen less than the projected amount of 2,074 million yen.
In the North and Central America segment, sales were 267 million yen, 398 million yen less than the projected amount of 665 million yen, due in part to a larger-than-expected decline in capital investment by Japanese automakers, which are our key customers, against the backdrop of inflation in the United States.
In terms of profit and loss, although we worked to reduce costs and other expenses, it was not enough to cover the decrease in gross profit due to persistently high resource prices, etc. Operating profit was 1,249 million yen, 31 million yen less than the projected amount of 1,280 million yen, and ordinary profit was 1,414 million yen, 164 million yen more than the projected amount of 1,250 million yen due to the foreign exchange gains of 139 million yen in non-operating income and expenditures. Net income attributable to owners of the parent was 929 million yen, almost the same as the projected amount of 930 million yen, due to an increase in income taxes.
2. Review of FY2023 Management Strategy
(1) Strengthen business expansion in new markets and growth fields
- Response to next-generation technology
- Next-generation battery technologies including solid-state batteries, and new product development went smoothly, and inquiries and test requests mainly from the automobile industry increased.
- We promoted compliance with CQI-23 in the automotive industry.
- We are continuing to work with each molding machine manufacturer to implement communication standards for the conversion of molding factories to IoT.
- Enhancing information gathering, market research and analysis, and promotion
- In Japan, material feeding equipment, temperature controllers, dust/fines separators, inkjet printers, etc., were on display at IPF Japan 2023 (International Plastic Fair), and various equipment useful for saving energy, reducing resource consumption, and improving production efficiency were widely exhibited and introduced with the goal of achieving carbon neutrality.
- Super Mixers and ink-jet printers were exhibited and introduced at BATTERY JAPAN (Rechargeable Battery Expo, Osaka), and FOOMA JAPAN 2023, respectively.
- In the U.S., small-sized mixers were exhibited and introduced at The Battery Show North America 2023 held in September.
- Efforts to reduce the load on the global environment
- We supported new environmentally friendly materials and composite materials by utilizing our plastic mixing technology.
- We developed and launched equipment (a deodorant unit) contributing to environmental improvement at various factories.
- We developed equipment compliant with the Toxic Substances Control Act (TSCA) in the U.S.
(2)Expand sales and improve profitability in existing markets and business fields
- Initiatives for energy, labor and space savings at manufacturing factories
- We started sales of a hot-air dryer, a space-saving model of the smallest class in the industry.
- Dust/fines separators to improve molding defects at various molding factories were exhibited and introduced.
- We enhanced product support website with video contents and strengthened after-sales service through regular follow-up of major equipment.
- Expansion of existing business base
- Colortronic business being transferred from Kubota Keiso Co., Ltd., we started manufacturing, sales, and after-sales service activities.
(3) Strengthen management bases
- The Kawata Technical Center was opened as part of the investment in human capital, such as passing down technologies and skills and strengthening customer service capabilities with an eye toward the medium-and long-term growth of the Kawata Group.
- One of our subsidiaries is constructing the new headquarters plant for business expansion (productivity improvements, R&D, modifications) and as part of BCP (disaster risk)
- We promoted the improvement of equipment and functionality by actively contracting patents and licenses among the Group companies.
3. Business Environment and Basic Principles
(1) Business Environment
- The global economy is expected to remain at a low growth rate for the foreseeable future, due to China’s declining growth potential and the lack of significant economic recovery in Europe and the United States until monetary policy changes. The world’s real GDP, announced by the IMF, is expected to grow at a moderate rate of 3.1% in 2024, just as it did in 2023.
- There are also concerns about a downturn in the economy due to heightened geopolitical risks, including the political climate in Russia and Ukraine, the Middle East, and East Asia, as well as elections in major countries scheduled for 2024.
- On the other hand, we expect labor-saving and efficiency improvement to compensate for the decline in the working-age population, particularly in developed countries, as well as the demand for replacement of production facilities as they age, and equipment sales and services are expected to recover in the medium to long term.
(2) Basic Principles
- Even from the medium-and long-term point of view, since plastic will remain an indispensable material in the lives of people around the world, demand is expected to grow in various fields.
- Since the automobile and electronic components industries have broad economic bases and present high growth potentials, we will continuously target them as our main areas. Specifically, we actively allocate our technologies and resources into the electrification of vehicles, autonomous, vehicle weight reduction, and integral molding (giga casting).
- We will effectively respond to the expanding use of communication devices (tablets, PCs, smartphones, and VR) that accompany social changes, while also supporting advances in digitization featuring AI, IoT, and 5G.
- To address environmental issues at the global level (decarbonization and reduction of disposable plastics), we aim to contribute to society in our customer’s production sites and our business activities as well as through their products. In particular, we believe that the fields of energy conservation, bioplastics, and recycling can be business opportunities for us.
4. FY 2024-2026 Medium-Term Management Plan
(1) Medium-Term Management Policy
- Aim to be a “top-tier company” needed by society -
“To organize stronger business entity”
①Strengthen ESG management practices
- Contribution to environment and society
- Establishing highly transparent corporate governance
- Consideration for all stakeholders
(shareholders, employees, customers, suppliers, financial institutions, national and local governments, and local communities)
② Establish a highly profitable structure with a small number of highly-talented employees (For steady and sustainable growth)
- Investment in human capital (securing human resources, and establishing and operating education system)
- Investment in R&D and technological enhancement
- Optimum location and renewal of business offices, and investment in capacity enhancement and improved efficiency
- Promotion of automation, labor savings, and systematization
- Increasing capital efficiency (appropriate inventory management and reduction of interest-bearing debt)
- Stably securing net income of 1 billion yen or more, ROE of 8% or more, DOE of 2.5% or more
(2) Outline of Medium-Term Management Strategy
①Strengthen business expansion in new markets and growth fields (Initiatives to meet expanding customer needs and growth fields)
- We develop and expand new sales areas, including batteries, food, and cosmetics by applying our prowess and expertise cultivated in the plastic molding field. Especially with a focus on “mixing process”, we propose high-speed mixers as a single unit or a system incorporating loading and weighing process.
- We develop specific uses, and secure and develop human resources for the industries (food and new materials) other than the plastic industry, centered on high-speed mixers.
- New commitment to the EV-related industry
- LIB-related business (powder and film: material conveying and feeding, temperature control)
- Integral molding (giga casting) business
- Promoting commercialization of particulate coating technology to make all-solid-state batteries practical
②Expand sales and improve profitability in existing markets and fields (Initiatives to retain customers and expand our market in existing markets and fields)
- We aim to increase sales of standard equipment (loader, weighing mixer, high-speed mixer, dryer, temperature controller, chiller and plastics granulator). In particular, we promote brand switching from competitors by differentiating our products with development of new models with superior operability for realization of space and energy savings, improvement of existing models, and strengthening of service capabilities.
- As a company, we will work to create proposal materials and data that are easy to understand and appeal to customers on the advantages of our space- and energy-saving products. (Arranging to become Group property)
- We aim to increase sales and profit, actively supporting system projects for fields including extrusion molding
- We capture the demand for replacement purchases by users, as well as respond properly to investment in labor saving and production efficiency as the working-age population has decreased particularly in the developed countries.
③Enhance management foundation (Initiatives to enhance management foundation for sustainability growth)
- Establishing highly transparent corporate governance
- Practicing honest corporate activities based on thorough compliance awareness
- Strengthening and promoting risk management and BCP
- Promoting human capital management
- Securing excellent human resources and appropriate personnel
- Ensuring psychological safety
- Enhancing education and training systems based on development policies
- Education and human resource development by utilizing the Kawata Technical Center
- Strengthening diversity initiatives
- Creating synergy effect of the Group
- Optimization and reorganization of business bases
- Strengthening mutual collaboration among the Group companies
- Implementing global human resources development program and enhancing personnel exchanges among the Group companies
④Enhance capital profitability conscious management
- Improving profitability
- Bringing forward profit improvement by accelerating efforts; ①strengthening business expansion in new markets and growth fields, and ②sales expansion and profitability improvement in existing markets and fields
- Review of reforms in business operations to improve profitability and stabilize earnings of each company of the Group
- Enhancing asset efficiency
- Reducing ordinary working capital, including accelerated collection of receivables, expansion of advance payment in large-scale projects, optimization of inventories, and reduction of production lead times.
- Maintaining the appropriate level of interest-bearing debt, including effective use of the internal funds of Group
With the goal of securing stable net income of 1 billion yen and ROE of 8% or more, we will strive to enhance returns to capital by improving both profitability and asset efficiency.
(3) Mid-term management targets for fiscal 2024
FY2024 Mid-term Management Targets
| FY ending March 31, 2025 | FY ending March 31, 2026 | FY ending March 31, 2027 | ||||
| Million yen | Sales ratio | Million yen | Sales ratio | Million yen | Sales ratio | |
|---|---|---|---|---|---|---|
| Sales | 22,100 | 100.0% | 22,200 | 100.0% | 23,400 | 100.0% |
| Operating Profit | 650 | 2.9% | 790 | 3.6% | 1,030 | 4.4% |
| Ordinary profit | 660 | 3.0% | 780 | 3.5% | 1,020 | 4.4% |
| （Parent）Net income | 400 | 1.8% | 500 | 2.3% | 680 | 2.9% |
Sales and Profit Targets (as of May 2024)
