Q2FY19 Earnings Presentation - Furusato · 2019-11-06 · Earnings Presentation November 2019 First Section of the Tokyo Stock Exchange :8087 ... ・Price hike and impact by sales

Q2 FY2019

Earnings Presentation

November 2019

First Section of the Tokyo Stock Exchange :8087

Furusato Industries, Ltd.

2Copyright© Furusato Industries, Ltd. All Rights Reserved

１．H1 FY19 Financial Results

２．FY19 Earnings Forecasts

３．Business Overview・Advantage

and Strategy

４．Non-consolidated Results

Copyright© Furusato Industries, Ltd. All Rights Reserved 3

（Millions of yen） H1 FY19% of sales

H1 FY18% of sales

YoY Progress(V.S. H1 Forecast)

Net sales 53,260 100% 51,343 100% +1,917 +3.7％ +160 100.3％

Gross profit 8,056 15.1% 7,235 14.1% +820 +11.3％ +256 103.3％

SG&A 5,862 11.0% 5,558 10.8% +304 +5.5％ (37) 99.4％

Operating income 2,194 4.1% 1,677 3.3% +516 +30.8％ +294 115.5％

Ordinary income 2,383 4.5% 1,882 3.7% +501 +26.7％ +283 113.5％

Net income attributable to owners of parent 1,559 2.9% 1,236 2.4% +323 +26.2％ +189 113.9％

●Net sales：Increase due to an addition of Security Design Inc.(SD), included in the scope ofconsolidation from FY19, sales growth in purchasing building supplies

●Gross profit margin：+1.0P due to high profitability of Security Business and improvement inbuilding supplies

●SG&A：Increase due to an addition of Security BusinessDecrease due to a rebound from a drop by the special factor in Machine & FacilitySegment in FY 18

●Operating income：Growth in all segments, led by improved gross profit margins●Net sales：Increase after deducting net income attributable to non-controlling interests

P/L (Consolidated)


Changes in Net Sales by Factor

Construction & Piping

53,260

H1 FY18

51,343

Equipment & Tools

Machine & Facility

+1,187

+60+669

H1 FY19

●Net sales：+¥1,917M, +3.7% YoY●Equipment & Tools：Security Business ¥1,208M

(Addition of SD+sales transferred from Overseas & Other Business)●Machine & Facility：Sales growth of machine tools, led by backlog accumulated by FY18●Construction & Piping Products：growth, led by sales growth of a specific building supply

Rounded down to the nearest million yen

-338

+270


Changes in Operating Income by Factor

+550

-155

Sale

s

gro

wth

Change in

gro

ss

pro

fit marg

in

Sellin

g e

x.

Perso

nnel e

x.

Adm

inistra

tive e

x.

& O

ther e

x.Op. income ratio

3.3%

H1 FY18 H1 FY19

2,194

1,677

Op. income ratio

4.1%

+189

●Operating income：+¥516M, +30.8% YoY

●Gross Profit Margin：15.1%, +1.0P

●Selling Ex.：Decrease in provision of allowance for doubtful accounts

●Personnel ex. , general administrative ex. and other ex.：Increase by an addition of

expenses of ＳＤ, etc.



Sales Changes by Segment / Business

（Millions of yen） H1FY19 % of sales H1FY18 % of sales YoY

Equipment & Tools

Industrial Equipment 17,400 32.7% 18,093 35.2% (693) (3.8)%

Machine & Tools For Automotive 3,466 6.5% 3,225 6.3% +240 +7.5%

Housing Equipment 2,794 5.2% 2,530 4.9% +263 +10.4%

Security 1,208 2.3% - - +1,208 -

Other 83 0.2% 433 0.8% (350) (80.9)%

Total 24,952 46.9% 24,283 47.3% +669 +2.8%

Machine& Facility

Machine Tool 9,557 17.9% 8,938 17.4% +618 +6.9%

Factory Automation 1,065 2.0% 1,624 3.2% (558) (34.4)%

Total 10,623 19.9% 10,562 20.6% +60 +0.6%

Construction & Piping Products

Building Supplies 14,291 26.8% 13,053 25.4% +1,238 +9.5%

Piping Products 3,392 6.4% 3,443 6.7% (50) (1.5)%

Total 17,683 33.2% 16,496 32.1% +1,187 +7.2%

Consolidated Total 53,260 100% 51,343 100% +1,917 +3.7%

●Equipment & Tools・Housing Equipment：Double-digit growth due to the last-minute demand before

consumption tax hike・Security：Increase by a new addition of SD and transfer from Overseas & Other Business

●Machine & Facility：Retaining growth due to sales growth of machine tools despitea substantial drop in orders received

●Construction & Piping Products：Growth due to sales growth of specific building supply


Equipment & Tools Segment～Topics

■Performance of Industrial Equipment Business

・Sales decrease in peripherals of machine tools and built-in devises, reflecting a decrease

in business investment

・Increase in sales for e-commerce sites by developing and enhancing original products

・Sales growth by launching a new manufacturer, KT

■Growth in Machine & Tools for Automotive Business

・Sales growth in new fields（inspection jig, processing jig, die）

・System integration of automation facilities by factory automation system function

・Reinforcing sales of processing facilities and robots

■Growth in Housing Equipment Business

・Increase in sale opportunities by utilizing construction function as our added-value

・Expanding market, targeting at remodeling demand

■Growth in Security Business

・Offsetting a drop of sales of major supplies due to U.S.-China trade friction by introducing

original brand products

・Receiving orders by offering project management function amid domestic favorable

demand

・Stabilizing earnings structure by expanding subscription-based business model


Machine & Facility Segment～Topics

■Performance of Machine Tool Business

・Orders received in H1 -37.9% YoY

・Backlog at H1E -40.5% YoY, ¥7,141M

■Performance of Factory Automation Business

・Orders Received in H1 -23.0% YoY

・Backlog at H1E -18.1% YoY, ¥1,012M

■Promoting robotic system integrator business

・ＲＴＣ（Hyogo/Tokyo）Robotic school, The number of trainees up

・Ongoing establishment of system integrator network（currently 40 companies）

11,997 10,327

9,706 9,524

7,141

1,235 761 742 815 1,012

0

5,000

10,000

FY18Q2 FY18Q3 FY18Q4 FY19Q1 FY19Q2

Machine Tool Factory AutomationOrders Received


Construction & Piping Products Segment～Topics

■Growth in Building Supplies Business

✓ Reducing production costs by new production system

・Total production hours -20%, Direct workers -15%,

Monthly output per capita +1.3ｔ（+16.3％）v.s. FY15

・Sales volume -4.8％ YoY, Ave. unit price +4.7% YoY（In-house product）

✓ Growth in high strength bolts（+38.1％ YoY）

・Sales volume +12.8％ YoY, Ave. unit price +22.4% YoY

✓ Growth in sales of original building supplies（+50.1％ YoY）

■Growth in Piping Products Business

✓ Planning sales initiatives and conducting process management by Piping Products

Headquarters

・Creating strategy by industry, targeting at customers classified by industry

・Improving productivity in operation by establishing the West Contact Center

✓ Growth in sales in machine and tools and fastening products

・Price hike and impact by sales before consumption tax hike

✓ Decrease in sales of piping products（pipe fittings, flange, pipes, valves）





and Strategy



FY20 Consolidated Earnings Forecast

⚫ Offsetting a drop in demand in Industrial Equipment Business and Machine Tool Business by an addition of ＳＤ

⚫ Profitability up due to production cost reduction, backed by steady construction demand

⚫ Continuing investment to reinforce competitiveness and improve working environment

（Millions of yen） FY19 % of sales FY18 % of sales YoY

Net sales 108,000 100% 107,873 100% +126 +0.1％

Gross profit 15,900 14.7% 15,109 14.0% +790 +5.2％

SG&A 11,900 11.0% 11,069 10.3% +830 +7.5%

Operating income 4,000 3.7% 4,040 3.7% (40) (1.0)％

Ordinary income 4,400 4.1% 4,416 4.1% (16) (0.4)％

Net income attributable to owners of parent 2,950 2.7% 2,893 2.7% +56 +2.0％

Dividend FY19 Forecast FY18

Amount ¥61.50 ¥60

Dividend payout ratio 30.2% 30.1%


FY20 Consolidated Earnings Forecast (H1/H2)

⚫ H2 forecast based on H1 results is the amount after deducting H1 from the full-year forecast announced in May 2019, considering an impact of consumption tax hike and slowdown in machinery investment.

⚫ Mid-term dividend: ¥5.00 (fixed). Full-year dividend forecast:¥61.50 (unchanged from the forecast, announced in May 2019)

（Millions of yen） H1 FY19% of sales Progress H2 FY19

% of sales FY19 Forecast

Net sales 53,260 100% 49.3% 54,739 100% 108,000

Gross profit 8,056 15.1% 50.7% 7,843 14.3% 15,900

SG&A 5,862 11.0% 49.3% 6,037 11.0% 11,900

Operating income 2,194 4.1% 54.9% 1,805 3.3% 4,000

Ordinary income 2,383 4.5% 54.2% 2,016 3.7% 4,400Net income attributable to owners of parent 1,559 2.9% 52.9% 1,390 2.5% 2,950

Dividend FY19 Forecast H1 FY19 Actual

Amount ¥61.50 ¥5.00

Dividend payout ratio 30.2% 4.6%




Net sales 24,952 +2.8% 47.4% 27,647 +8.0% 52,600

・Industrial Equipment 17,400 (3.8)% 46.9% 19,699 +3.9% 37,100

・Machine and Toolsfor Automotive 3,466 +7.5% 51.1% 3,313 (5.9)% 6,780

・Housing Equipment 2,794 +10.4% 54.8% 2,305 (16.0)% 5,100

・Security 1,208 - 36.6% 2,091 - 3,300

・Overseas &Other 83 (80.9)% 25.9% 236 (34.6)% 320

Gross profit 3,204 14.7% 48.0% 3,475 19.0% 6,680

SG&A 2,588 17.9% 49.8% 2,611 17.6% 5,200

Operating income 616 3.1% 41.7% 863 23.4% 1,480

⚫ Security Business up due to including SD in the scope of consolidation

⚫ Machine and Tools for Automotive expanded sales in fields of inspection jig, processing jig and die.

Earnings Forecast (Consolidated)

Equipment & Tools Segment



% of sales

FY19Forecast

Net sales 10,623 +0.6% 50.1% 10,576 (22.1)% 21,200

・Machine Tool 9,577 +6.9% 54.0% 8,142 (30.0)% 17,700

・Factory Automation 1,065 (34.4)% 30.5% 2,434 +24.4% 3,500

Gross profit 894 +6.7% 52.6% 805 (25.7)% 1,700

SG&A 535 (21.0)% 48.7% 564 +0.8% 1,100

Operating income 359 123.3% 59.8% 240 (54.1)% 600

⚫ Machine Tool demand Forecast：Orders received -12%

⚫ Supporting to improve productivity of E/U by utilizing IoT operation management /CAD CAM System


Machine & Facility Segment




Net sales 17,683 +7.2% 51.7% 16,516 (4.9)% 34,200

Building Supplies 14,291 +9.5% 52.9% 12,708 (7.8)% 27,000

Piping Products 3,392 (1.5)% 47.1% 3,807 +6.3% 7,200

Gross profit 3,956 +9.8% 52.6% 3,563 (7.8)% 7,520

SG&A 2,788 +1.6% 49.8% 2,811 +0.5% 5,600

Operating income 1,167 +35.8% 60.8% 752 (29.6)% 1,920

⚫ Steel frame building demand forecast：Flat－slightly up YoY

⚫ Piping Products Business: Expanding sales by optimizing strategy based on customers classified by industry


Construction & Piping Products Segment


1,663 1,710

1,157 1,193

1,000

392 533

666 611 630

0

500

1,000

1,500

2,000

FY15 FY16 FY17 FY18 FY19 Plan

Business Investment Depreciation & Amortization

FY15 FY16 FY17 FY18 FY19 plans

BusinessInvestment

1,663

・ New Shiga Plant(Buildings, Machines)

・ Facilitiesrenewal atbranches

1,710

・ New productionsystem

・ Shiga PlantFacilities

・ Facilitiesrenewal atbranches

1,157

・ G-NET Nagoya・ New production

system・ Facilities

renewal atbranches

1,193

・ G-NET Nagoya・ Gifu Shoji

Headquarters・ Facilities renewal

at branches

1,000

・ Shiga Plant Ⅱ・ Gifu Shoji

Headquarters・ Facilities

renewal atbranches

Depreciation &amortization

392 533 666 611 630

Business InvestmentDepreciation & Amortization




166.69 161.06 159.44

199.57 203.50

50.50 48.50 48.00 60.00 61.50

0.00

50.00

100.00

150.00

200.00

250.00

FY15 FY16 FY17 FY18 FY19 Forecast

EPS Dividends

FY15 FY16 FY17 FY18 FY19 Forecast

EPS 166.69 161.06 159.44 199.57 203.50

Dividends 50.50 48.50 48.00 60.00 61.50

Share price(Fiscal year-end)

1,685 1,687 1,825 1,612 1,440*

Unit: yen

Unit: yen

* : Stock price at Q2E

Returns to shareholders





and Strategy



Group Business Structure & Overview

Company % of total sales

% of total op. income Market

Equipment & Tools 48.7% 37.0%

Industrial Equipment G-net 34.4% Manufacture (Production）

Machine & Tools for Automotive

Gifu Shoji 6.3% Automotive (components) manufacturer

Housing Equipment G-net 4.7% New housing, remodeling

Security Security Design 3.1% Communication, building management companies

Overseas・Other G-net 0.3% Foreign manufacturer

Machine & Facility 19.6% 15.0%

Machine Tool G-net 16.4% Manufacturer（Facility）

Factory Automation G-net 3.2% Manufacture（Facility）

Construction & Piping 31.7% 48.0%

Building Supplies Furusato 25.0% Steel frame building, steel frame housing

Piping Products Furusato 6.7% Plant, machine manufacturer

100% 100%

●Furusato: Pioneer of sales of steel frame building supplies. Top market share of turnbuckle brace (In-houseproduct) and high strength bolts (purchasing supply)Launching Piping products Business in 2003, developing nationwide utilizing network of existing salesbranches, expanding the business by increasing the market share

●G-net: Long-established company of machine and tools trading company, implementing differentiationstrategy targeting at end-users’ needs（Grouping in 2000)

●Gifu Shoji: Direct trading company to propose cutting tools to automotive manufacturers, expanding saleschannel utilizing FA function（Grouping in 2007）

●Security Design: Selling and constructing security devices, expanding sales network nationwide throughproactive investment（Grouping in 2016）

※% of total sales/operating income is calculated based on forecast of full-year of FY19


Advantage of Furusato Group

■Stability in the steel frame buildingsupplies market・Registered users approx. 23,000, market share

over 25%*・In-house product with top share（Turnbuckle

brace approx.60％）・Purchasing power based on strong relationship

with suppliers

■Power of long-established company byrecovering trust ・Revitalizing operation, stable financial base by

enhancement of performance・Strong suppliers（MAZAK, SMC, etc.）・Strong relationship by establishing the

organization of leading customers

■Strong tie with automotive industry・Relationship with Toyota tier 1・Sharing high-level know-how of proposal for

cutting tools・Developing market by FA function

■Business development by utilizingmanufacturing know-how・Utilizing manufacturing technology of Furusato

into automation line business・Collaborating with SIers by dividing working

process・Developing saving-labor・automation markets

of SMEs

■Growth by M&A・Revitalizing operation, implementing growth

strategy・Establishing M&A strategy team・Defined strategy（function or scale）

■Sharing know-how of proposal in the group・Utilizing know-how of proposal method to Tier 1

by Gifu Shoji・Establishing proposal-based marketing method

“Identifying potential needs”・Realizing differentiation by increasing recognition

■Original credit management system・Establishing to enable us to sell to customers

with weak management base・Appropriate balance to miss sales opportunities・Sharing know-how in group companies

■Function to supervise management byoutside directors・Outside directors: 2 out of 7 directors・Supervising management by suggestions and

advises by the Board of Directors

* In case of estimating market of steel frame building supplies (excluding industrial gas) of ¥100B. Calculating base on net sales ¥26.8B in FY18


Aiming for further growth by gathering the power of the group

876 948 941

988 1,078 1,080

32 3531 31

40 40

2015/3 2016/3 2017/3 2018/3 2019/3 2020/3 2021/3 2022/3 2023/3

Consolidate net sales

Consolidated operating income

Current plan Next plan

＊～2019/3 Actual results

Mid-term Management Plan

■Numerical target

・FY19

・Net sales ¥108B

・Operating income ¥4B

■Business strategy to clarify each

priority subjects

・Setting priority subjects of each

business and completing initiatives

through regular follow-up meeting

■Realizing M&A strategy

・Collaborating with partners who can

maximize synergy

■Renovating workplace environment

・Aiming for realizing workplace

environment with high job satisfaction

Corporate slogan Design the Future 2020One step ahead, pursuing the value customers never experience


Growth strategy① ＜Improving Productivity to Overcome a LowBirthrate and Aging Population ＞

■New production system・Pursuing efficiency of the automatic production system for

turnbuckle braces・Pursuing efficiency of production by further investing in Shiga

plant, the major plant・Increasing comprehensive capability of supply by establishing

the second major plant (Kanto)・Researching to develop machinery to rationalize processes of

production■Improving convenience for customers

・Promoting rationalization by revising each processes fromreceiving orders to delivery

・Reducing total lead-time by introducing a system to streamlineeach process

・Eliminating claims about quality by reinforcing qualitymanagement system

◆Establishing automatic production system, not depending on manpower toovercome shortage of labor amid a low birthrate and adding population

◆Generating stable earnings by establishing production system to surviveamid sluggish demand

Shiga Plant 2（Scheduled to be completed in spring 2020）

Change of output

vs FY15 (before start of mid-term management plan+ 1.3t/ month


Growth Strategy②＜Robotic SIer Business Targeting at ProductionAutomation Needs＞

■Utilizing RTC (Robot Technical Center)・Effective use of RTC with three functions, robotic school,

consulting and trial・Expanding sales channel by follow-up approach to trainees at

the robotic schools

■Organizing SIers network・Organizing SIers network by function and by area in order to

establishing a nationwide structure to respond to needs

■Complementing required capability ・Complementing short of technical sales staff who are able to

have a meeting of production line planning with customers・Utilizing capable human resources overseas under offshore

development ・Drawing an image of automation plan by using 3D CAD

■Increasing recognition among E/U・Direct sale of robotic package system to E/U as manufacturers・Generating opportunities for propose-based marketing by direct

visits to E/U

◆Reinforcing ability to respond to needs of labor-saving, automation andimprovement in work efficiency in SMEs

◆Establishing collaboration between our own technical sales and engineeringfunction and SIers

The number of trainees at RTC

Robot system integrator


Growth Strategy③＜Security Business with Increasing PotentialNeeds＞

■Expanding service business・Increasing composition of service business to stabilize earnings

structure・Newly developing subscription-based business・Expanding targeting markets including production facilities and

disaster prevention monitoring■Strong ties with business partners by enhancing

support systems・Help desk mainly for technology, construction and operation・Testing and inspection function by specialized staff to maintain

good quality・Offering local response by specialized maintenance staff

■Fostering a new business・Solar/wind power hybrid power supply system “Eco-pokkuru”・Simple and self-standing system: Expected use at outside

facilities and the affected area hit by disasters

◆Defining Security Business as a leading business to expand consolidatedperformance

◆Optimizing business structure to develop a service business to expand andstabilize earnings structure

Security Design

Distribution

Delivery

Supplier

Project

Service

UserBusiness line

Security company,

etc.

Telecom company,

etc.


Initiatives for Environment and Society

Revising salary levelLaunching telework Career path supportIntroducing RPA

We operate businesses by intending to take responsibilities for the impact to the society as a company to realize sustainable environment and society.

■Setting CO2 emission reduction targets・INDC of Japan：▲26% in 2030 v.s. 2013・Achieved 43% in FY18・Continuing to invest in reduction in power and fuel consumption

■Workplace renovation・Reduction in overtime work：No. of employees working

overtime over 45 hours ▲94.7%, substantial drop・Renovation for flexible working style：Launching telework,

staggered working hours・Wage hike：Review of personnel system・Improvement in working productivity：Expanding adoption of

RPA, providing mobile devices, introducing groupware service・Promoting diversity：Child care support, support for a balanced

life between treatment and work(LTD), career path support,recruiting foreign human resources

Emissions and emission reduction

target in Japan





and Strategy




H1 FY18% of sales

YoY

Net sales 17,688 100% 16,503 100% +1,185 +7.2％

Gross profit 3,956 22.4% 3,603 21.8% +352 +9.8％

SG&A 2,788 15.8% 2,743 16.6% +45 +1.6％

Operating income 1,167 6.6% 860 5.2% +307 +35.8％

Ordinary income 1,259 7.1% 992 6.0% +266 +26.9％

Net income attributable to owners of parent 840 4.8% 660 4.0% +180 +27.3％

Non-consolidated Results－Furusato



H1 FY18% of sales

YoY

Net sales 31,563 100% 32,383 100% (820) (2.5)％

Gross profit 3,083 9.8% 3,119 9.6% (35) (1.1)％

SG&A 2,357 7.5% 2,576 8.0% (219) (8.5)％

Operating income 726 2.3% 542 1.7% +184 +34.0％

Ordinary income 825 2.6% 638 2.0% +187 +29.4％


Non-consolidated Results－G-net



H1 FY18% of sales

YoY

Net sales 3,469 100% 3,226 100% +242 +7.5％

Gross profit 512 14.8% 512 15.9% (0) (0.1)％

SG&A 304 8.8% 296 9.2% +8 +2.8％

Operating income 207 6.0% 216 6.7% (8) (4.0)％

Ordinary income 250 7.2% 250 7.8% (0) (0.1)％


Non-consolidated Results－Gifu Shoji



H1 FY18% of sales

YoY

Net sales 1,211 100% 1,122 100% +88 +7.9％

Gross profit 503 41.5% 382 34.1% +120 +31.4％

SG&A 434 35.9% 292 26.1% +141 +48.3％

Operating income 68 5.7% 89 8.0% (21) (23.8)％

Ordinary income 75 6.2% 86 7.7% (10) (12.7)％

Net income attributable to owners of parent 48 4.0% 56 5.0% (7) (13.5)％

Non-consolidated Results－Security Design


Disclaimer

This material is prepared for the sole purpose of providing information to use as reference in making investment decisions, and is not intended as a solicitation for investment.

This material contains forward-looking statements that reflects Furusato’s plans and expectations. These forward-looking statements are based on information currently available and a rational evaluation based on certain assumptions that may cause Furusato’s future results to be materially different from any future results expressed or implied by these forward-looking statements due to a number of factors including change of business environment, market trend and others.

Documents

Q2FY19 Earnings Presentation - Furusato · 2019-11-06 · Earnings Presentation November 2019 First Section of the Tokyo Stock Exchange :8087 ... ・Price hike and impact by sales