Top Management Message
To Our Shareholders and Investors
Global economic conditions in the six months ended September 30, 2018 continued to grow moderately as a whole, driven primarily by a solid U.S. economy. However, the outlook for the global economy remained opaque, mainly based on heightened tensions due to trade friction between the U.S. and the PRC, among other factors. The Japanese economy continued to stage a modest recovery mainly reflecting firm capital investment and employment conditions underpinned by favorable corporate business performance.
In this environment, for the six months ended September 30, 2018, the Teijin Group posted higher earnings on higher sales in the Healthcare Business Field, as growth in sales covered the impact of downward revisions to drug prices and medical fees as well as the absence of the upfront payment from Merck (¥3.0 billion) recorded in FY2017 1H. In the Materials Business Field, the Teijin Group posted lower earnings on higher sales, mainly reflecting the impact of persistently high raw materials and increased costs for the launch of projects in connection with new order intake in the composites business, despite firm sales. Consolidated net sales totaled ¥439.4 billion, an increase of 8.6% year on year. Operating income decreased 3.5% to ¥36.2 billion. Ordinary income increased 4.9% to ¥39.8 billion, mainly reflecting an increase in foreign exchange valuation gains due to the yen’s depreciation. Profit attributable to owners of parent rose 16.2% to ¥33.9 billion, helped by the recording of extraordinary income.
Looking at our consolidated full-term operating results forecasts for FY2018, In light of our business performance during the first half of FY2018 and expectations for impacts such as persistently high raw materials prices, primarily in resin products and composites, to remain in place in the Materials Business Field, we are forecasting net sales of ¥900.0 billion, compared with our previous forecast of ¥890.0 billion, operating income of ¥65.0 billion, compared with our previous forecast of ¥70.0 billion, ordinary income of ¥67.0 billion, compared with our previous forecast of ¥72.0 billion, and profit attributable to owners of parent of ¥48.0 billion. We are unchanging the profit attributable to owners of parent from our previous forecast.
Teijin’s three-year Medium-Term Management Plan began in FY2017. I’m pleased to report that the first half of the plan has progressed largely in line with our targets, and we have finally entered the second half of the plan. We will continue to implement the plan’s core cycle: generate profits in existing businesses and allocate resources to initiatives that will drive the ceaseless evolution of our businesses, with a view to achieving future growth and transformation. In the Materials Business Field, we are currently pushing ahead with the composites business in North America to supply automotive composites that will reduce vehicle weight. In August 2018, we completed the acquisition of Inapal Plasticos SA, a leading European automotive composite supplier based in Portugal. This acquisition will pave the way for expanding our composites business in Europe. In the Healthcare Business Field, we are working to expand demographic change and increased health consciousness solutions. Alongside these efforts, we will make steady strides to drive further transformation and growth in this business.
In 2018 the Teijin Group celebrates its founding centennial—a landmark year for all of us. We would like to once again express our heartfelt gratitude to you for your continued support for our businesses over the years. On occasion of its centennial, the Teijin Group is launching the message “Toward the world we all desire: FUTURE NAVIGATION”. Along with this message, in the future also, we aim to be a company that supports the society of the future as an enterprise that puts people first in its thinking beyond materials and products, and focusing on quality of life (QOL) for future humanity. Looking ahead, we will continue to hand to future generations the entrepreneurial spirit and ambitious DNA that Teijin has developed since its founding. With this in mind, we will continue to endeavor ceaselessly and ambitiously to remain an essential partner to society over the next century.
We look forward to the continued understanding and support of our shareholders and investors.
November 5, 2018
President and CEO