We are laying the groundwork for
a new stage in our business growth.
Toshihiko Kai
President & Chief Executive Officer
March, 2018

I would like to sincerely thank all shareholders for the support extended to our company.
It is my pleasure to provide an overview of Nikkiso’s business performance for the fiscal year ended December 2017.

Performance Overview

In the fiscal year ended in December 2017, Nikkiso recorded orders received of 140.4 billion yen, net sales of 140.9 billion yen, operating income of 8.7 billion yen, income before income taxes of 8.3 billion yen, and net income attributable to owners of the parent of 5.1 billion yen.

In the Industrial Business, the Industrial Division recorded growth in sales and profits as it continued improving the profit performance of the domestic pump business and LEWA GmbH. Aerospace Division sales dipped slightly due to a period of production adjustments as aircraft makers prepare for production of new models, but profits rose from improved production efficiency and a boost from a weaker yen.

The Medical Business profits declined despite increased sales of consumables as results were impacted by sluggish domestic sales of medical equipment in a stagnant market for hemodialysis machines while overseas earnings continued to weaken in the continuous renal replacement therapy (CRRT) business. The Company’s overall operating income increased in the fiscal year ended in December 2017 as the sale of the NIKKISO No. 2 building more than offset one-time expenses from advisory fees associated with the acquisition of shares of the Cryogenic Industries Group (CI Group) and from startup costs for the new Miyazaki Factory.

Initiatives in the third year of the medium-term business plan

Management continues to be challenged by a severe business environment that includes low oil prices and the changing business environment in the domestic medical care industry.

The current fiscal year ending in December 2018 is the third year of our current medium-term business plan, and we will continue advancing the plan’s directives to strategically invest for business growth and fortify the foundation for expanding our new businesses. We also see the year as the right time to reinforce the stability of our profit structure to make it more resilient to the changing economic environments at home and abroad. In this direction, we will continue to establish the Nikkiso Group as a provider of world-class advanced technologies in each of our areas of business.

Nikkiso acquired CI Group in August last year with the aim to combine our two companies’ core technologies to develop cryogenics products for a worldwide business. We are also strongly determined to apply the lessons we humbly learned from the quality non-conformance incident and late shipment issues in the past fiscal year. We are committed to raising our quality control systems to a higher level and are rigorously improving our technologies, updating and improving our facilities, and providing additional employee training to further heighten awareness and understanding of the manufacturing processes at our factories.

Outlook for the fiscal year ending in December 2018

In the Industrial Business, we anticipate growing worldwide demand for LNG and ongoing inquiries about our cryogenic pumps.

In the Aerospace Business, we expect continued strong demand for commercial aircraft as we continue to field brisk inquiries and are currently negotiating with several clients. In 2018, we expect further growth in shipments of cascades and wing components. We also plan to boost shipments of fan case liners following the recent attainment of full operating capacity of our new production facility at the Higashi Murayama Factory in Tokyo.

In the Medical Business, we are revising our management structure and developing new products and services to meet the changing requirements of dialysis treatment. We are also strengthening our sales channels in overseas markets. In the CRRT business, we are reconfiguring our global sales structure and radically overhauling our development system for new equipment as we seek to bolster our earnings performance.

Shareholder returns

Nikkiso distributed dividends of 8 yen per share at the mid-term and year-end for a total dividend payout of 16 yen per share in the year ended December 31, 2017.

Nikkiso’s basic capital policy is to seek the optimal balance of financial soundness, capital efficiency, and shareholder returns while maintaining sustained growth and enhancing its long-term corporate value.

Management recognizes that providing continuous and stable shareholder returns is fundamental to this policy. We are committed to returning profit to shareholders while taking into consideration the comprehensive status of the company, including earnings performance and the business environment.

Internal reserves will be reinvested in the company to promote the development of new business and strengthen the production structure.

Toshihiko Kai
President & Chief Executive Officer
March 2018