Nikkiso enters its next stage of growth
Toshihiko Kai
President & Chief Executive Officer
March, 2019

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 ending December 2018.

FY 2018 Results

In the fiscal year ended December 31, 2018, Nikkiso recorded orders received of 172.4 billion yen, revenue of 165.3 billion yen, operating profit of 10.3 billion yen, profit before tax of 9.7 billion yen, and profit for the year attributable to owners of the company of 7.4 billion yen.

In the Industrial Business, orders grew primarily in LEWA and the Cryogenic Industries Group (“CI Group”) as the upstream business, including oil and gas mining, saw resumption in capital investments in conjunction with the rise in crude oil prices from the latter half of 2017 and experienced an upward trend in orders. On the revenue side, the booming cryogenic pump business drove the overall performance of the Industrial Division. Performance was also strong in the Precision Equipment Division and the Aerospace Division. As a result, both revenue and profit increased year on year.

In the Medical Business, the mainstay hemodialysis business saw a recovery in domestic demand for dialysis machines compared to a year earlier when demand slumped, and there was an increase in sales of blood tubing lines and other disposables. In the overseas market, strong sales in the rapidly expanding Chinese market drove overall performance, and sales of equipment increased in other Asian countries and in Europe. Consequently, both revenue and profit increased year on year.

Outlook for FY 2019

In the Industrial Business, we will continue our efforts to win orders after receiving inquiries from customers while promoting synergistic effects within the Nikkiso Group to strengthen ties between LEWA and the CI Group for accelerating global promotion through mutually utilizing sites and integrating sales promotion structures.

In the Aerospace Business, we will move forward with our initiatives to consolidate and optimize dispersed production sites and production structures while making the new Miyazaki plant also function as a research and development site for aircraft components. We pursue these efforts to further increase quality and reduce costs, thereby putting in place a business foundation that enables us to accommodate the needs of customers with high-level solutions.

In the Medical Business, we will strive to develop new products and services that offer even greater functionality and convenience while steadily taking steps to re-establish a business operating structure to support our development efforts and implement operational reforms. At the same time, we will strengthen our service system for the rapidly growing Chinese market and reinforce our sales operation systems for Asian countries other than China where the medical insurance system is expanding, as well as for the U.S., a major dialysis market, where we will also explore the option of a tie-up with a leading dialysis service provider.

Progress of Medium-Term Business Plan

Given the uncertainty over future crude oil prices, changes in the domestic healthcare economic environment and other factors, we recognize that the environment surrounding Nikkiso remains harsh. However, in the fiscal year ending December 31, 2019, the fourth year of our medium-term business plan “Nikkiso 2020,” we expect to see positive effects from the investments for growth we have made to date in our businesses, gradually but surely contributing to our earnings. The time has come for our business divisions to carry out specific measures and produce specific results. The Industrial Business will enhance its capability in the LNG value chain with the acquisition of the CI Group, the Aerospace Division will achieve further growth through the full-scale operation of the new plants in Miyazaki and Vietnam, and the Medical Business will take on challenges in the global dialysis market. In addition, we will review and revise allocation of our management resources, including identifying any unprofitable business activities to shift resources to growth businesses, in an effort to foster strong profitability overall as a Group.

Return to Shareholders

The basic capital policy of the Company is to realize sustainable growth and higher corporate value for the Company over the medium to long term while pursuing an optimum balance among its financial health, capital efficiency and return to shareholders.
Based on the recognition that continuous and stable return of profit is the main pillar of capital policy, we will return profits considering our performance, operating environment and other factors comprehensively, and properly allocate retained earnings to reinvestments in developing new businesses and enhancing production.

During FY 2018, all our business segments showed strong performance and our consolidated financial results exceeded the forecasts announced at the beginning of the year. Considering the prospect that operating profit of 10 billion yen can be stably maintained, and comprehensively considering the latest financial position and other factors, we decided on a year-end dividend for FY 2018 of 10 yen per share, an increase of 2 yen from 8 yen per share, to enhance return to shareholders. The annual dividend for FY 2018 comes to 18 yen per share, including the interim dividend of 8 yen per share distributed earlier. In the coming FY 2019, we plan to pay an annual dividend of 20 yen per share.