President & Chief Executive Officer
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 2020.
Current year performance
Corporate performance for the FY ended December 2020 was underpinned by the performance of the Medical Business although the Aerospace Business struggled. The result was revenue of 158.5 billion yen, a 4.4% year-on-year decrease, and operating profit of 10.2 billion yen, a 17.9% year-on-year decrease.
Orders received fell in the upstream sector, including those for crude oil and gas mining, due to the effects of the spread of the novel coronavirus. However, in the downstream sector such as petrochemical and other markets, our business performance remained relatively steady thanks to solid replacement demand.
LEWA expanded its revenue and profit by progressing with production and shipments for existing orders, focusing more on the downstream sector and after-sales services, and striving for cost reduction, although orders received for large equipment, etc. fell in the upstream sector.
The Cryogenic Industries Group received prior-year-level orders, steadily fulfilled existing orders, strove for cost reduction, and reviewed its business portfolio. It did so amid challenging market environments that caused the postponement or revision of investment decisions at facilities related to industrial gas and LNG. As a result, although the Group posted lower revenue, it improved profitability.
The Aerospace Business saw a significant decline in shipments in and after Q2 of the year. Challenging business conditions are anticipated to continue despite the launch of new business initiatives, including the receipt of orders for new projects. With this in mind, loss-reduction measures will be continuously taken, such as the integrating manufacturing functions into one location including transferring these functions in Kanazawa to Miyazaki by the end of June 2021.
We will launch peripheral products using existing technologies, and aim to strengthen the business foundation by various means including promoting research and development with a view of a future recovery in demand and restructuring of manufacturing systems in Miyazaki and Vietnam.
The Medical Business increased its revenue and profit thanks to higher sales of disposables, cost reduction through improved operational efficiency and other measures taken in the hemodialysis business although business activities were hindered by the imposition of strict visitor restrictions by medical institutions both in Japan and foreign countries.
In the domestic market, equipment sales declined year on year mainly due to a prolonged replacement cycle caused by medical institutions’ restrictions on their capital investments. However, we have been able to capture demand for products replacing competitor products as our new equipment is highly evaluated. Sales of disposables, such as blood tubing lines providing added value in combination with our equipment, were also solid. In overseas markets, shipments to China grew significantly thanks to its early recovery from COVID-19, but in Europe and Asia, demand for dialysis machines declined. In addition, the healthcare business, using deep UV-LED technology, grew.
There are factors such as an expected delay in the recovery of the Aerospace Business and higher depreciation costs in the Miyazaki Factory. However, the Industrial Business will strive to strengthen marketing activities in the downstream sector, including the petrochemical market, revamp after-sales services, and get orders in new business fields such as medical, food, semiconductor fields. As we are also expecting to receive many development project orders in view of increasing LNG demand from medium- to long-term perspectives, we will aim to get orders by using the cryogenic pump testing facility in Miyazaki.
In the medium to long run, the Nikkiso Group will strive to enhance its technological capabilities to be able to respond to any changes including the use of hydrogen as next-generation energy amid the shift to a decarbonized society in the future.
The Medical Business will aim to increase its market share by penetrating further into markets. It will do this by emphasizing the value of hemodialysis machines equipped with functions it has developed and by strengthening its service system. We will also strive to build stronger trust in relationships with medical personnel by using “M.ReT Miyazaki,” a research training facility currently under construction in Miyazaki, and providing them with our product information and more opportunities to acquire skills. In overseas markets, a high-performance machine, which is highly evaluated in Europe, will be released in the Chinese market, and necessary preparations will be made for the launch of this product on the U.S. market on a full-scale basis. To meet increasing global demand for blood tubing lines, we will also build a factory in Vietnam to expand manufacturing capacity.
The healthcare business will strengthen its product supply system, expand its product lineup, grow the operations as part of our main businesses in view of an expansion of overseas sales channels, and build into a company promoting infection control.
We will strive to improve profitability by continuing to steadily carry out necessary measures and promoting activities to strengthen our business foundation including the optimization of our business portfolio.