I would like to extend my sincerest appreciation for your patronage of TOKYO KEIKI.
In FY2023 (fiscal year ended March 31, 2024), we posted a 6.5% increase in net sales to ¥47,166 million. This was due to the strong performance of overseas markets and the depreciation of the yen in Marine Systems Business, and the delivery of new projects to the Japan Coast Guard in Defense & Communications Equipment Business. In terms of profit, the cost of sales ratio improved thanks to optimization of selling prices in Hydraulics and Pneumatics Business and other businesses, and changes in the product mix. As a result, all profit items recorded a significant increase, and profit attributable to owners of parent increased 160.9% year on year to ¥2,277 million.
The TOKYO KEIKI Group has taken initiatives based on three basic policies of the Medium-term Business Plan in our TOKYO KEIKI Vision 2030, released in June 2021: “Expanding business areas,” “Promoting globalization,” and “Continuously strengthening existing businesses.”
Major initiatives in FY2023 were as follows:
In terms of “Expanding business areas,” Hydraulics and Pneumatics Business has begun research and development in collaboration with the National Institute of Advanced Industrial Science and Technology (AIST) for the development of a compact, practical application model for high-pressure hydrogen production equipment using formic acid. In addition, in Defense & Communications Equipment Business, we completed the construction of “the Space building” that enables the simultaneous manufacturing of several small satellites in order to expand our space business.
Regarding “Promoting globalization,” we expanded production items in order to further utilize our hydraulic equipment production subsidiary in Vietnam.
Regarding “Continuously strengthening existing business,” Marine Systems Business participated as a consortium member in the “Joint Technological Development Program for the Demonstration of Fully Autonomous Ships” under the Nippon Foundation’s Fully Autonomous Ship Program “MEGURI2040,” and took the lead as a leader in the working group. In addition, in Defense & Communications Equipment Business, we began constructing a management building for the defense business in order to strengthen our system for increasing production and to develop and produce new products in the future in line with an increase in orders received caused by the recent increase in the national defense budgets. Furthermore, for expanding sales in Railway Maintenance business in Other businesses, we released a new product, the track diagnosis support system, which contributes to the safety and streamlining of railway maintenance operations, and delivered the first unit to a major railway company.
Medium- and long-term management strategies and issues to be addressed
TOKYO KEIKI Vision 2030, which we disclosed in June 2021, is the milestone of our 125th anniversary since our founding. This vision, which marks the 125th anniversary of TOKYO KEIKI’s founding, outlines the Group’s aspirations for 2030 in order to continue sustainable growth for the next 150 to 200 years. We have set targets for net sales of ¥100 billion or more, the operating profit margin of 10% or more, and a return on equity (ROE) 10% or more as management indices for FY2030 (fiscal year ending March 2031).
Under the Vision, we use the original technologies we have developed over many years to drive new innovation, creating “global niche-leading businesses” that take the SDGs as their starting point. In turn, this will allow us to shift to a stage of sustainable growth and mid to long-term corporate value.
With regard to the 3-year medium-term business plan from FY2021 (fiscal year ended March 31, 2022), profits fell significantly short of the plan due to higher than anticipated raw material costs in the Corona crisis and higher energy prices caused by higher crude oil prices. Accordingly, we have decided to adopt the basic policy of the entire Group as a guideline with an emphasis on improving profitability. The 3-year medium-term business plan from FY2024 (fiscal year ending March 2025) establishes the following 3 basic policies to achieve sustained growth and improved medium- to long-term company value, and to meet the demands and expectations of stakeholders.
- Improve profitability
We will promote business strategies focused on increasing our earning capacity to reach our target of 10% or more of the operating profit margin and 10% or more of ROE in FY2030.
- Expand business areas
We will take on the challenge of sustained expansion in our business areas with a "niche top strategy" of creating and nurturing new products and businesses for specific markets that contribute to solving social issues, while leveraging the various tangible and intangible experiences and strengths we have cultivated over the years. With regard to new products and businesses, as the technology and product cycles are accelerating, we will also utilize M&A and open & close strategies as appropriate, while having a global perspective, in order to respond to the intensifying competitive environment and rising R&D expenses.
- Reinforce business fundamentals
Aiming to improve profitability and expand business areas, we will strengthen our Group-wide human capital, strengthen governance, improve capital efficiency, promote digital transformation (DX), and invest in R & D for achieving the management indices of TOKYO KEIKI Vision 2030.
Outlook for FY2024 (fiscal year ending March 2025)
In FY2024, we expect that concerns will remain over rising prices stemming from soaring crude oil and raw material prices, delays in economic recovery due to continued monetary tightening in various countries, and continued yen depreciation. Furthermore, uncertainty is expected to continue owing to factors such as the situation in Ukraine, the conflict between the United States and China, the further
heightening of geopolitical risks including the situation in the Middle East, and the impact of the U.S. presidential election outcome.
In FY2024, we expect higher sales in Defense & Communications Equipment Business and other businesses to be firm. As a result, we predict to see higher overall earnings. Net sales will increase by 21.5% to \57,300 million, operating profit by 28.6% to \3,560 million, ordinary profit by 26.4% to \3,780 million, and profit attributable to owners of parent by 25.2% to \2,850 million.
Basic profit-appropriation policy and dividends for the current and next fiscal years
Our basic policy is to implement optimal shareholder returns measures that take into account an optimal capital structure, while giving top priority to growth-oriented investments, with a view to balancing these investments with our financial base, in order to increase corporate value by realizing TOKYO KEIKI Vision 2030. In accordance with this stance, we will strive for stable and continuous shareholder returns with regard to dividends for each fiscal year, taking into account our past dividend performance.
For the FY2023 dividend, we have decided to deliver an ordinary dividend of ¥32.50 per share. For FY2024, we plan to increase the ordinary dividend by ¥2.50 to ¥35.00 per share, with the aim of achieving stable and continuous dividends, taking into account our business performance and past dividend results.
I would like to close by asking all stakeholders for your ongoing and further support and cooperation.