Last updated: July 23, 2012
* Please see the presentation materials for the most recent business results.
Net sales: Increase of 4.4 billion yen to 200.0 billion yen
Operating income: Increase of 1.5 billion yen to 3.0 billion yen
The Urban Infrastructure & Environmental Products (UIEP) Company is the leading supplier of resin pipe products in Japan. The UIEP Company utilizes its know-how accumulated over 50 years of business activities to actively advance the development of its overseas businesses through its pipeline renewal products; glass reinforced plastic pipes; various piping products including industrial piping materials, such as valves; and performance materials, such as sheet material for aircraft and fiber-reinforced foamed urethane for railway applications.
The UIEP Company seeks to expand sales by leveraging its accumulated brand power and sales strength and is reformulating the business model and broadening the business domain for its domestic core businesses centered on its resin pipes and other mainstay products.
Specifically, the company is seeking to eliminate its dependence on sales of single product items and transition to a business model that will enable full application of its comprehensive business strength for system sales, “package” orders, and other integrated products. The company is maximizing the utilization of the company’s resources and aggressively fortify partnerships in areas where the company’s resources are limited with the aim of creating an operating structure that will enable it to compete at its full strength.
The UIEP Company is aiming to realize steady profit growth supported by its primary profit base of the domestic core businesses and a product mix connected to the growth potential of its overseas businesses.
In fiscal year 2011, we revised mainly the business model for the domestic core businesses and fully implemented the revisions in all of the company’s internal divisions.
The water business alliance with Swing Corporation created in May 2011 is one example of the progress achieved during the year. The alliance enabled the establishment of a business structure capable of responding to a broad range of orders by combining the UIEP Company’s pipeline product value chain (examination and diagnostics, design, products, construction, maintenance, and management) with Swing Corporation’s expertise in the water treatment field. The alliance addresses our ability to design, construct, operate, maintain and manage water supply and sewerage operations, water treatment facilities, and other water-related operations with the objective of attracting proposed consignment projects for combined pipeline infrastructure and water treatment facilities. We expect this ability to propose complete-package orders for facilities in Japan as well as in developing and emerging countries with limited water-related expertise to lead to the company attracting increasing orders from overseas.
The UIEP Company’s fiscal year 2011 results included increased revenue as the company responded to earthquake reconstruction demand and improved the profit margin for its PVC pipe products, which is its core domestic business. The pipeline renewal business posted a year-on-year increase in revenue but fell short of the profit target for the year largely owing to the postponement of project orders after the earthquake in Japan. Overseas businesses posted a year-on-year decline in revenue as the pipeline renewal business struggled under the impacts from economic slowdown due to the debt crisis in Europe and the reduced and postponed public sector investment budget in the United States. The combined result was the UIEP Company recording a 4.4 billion yen year-on-year increase in net sales to 200.0 billion yen in fiscal year 2011.
The UIEP Company’s operating income from Japan operations increased 3.2 billion yen year on year as positive factors including increased sales volume from the demand recovery (2.0 billion yen, including 900 million yen in earthquake reconstruction demand), improved product sales prices due to price hikes (1.4 billion yen), progress with cost cuts (300 million yen) and reduced fixed costs from personnel cuts (plus 1.2 billion yen) more than covered the negative factors, which included a 1.3 billion yen impact from higher material costs.
Operating income from overseas operations decreased 1.7 billion yen year on year, due to the sluggish orders in the pipeline renewal business and other conditions that led to a 1.4 billion yen decline in sales volume and a 400 million yen increase in fixed costs.
Supported mainly by the earnings recovery in the domestic operation, the UIEP Company ultimately recorded operating income of 3.0 billion yen in fiscal year 2011.
Net sales: Increase of 25.0 billion yen to 225.0 billion yen
Operating income: Increase of 4.0 billion yen to 7.0 billion yen
* The fiscal year 2012 consolidated forecasts for overseas subsidiaries encompass the 15-month period beginning on January 1, 2012, and ending on March 31, 2013, owing to the revision to the overseas subsidiaries’ accounting period effected in fiscal year 2012.
The UIEP Company aims to record a third consecutive year of sales and profit growth in fiscal year 2012 as it continues to develop and generate results from the value chain business, which the company fully established in fiscal year 2011.
In the water infrastructure business, which the UIEP Company is seeking to develop, we expect the 2012 market environment to improve from the previous year, as we anticipate growth in new housing starts and the emergence of a certain degree of reconstruction-related demand after the Great East Japan Earthquake. We also anticipate increasing demand for high-performance anti-seismic and energy-saving products.
We expect conditions in the pipeline renewal field to improve in fiscal year 2012 from the severe conditions in fiscal year 2011. In Japan, we expect spending budgets to be larger than last year and for orders to include those that were postponed in fiscal year 2011. Overseas, we anticipate active orders in the Eastern European region. Based on this outlook, we believe the overall market environment for our main businesses will improve from the previous fiscal year.
Sales and Income Targets
In fiscal year 2012, the UIEP Company will accelerate the business model reform commenced in fiscal year 2011 and focus all of its efforts on creating and generating results from a business structure designed to accommodate a larger volume of orders and boost both sales and profit.
We plan to increase sales substantially in the three business domains of domestic government demand, specifically the pipeline renewal business and other businesses related to the public sector; domestic private-sector demand, specifically housing and other private construction; and in the overseas businesses.
After struggling to generate sales overseas in fiscal year 2011, we plan to raise sales by a substantial 52% year on year primarily by fortifying the value chain structure to support growth in orders. Initiatives that will be implemented include utilizing the recently acquired construction company in Eastern Europe to attract increased orders in the pipeline renewal business, strengthening partnerships to expand operations in regions with water infrastructure demand, urther cultivating the aircraft-related business and introducing new materials to the plastic sheet business. We also aim to expand sales by strengthening our marketing activities focused on domestic governmental and private demand.
Through these efforts, the UIEP Company is targeting raising overall net sales by 25.0 billion yen year on year to 225.0 billion yen in fiscal year 2012.
The company is likewise aiming to increase operating income by expanding its sales volume both in Japan and overseas. We aim to raise operating income in Japan by 2.5 billion yen and overseas by 1.4 billion yen for a combined increase of 4.0 billion yen to 7.0 billion yen in operating income in fiscal year 2012.
The UIEP Company will focus on three areas as priority measures in fiscal year 2012: advancing the value chain business, assertively responding to the earthquake reconstruction demand, and reestablishing the overseas businesses.
The first initiative, advancing the value chain business, consists of further developing the value chain on the structure set in place in fiscal year 2011. Targeting factories, housing, public facilities, and other demand segments, we will seek to expand orders by utilizing the company’s competitive product lines and leveraging our comprehensive project proposal capabilities encompassing examination and diagnostics, design, products, construction, maintenance, and management to attract combination orders.
Under the second initiative, assertively responding to the earthquake reconstruction demand, we plan to strengthen our connections with local governments. We will aggressively approach local governments with reconstruction project proposals and seek to expand orders by presenting comprehensive proposals that include urban development along with water infrastructure and developing highly sophisticated project proposals beyond the capabilities of other companies, such as infrastructure incorporating sewage thermal utilization systems, which the company is researching in collaboration with the Ministry of Land, Infrastructure, Transport and Tourism.
Reestablishing the overseas businesses, the third initiative, will involve dispatching personnel to be accountable not on the individual business level but for designated regions, constructing a system capable of generating fully integrated project proposals, and activating the full strength of our capabilities.
In implementing these initiatives, we aim to expand orders in the pipeline renewal business through aggressive activities to secure orders in Eastern Europe, where we anticipate strong demand, and by consolidating the construction operating structure by unifying the management of the three businesses in the United States. We plan to raise orders in the water infrastructure business by constructing a value chain structure targeting the coastal regions of China. We will also fortify the sheet business, which focuses on the aircraft industry, through measures including strengthening the synergy between the two affiliated companies while also broadening the range of applications and accelerating development of new products.
Through the steady implementation of these initiatives, we aim to increase earnings and fortify the business foundation to achieve the medium-term management plan targets.
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