Last Updated: Nov. 1, 2021
Presentation of Financial Results Progress under Management Plan for the 2Q of FY2021
About SEKISUI AEROSPACE CORPORATION
We recognize that conditions surrounding the production of aircrafts earmarked for international flights, our principal customer base, will remain difficult for some time, and are looking at a recovery around 2024.
We believe that we can maintain the same profit margins in the engine and medical markets, where we are promoting other applications, as we do in the aircraft market.
While this will depend on trends in aircraft demand, especially for international flights, we are undertaking management reforms with the goal of returning to a profit in FY2024.
As a result of this latest impairment, the remaining balance of goodwill stands at approximately ¥2 billion. There will be no further loss on impairment in the future.
About the outlook for HPP
We are taking a relatively conservative view toward liquid crystal market conditions compared to the industry consensus, which is looking at market conditions to remain roughly the same as the previous year. In the Non-LCD field, first of all, there is strong demand for products used in the production process of semiconductors, which has grown substantially compared with the previous year. While demand for products used in equipment that utilize semiconductors, such as base stations and data centers, is a little weak, we believe that overall demand will grow, especially in the Non-LCD field.
- *HPP Company：High Performance Plastics Company
We anticipate overall demand will remain sluggish until the middle of the 3Q. However, production of luxury cars, where the usage ratio of our high-performance interlayer films is high, is trending at existing levels to a certain extent. As a result, the downturn in high-performance interlayer films has not been as significant as the overall decline in automobile production compared with standard films. We believe that this trend will continue in the future.
We announced a price increase in June this year, which certain customers understood and accepted. We will continue to negotiate in a careful and persistent manner.
We will continue to focus on increasing selling prices, cost reductions including productivity improvements, and to control fixed costs in a bid to hedge against hikes in raw material costs.
On top of the additional impact of fluctuations in foreign currency exchange rates and the weaker yen, we are expanding sales volumes in the Mobility field in excess of plans, mainly in the area of high-performance interlayer films. This also includes such factors as the recovery in market conditions in India in the Molded Products Business. Another element is the indeed the increase in sales attributable to the upswing in market share.
Improvements in selling prices are progressing in the Building and Infrastructure field. Global demand is particularly strong for CPVC. We will also continue to improve the selling prices of building materials in Japan against the backdrop of such factors as strong housing market conditions.
About the Housing Company
Plans called for the number of new houses sold to increase by 290 as of July year on year. Thereafter, the increase came in at 170. This was largely due to delays in construction of 120 houses owing to long periods of rain mainly in western Japan and the impact of COVID-19.
Certain products including water heaters and kitchens have experienced a slight impact. We are minimizing this impact through discussions with suppliers and the procurement of substitute items. We will continue to share information closely with suppliers and sales departments to identify and address risks at an early stage.
While there was a slight rush prior to the termination of housing loan tax measures, activity was less than the period prior to the consumption tax rate hike. For the 2H, we have adopted a stringent approach toward the 3Q in light of the wait-and-see attitude toward extension of the housing loan tax reduction and other factors, uncertainty surrounding the impact of COVID-19, and a drop in the number of visitors below expectations in the 2Q. Taking into account the aforementioned, we revised our order plans for the 2H from 108% to 106%. However, we are projecting a modest overall recovery in customers in the 4Q including the number of visitors and participants in onsite tours and seminars outside WEB-based channels. Orders for the full fiscal year are forecast to exceed the initial plan of 108%. Accordingly, we have upwardly revised to 109%.
September saw a YoY decline due to the high level of orders received in the previous year. As far as the 2H is concerned, while the level of orders received in the 3Q of the previous year was high, we expect orders in the 4Q to substantially exceed the previous year. This largely reflects the significant drop in customers from around the end of last year due to the impact of COVID-19.
About the UIEP Company
The impact of increases in raw material costs was felt on two occasions from the 1H. While we were able to offset virtually all of the increase in the first instance, we are working through steps to lift product prices in response to the second raw material cost hike in August and to secure an early conclusion. In light of newspaper reports that certain raw material manufacturers are looking to implement a substantial increase in costs, we will carefully examine all details and then consider an appropriate response.
- *UIEP Company : Urban Infrastructure & Environmental Products Company
The UIEP Company has indeed reported a modest recovery compared with the previous year. However, the recovery in demand is less than half compared with the levels prior to COVID-19. The UIEP Company’s Sheet Business mainly targets the aircraft interior market. We have seen a partial recovery mainly for domestic flight equipment.