Last Updated:Nov. 4, 2020
Financial Results and Progress under the Management Plan for the 2Q of FY2020
About conditions in the three strategic fields of the HPP Company and other matters
In addition to conditions in the global automobile market exceeding assumptions, sales trends are attributed to the upswing in new applications focusing on high-performance interlayer films. We believe this is the result of ongoing sales activities.
- *HPP Company:High Performance Plastics Company
There have been some instances where our products were adopted at the same time as the switchover to new models. Once again, this is the result of past sales activities.
In the 4Q last year, the manufacture of automobiles in China had already been suspended. The production of automobiles in Europe and the U.S. had also declined considerably in March. Taking these factors into account, our plans are based on the assumption that the number of automobiles manufactured in the 4Q of this year will essentially return to the same levels reported last year.
While sales of products for the Non-LCD field expanded steadily up to the 2Q, we expect export restrictions imposed by the U.S. on China will have some impact in the 2H. While anticipating a decline in demand from certain customers, especially for heat release materials for 5G base stations, we do not see a serious impact so long as there is no downturn in overall demand with orders from other customers actually increasing.
We project sales to climb around 50% compared with the previous year mainly for 5G base stations.
About aircraft-related business conditions
As far as SEKISUI AEROSPACE CORPORATION's earnings in the HPP Company are concerned, we believe that the accuracy of current plans is high. Our plans are based on the assumption that demand will be slightly lower than the production rates of customer companies announced around the end of July, including Boeing, a principal customer. In the UIEP Company's aircraft-related sheet business, plans are in line with the facility operating rates of direct seat manufacturing customers.
- *UIEP Company:Urban Infrastructure & Environmental Products Company
A. In line with plans, SEKISUI AEROSPACE CORPORATION is looking to complete the consolidation of three factories in the State of Washington in the U.S. into two factories by the end of the fiscal year under review. As far as the sheet business is concerned, a review of certain development and sales operations, focusing mainly on production base optimization in the U.S., was completed as of the end of the 1H. Moving forward, steps will be taken to shift management resources to medical- and railway-related fields.
The Purchase Price Allocation of the amount of goodwill and intangible non-current assets has not been finalized due in part to restrictions on the movement of accountants as a result of COVID-19. In the future, certain intangible non-current assets will be evaluated after estimating aircraft-related demand more stringently than at the time of acquisition. Having said this, and as far as the amount is concerned, we do not believe it will have a major impact on bottom line plans for the fiscal year under review.
We are looking to even out profit and loss at SEKISUI AEROSPACE CORPORATION on a non-consolidated basis.
About Housing Company result, order plans, and other matters
Order plans are based on the assumption that the business environment will return to normal in the 2H. Currently, the impact is still being felt. For the most part, 2H sales of properties for which orders will be received in the 3Q are projected to fall short of initial plans. Moreover, we anticipate the recovery in rebuilding and other demand will be slower than forecast at the beginning of the period. We are looking at a slight deterioration in the product mix and accordingly have left forecasts for operating income essentially unchanged.
In the 1H, successful steps were taken to reduce mainly sales promotion expenses by controlling activities centered on large-scale events including factory tours and pushing forward such initiatives as digital marketing. While we will continue to focus on reducing sales promotion expenses and to increase the efficiency of business operations, we will undertake strategic investments in such areas as experience-based showrooms.
Looking back at the 1H, the number fell dramatically to 28% of the previous year in the 1Q due to the government's declaration of a nationwide state of emergency and other factors. In the 2Q, this number improved to 80%. Having said this, the temporary spread of the pandemic also pushed down the number of visitors in the 2Q. With this in mind, we believe that a recovery to prior levels will take some time. In contrast, the number of online customers that are gathering information in advance is increasing substantially. As the number of customers who first gather information online and then visit exhibitions to gain a first-hand look at our products increases, we will also focus on this area.
About UIEP Company prioritized product sales growth
Results were impacted by stoppages in construction in the 1H. In addition to the portion of sales that were subsequently carried forward into the 2H, new products are also contributing to sales. While focusing on expanding sales of prioritized products since FY2017, the rate of sales growth has exceeded 10% each period including the fiscal year under review. Looking ahead, we will continue to pursue existing measures including the development and introduction of new products from FY2021 with a focus on maintaining an annual rate of sales growth of at least 10%.
With the exception of the Housing segment, where we are strategically increasing inventories including ready-built houses, the amount is decreasing compared with the end of March and in general returning to a more appropriate level. Despite sales not having fully recovered because of the impact of COVID-19, and the slight deterioration in such indicators as inventory turnover, we do not sense any feelings of excess compared with the previous year, and anticipate the future recovery in sales will help resolve this issue.