The Urban Infrastructure & Environmental Products (UIEP) Company is a manufacturing and sales leader in Japan in water sewerage and supply pipe systems as well as construction materials supply businesses, which collectively form the company’s core operating platform.
Based on the Medium-Term Management Plan that will start in fiscal 2017, we redesigned our business portfolio and set up a new strategic portfolio consisting of three strategic areas: “Piping and Infrastructure,” “Building and Living Environment” and “Advanced Materials.”
We will promote strategies, such as “overseas,” “growth,” “core” and “reform,” in accordance with the market and competitive environments in which the products are produced in each field.
In particular, under “growth” and “overseas,” we will actively introduce high-value-added products, based on the technologies cultivated in our fundamental businesses for many years, and promote business domain expansion through alternative materials, such as metal, wood and glass.
The Urban Infrastructure & Environmental Products (UIEP) Company reported record high operating income for a second consecutive fiscal year in fiscal 2017. In addition to contributions from the increase in sales volumes and improvements in the product mix attributable to growth in prioritized products that are expected to drive future growth, this record-high upswing in operating income also reflects the effects of cost reductions on the back of improvements in total production costs.
Net sales in the fiscal year under review came to ¥239.2 billion, a decrease of ¥1.1 billion compared with the previous fiscal year. However, the impact of structural reforms amounted to ¥5.1 billion. On this basis, net sales actually climbed ¥4.0 billion in real terms.
Looking at operating income by region, results were impacted by increases in sales volumes and significant improvements in the product mix attributable to growth in prioritized products in domestic businesses. Despite a slight overrun, successful steps were taken to secure a general improvement in spreads through various measures including the reduction of costs to address the high price of raw materials. Moreover, progress was made in improving the profitability of low-profit businesses. Accounting for each of these factors, domestic business operating income grew ¥2.7 billion compared with the previous fiscal year.
Turning to overseas businesses, on the other hand, operating income declined ¥0.7 billion year on year. Despite a return to profit by the pipeline renewal business, where the Company has promoted structural reform measures since fiscal 2015, and an upswing in FFU sales in Europe, the U.S., and Australia, this downturn was largely attributable to the slow recovery in demand for aircraft sheets, a mainstay product.
As a result, operating income in the UIEP Company came to ¥14.8 billion, an increase of ¥2.0 billion compared with the previous fiscal year.
The UIEP Company has identified Piping and Infrastructure, Building and Living Environment, and Advanced Materials as its three strategic fields. The Company is looking to expand profit over the medium-to-long term by accelerating the pace of growth in each of the three strategic fields and boosting prioritized products, which deliver high added value while promising expectations of growth.
In fiscal 2017, the Company formed an alliance with TP Group in Vietnam in the Industrial Piping business. At the same time, energies were channeled toward promoting alliance strategies in the pipeline renewal business overseas. Through these and other means, the UIEP Company worked diligently to lay the groundwork for future growth. Again, with an eye toward activities outside Japan, the Company undertook investments aimed at expanding production capacity of sheets and FFU, where demand is high. Efforts were also made to strengthen product strategy implementation by area.
In fiscal 2018, the UIEP Company will continue to increase sales volumes while improving the product mix in its domestic businesses. Overseas, the Company will work to substantially expand sales by implementing product strategies by area. In this manner, plans are in place to secure an increase in net sales and profits both in Japan and overseas. Furthermore, the Company will remain committed to improving its earnings platform by initiating steps to optimize production capacity in light of the anticipated drop in demand after the consumption tax rate hike while implementing other measures. This includes fortifying its business structure.
Based on the aforementioned, net sales are projected to reach ¥247.0 billion, an increase of ¥7.8 billion compared with the fiscal year under review. Operating income is forecast to total ¥16.5 billion, up ¥1.7 billion year on year. On this basis, the UIEP Company is targeting a third consecutive fiscal year of record profit.
Looking at each of the three strategic fields, the UIEP Company will work to capture construction and infrastructure demand that is expanding mainly in the Tokyo metropolitan area in its domestic businesses in the Piping and Infrastructure field. Looking overseas, the UIEP Company will roll out products for plants, fittings, catch basin and other products in the ASEAN region while at the same time stepping up activities in the pipeline renewal business.
In the Building and Living Environment field, the UIEP Company will look to expand profits by focusing on such high-value-added products as CHOUSHIN LEVOL, high flowrate drainage systems, and functional flooring MIGUSA as well as the Wells Series of independent living facilities targeting the nursing care market.
Finally, in the Advanced Materials field, the UIEP Company will take steps to address strong domestic infrastructure demand in the FFU business while at the same time accelerating the pace of railway sleeper rollout overseas. In addition, the Company is forecasting an increase in sales on the back of the recovery in aircraft sheet demand, which temporarily declined in fiscal 2017. Furthermore, plans are in place for the Blow-molded Container business to expand into the regenerative medicine and electronic materials domains.
The UIEP Company will hasten the rate at which it injects new products in order to accelerate the pace of growth in the three strategic fields. Continuing on from the 27 products in fiscal 2017, the Company will bring 30 new products to market in fiscal 2018. In addition to contributions from new products, energies will also be directed toward lifting the sales ratio of prioritized products.
In addition to developing, manufacturing and selling plastic products related to housing and social infrastructure with a focus on water, we also offer advanced materials, such as FFU and functional sheets, by applying our accumulated plastics-related technology.
We set up a strategic portfolio, which is classified into three strategic fields and four strategic positions, and implement management appropriate for each field and position. Overseas, we realize growth with a focus on growth positions.