Integrating the virtual and the physical

The Last Inch to IoT

General Outline

Financial Results (Kessan Report) for FY2016

The SATO Group has formulated a new five-year Medium-term Management Plan (FY2016–FY2020) geared toward the business vision of becoming the leader in the auto-identification solutions industry worldwide and the world’s most trusted company, as defined by our corporate values. The entire Group has been working together in implementing this plan that aims to realize sustainable growth and profit on the basis of our basic strategy to “pursue globalization and maximization of customer value.” (To reflect our recent business developments, changes in the external environment, and our performance for this fiscal year under review, partial changes have been made to the Medium-term Management Plan that will now begin in FY 2017 (the fiscal ending March 31, 2018). An overview of these changes will be provided at our forthcoming financial results briefing.)

In Japan, net sales and operating profit increased from the previous year due to various measures taken in this fiscal year. Overseas, the continued appreciation of the yen led net sales and operating profit to fall year on year.

As a result, the SATO Group recorded an increase in net sales, up 0.8% from the previous fiscal year to ¥106,302 million and a decrease in operating profit, down 5.4% to ¥6,104 million. Ordinary profit decreased by 11.3% to ¥5,426 million, and profit attributable to owners of parent decreased by 12.7% to ¥3,221 million.

By segment, the SATO Group reported the following:


In the Japanese market, sales of mechatronics and supply products increased year on year owing to increased demand from the manufacturing and e-commerce sectors. Operating profit and profitability also increased due to a combination of factors including lower procurement costs from a stronger yen, and improved gross profit margins mainly from expanded sales of the CLNX-J strategic barcode printer series.
Given the trend of overall labor shortage, demand for automation and streamlining operations in the logistics (including e-commerce), manufacturing, and other industries remains upbeat. A growing number of business discussions are taking place as we steadily commercialize our field-proven, customer-specific solutions as standard packages for the respective industries. Going forward, we aim to achieve stable growth in the domestic market by further strengthening our solutions capabilities.
Under these circumstances, net sales increased 1.9% to ¥67,375 million and operating profit rose 13.8% to ¥4,331 million, compared to the previous fiscal year.


In the North American market, net sales and operating profit increased significantly year on year as SATO America posted better-than-expected growth for label business with major drug store and continued strong sales for barcode printers including the CLNX series. For SATO Global Solutions (SGS), large-scale orders of printers for food management applications led to a year-on-year increase in net sales. Operating losses, on the other hand, rose from the previous fiscal year as R&D delays resulted in postponing the official launch of the retail-focused digital solution it is driving with several major global companies until next term.
In the South American market, Argentina’s Achernar S.A. was affected by major depreciation of its local currency, inflation, and subdued consumer spending, leading to the delayed closing of business deals with specific key customers. Attempts were made to offset this with sales gains from other customers but a shortfall remains, causing regional operating profit to decrease year on year. Meanwhile, Brazilian leading primary label producer Prakolar Rotulos Auto-Advesivos S.A., which we acquired in November 2015, contributed positively to sales results in the region.
Under these circumstances, net sales rose 7.6% to ¥13,580 million (an increase of 22.0%, however, excluding foreign currency effects), while operating profit fell 82.0% to ¥83 million, compared to the previous fiscal year.


In the European market, sales at our primary label company Okil-Holding, JSC in Russia grew steadily on a local-currency basis but operating profit declined significantly when compared to the previous fiscal year due to the recording of SG&A expenses and inventory disposal in the second half. At the same time, local-currency revenues and profits rose for existing business, as we were successful in growing CLNX sales volume significantly in countries such as Germany and implementing various measures to strengthen our sales structure. We are now working to establish stable repeat business for supply products while utilizing our new label plant in Poland that began operations in March 2016.
Under these circumstances, net sales fell 4.4% to ¥12,525 million (a rise of 9.0%, however, excluding foreign currency effects) and operating profit fell 30.1% to ¥584 million, compared to the previous fiscal year.

<Asia and Oceania>

In Asia, India, Indonesia, and Vietnam continued to achieve double-digit sales increases in local currency versus the previous fiscal year while key markets such as China, Thailand, and Singapore struggled to grow their business with Japanese companies in the manufacturing sector amid economic slowdown, leading to only a single-digit increase in local-currency sales. Operating profit decreased year on year as we made investments to strengthen business in Indonesia with the opening of a new local label plant in May 2016 and establish sales subsidiaries in the Philippines and Taiwan in response to increased local demand for auto-identification solutions. In Oceania, operating profit grew robustly for our sales companies, and earnings improved for SATO Vicinity, which develops solutions based on PJM, our proprietary RFID technology.
When compared to the previous fiscal year, Taiwan’s Argox Information Co., Ltd. reported lower sales and operating profit due to deterioration in the market environment and delays in the introduction of new products. We are aiming to achieve a recovery in earnings for Argox by overhauling its sales structure to develop new growth markets and introducing new products as previously planned.
The Asian markets are very important as they account for a high share of our operating profit, and we expect them to grow further going forward. We will continue to consider investing business resources for further market expansion in the region.
Under these circumstances, net sales decreased 6.1% to ¥12,821 million (a rise of 4.2%, however, excluding foreign currency effects), and operating profit fell 26.3% to ¥965 million, compared to the previous fiscal year.