General Outline

Financial Result (Kessan Report) for FY2018

The SATO Group has formulated a three-year Medium-term Management Plan (FY 2018–20) geared toward the business vision of becoming the leader and most trusted company in the auto-ID solutions industry worldwide, exceeding customer expectations in an ever-changing world. Launched this fiscal year, this plan aims to concentrate more resources on the auto-ID solutions business than ever before to realize stronger sustainable growth and stable profits. The Group is focusing particularly on the greater potential overseas to develop its auto-ID solutions business globally with the knowledge and knowhow gained from its business in Japan.

Continued efforts in executing the necessary business strategies have paid off in the fiscal year under review to produce increased revenues and profits for our auto-ID solutions business, which maintained strong performance both in Japan and overseas. Meanwhile, for our IDP business in which we are investing strategically as one of our future business pillars, R&D activities have progressed largely in line with plans.

As a result, the SATO Group posted net sales of ¥116,179 million (up 2.5% from the previous fiscal year), operating income of ¥7,679 million (up 22.9%), and ordinary income of ¥7,618 million (up 29.4%), achieving new record highs for all three. Net income attributable to owners of parent, on the other hand, totaled ¥3,773 million (down 7.4%) after reflecting impairment loss from a UK subsidiary.

By segment, the SATO Group reported the following.

The Group has renamed its “Materials business” reporting segment “IDP business” from the fiscal year under review as the business would now focus on the development and commercialization of the IDP technology in anticipation of its strong future demand, based on the aforementioned Medium-term Management Plan. The definition of the segment remains unchanged.

<Auto-ID solutions business (Japan)>

In Japan, recent years’ efforts in implementing industry-specific strategies have paid off to help our sales frontlines competently enhance customer satisfaction and contribute towards their profitability, thereby generating record-high net sales and operating income for our auto-ID solutions business. Besides achieving a marked growth in mechatronics sales (primarily printers) and a strong year-on-year gain in accompanying consumables sales, the operating income ratio also increased by a significant 1.4 point from the previous year due to a better product mix. Our best-performing verticals include the manufacturing sector, where there has been robust demand for capital investments in automation and operational visibility, and the retail sector, where our solutions targeted at the growing e-commerce landscape and other surrounding changes have proved successful.

While labor shortages are creating prominent needs for increasing productivity, tracking work, and automating worksites across all trades, there are also rising needs to comply with new labeling standards in the food and healthcare sectors. Going forward, we aim to strengthen our ability to propose solutions for the increasingly sophisticated challenges of our customers to grow this business stably and increase its earning power.

Under these circumstances, net sales increased 2.8% to ¥72,435 million, and operating income increased 19.7% to ¥6,982 million, compared with the previous fiscal year.

<Auto-ID solutions business (Overseas)>

Overseas, our engagement in the different countries in understanding and executing action plans based on the Medium-term Management Plan has led our auto-ID solutions business to achieve growth in sales and profits for a second consecutive year. For our companies specializing in primary labels, an overall increase in sales and profits was possible as Okil-Holding in Russia was able to grow revenue and improve profitability on the back of positive foreign currency effects to offset investment cost in Russia (for various types of labels and soft packaging) and weak business performance in South America (where economic stagnation and local currency depreciation persisted).

For other overseas companies conducting our base business, the sales approach of proposing solutions based on our strategic CLNX printer series to improve customers’ field operations is gaining ground. While business in the Americas saw declining sales due to lesser orders from large customers in North America compared with the same period last year and the economic slump affecting South America, profits increased, mainly because of reduced software development expenses resulting from the liquidation of a group company. Business in the Europe, Asia and Oceania regions, on the other hand, achieved steady top-line growth to increase both sales and profits.

Under these circumstances, net sales increased 1.7% to ¥43,316 million (increase of 7.0%, excluding foreign currency effects) and operating income increased 20.0% to ¥2,239 million, compared with the previous fiscal year.

<IDP business>

For the IDP business centering on the Inline Digital Printing (IDP) technology that we own after fully acquiring UK-based DataLase in January 2017, an increase in sales was recorded for the existing base business while upfront investments for R&D progressed largely as planned.

Such ongoing developments for the IDP technology are key to the success of this business for which strong future demand is anticipated, and we are currently conducting testing aimed at commercialization, with plans to make the final decision on commercialization in FY 2019 and achieve operating profitability from FY 2020 onwards.

Under these circumstances, net sales increased 35.7% to ¥427 million (increase of 36.7%, excluding foreign currency effects), and an operating loss of ¥1,421 million was incurred, compared with that of ¥1,426 million for the previous fiscal year.