Integrating the virtual and the physical

The Last Inch to IoT

Top Message

Dear Shareholders,

Prior to my appointment as President and CEO of SATO Holdings this April, I have long served the front lines of our Japan business, relentlessly pursuing customer-centricity to expand and strengthen the Auto-ID solutions business in our home market. More recently, I have been fully engaged in open innovations and strategic alliances to create new customer value. These efforts are what I hope to extend beyond Japan to global markets that now act as our business growth drivers, in order to develop SATO into a corporate group that is one of its kind in the world. Our aim to establish sustainable growth and stable profits to heighten company value can only be accomplished with firm management intent, which I have embodied in our new management principles: “Perfect the basics,“ “Collaborate,“ and “Take new challenges.“
We are able to exceed customer expectations when we see from customer perspectives to identify the real issue, get people in and outside the company involved to suggest and execute a solution, and do the right thing completely right to accomplish them. As small efforts to achieve a goal build up into extraordinary results, we want to do the ordinary to inimitable perfection, which is our determination I have summed up in “Perfect the basics.“ And in the spirit of Ceaseless Creativity, each and every one of us around the world will “Take new challenges“ in seeking new ideas and added value as we “Collaborate“ as a team beyond organizations and national borders. Going forward, SATO Group will strive to operate our businesses under these principles, toward meeting and exceeding expectations of customers and society to become a company they need and count on.

■ Our FY 2017 performance

Consolidated results showed increased revenue and profits, with sales at JPY 113.4 billion (up 6.7% year-on-year), operating income at JPY 6.2 billion (up 2.4%), and profit attributable to owners of parent at JPY 4.1 billion (up 26.5%). We posted highest-ever sales for the fifth consecutive year, while our core Auto-ID solutions business recorded highest-ever profit for the first time in three years.
Our Japan business has come to solidify its groundwork for sustainable profits, owing to positive effects from a variety of initiatives that we put in place over the past couple of years. As every market faces the common challenge of improving productivity amid shortages in labor, the need for automation and efficiency solutions have heightened substantially, and it was with this tailwind that our strategy to expand printer sales rode to success. We also found our ways in “selling the solution, not the product” (koto-uri), whereby we suggested solutions with quantitative proof that they improve the customer’s operations. These initiatives led to higher revenue and profits and better profit margins.
While few subsidiaries in our Overseas business increased their operating losses, the segment overall kept up its recovery trend, primarily in its base business (DCS & Labeling +One) to improve revenue and profits. The gradual recovery of the global economy, together with our efforts in “selling the solution“ with specific focus on which solution to sell in which country and market, has come to present progressive effects.
And although the Materials business we defined as a segment in FY 2017 finished with an operating loss, this was due mostly to upfront R&D investments in the IDP (inline digital printing) technology owned by DataLase of UK (now a SATO company) and amortization of acquisition-related goodwill, which were anticipated at the start of the year. Actions are underway with IDP, including joint R&D with multiple partners and talks with specific customers on full-scale rollout. We have also started technical exchanges between DataLase and our other group companies, aiming to generate synergy with our existing businesses.

■ The new medium-term management plan

SATO Group met its medium-term operating income target for the first time in four years in FY 2017. In concentrating more resources than ever into our Auto-ID solutions business and further establishing sustainable growth and stable profits, the new management team updated its objectives and strategies in the form of a new medium-term management plan.

Click on the link below to see the new medium-term plan.

■ FY 2018 targets

Our consolidated targets for FY 2018 are sales of JPY 120 billion (up 5.8% versus FY 2017), operating income of JPY 7.3 billion (up 16.8%) and profit attributable to owners of parent at JPY 4.1 billion (up 0.6%). We expect our net profit increase to be minimal, as we do not anticipate any extraordinary income for FY 2018 as we did in FY 2017 when we sold off fixed assets.
We believe the Auto-ID solutions business will see demand for automation and efficiency solutions maintain its current trend in the market. We will enhance collaboration between our group companies in Japan and worldwide to further expand on “selling the solution“ to solve customer pain points and heighten the value we offer. Our growth-driving Overseas business, in particular, is targeted to achieve a significant increase in profits to reach record-high sales and operating income by drawing on a wealth of opportunities that we would work to close.
The IDP business, on the other hand, is expected to further focus on developing its technologies, thus leading to increased R&D investments and operating loss. We will carefully manage its progress, aiming to commercialize in FY 2019 a higher speed, higher resolution monochrome technology that will find greater demand than the currently commercialized monochrome IDP, and break even in FY 2020.

■ Dividends

Interim dividend was JPY 32 (up 2 yen from previous year), and year-end dividend is proposed at JPY 33 (up 3 yen), for a total of JPY 65 (up 5 yen) for the fiscal year. Keeping to our “(returns to) four stakeholders“ clause in our Credo, we stand on the policy to provide increased dividends in a steady and sustainable manner to improve our capital efficiency and shareholder value.

On behalf of employees and the management, I sincerely ask for your continued support as we work to shape the future of the SATO Group.

Excerpted from Notice of the 68th Annual General Meeting of Shareholders, June 2018

President and CEO
Ryutaro Kotaki