Integrating the virtual and the physical

The Last Inch to IoT

Top Message

Dear Shareholders,

SATO Group’s consolidated performance as of this interim period has met figures mostly as planned, with net sales at JPY 54.8 billion (up 7.3% year-on-year), operating income (OI) at JPY 2.5 billion (down 3.6%), ordinary income at JPY 2.3 billion (down 0.4%), and profit attributable to owners of parent at JPY 2.4 billion (up 60.1%).
Our core Auto-ID solutions business, which aims to post highest-ever profits over this first year of our new medium-term management plan, jumped to a great start, driven by its Japan sector that largely exceeded previous-year and budget figures, and was supported by the overseas sector that recovered after bottoming out. The newly defined Materials Business, meanwhile, is proceeding as initially planned with R&D focused on developing and commercializing new technologies.

■ Auto-ID solutions (Japan)

Amid the nation’s growing shortage of labor, businesses today face the challenge of innovating and optimizing the way they work. All markets, particularly in manufacturing, logistics, retail and e-commerce fields, increasingly demand automation and labor-saving solutions. It is under these circumstances that our FY 2017 Q1 and Q2 Japan sales reached record-highs for those respective quarters, largely exceeding year-on-year and budget figures in sales and OI.
We are also seeing rapid increase in business talks that seek more advanced solutions involving RFID tags and/or collaborative robots. As the nation’s industry and social structures change, SATO Group continues its transformation into a solutions-oriented business to improve customer value, and this effort has led us to expand our year-on-year sales volume of our strategic CLNX series of industrial printers by 67%, while expanding scale of our business in solutions that offer combinations of new consumables, maintenance services and software. These results largely improved our profitability. We hope to enhance our strengths in solutions to meet our customer’s on-site needs that keep demanding greater advances and complexity, and achieve steady growth in our Japan business.

■ Auto-ID solutions (Overseas)

The effects of our efforts from last fiscal year to strengthen base businesses worldwide have become evident in Q2 as OI increased by 82% year-on-year. While our Europe base business and Okil in Russia saw OI drop due to foreign exchange impacts and cost increases from sales/manufacturing enhancements, we see this as an opportunity to conduct fundamental reforms in 2H on sales, prices, manufacturing and SG&A expenses to improve earning power. We have also set up an Overseas Business Management team in September tasked to provide comprehensive support on our low-profiting sales companies overseas. It offers expertise on foreign exchange risks and enhanced monitoring of business performance to help overseas Group companies improve their profitability.

■ Materials Business

Rolled into action this fiscal year, our new Materials Business centers around Inline Digital Printing (IDP) technology, owned by UK company DataLase that we fully acquired in January 2017, and our very own Econano technology that reduces CO2 emission upon incineration. As set out in the new medium-term management plan, it will research and develop aiming to create and commercialize new technologies, and, as originally planned, has booked itself amortization cost from acquiring DataLase. Teams involved have already started establishing technical partnerships with external companies and taken concrete actions toward developing synergies with our group companies. And in propelling the business forward, we hired a Chief Technology & Innovation Officer (CTIO) in October who has experience developing businesses with related technologies. We aim to ensure this business breaks even in FY 2019 and contributes to group profits from FY 2020.

■ Dividends

The proposed dividend is JPY 65 (interim JPY 32, year-end JPY 33), a five-yen increase from the previous year. Keeping to our “(returns to) four stakeholders” clause in our Credo, we stand on the basic policy to provide increased dividends in a steady and sustainable manner to improve our capital productivity and shareholder value. We will continue our prompt actions to execute strategies in our medium-term management plan through 2H and onward, and make every group-wide effort to achieve our full-year performance goals.
On behalf of employees and the management, we ask for your continued support in our business going forward.

December 2017

President and CEO
Ryutaro Kotaki