KITO CORPORATION Annual Report 2018

Annual Report 2018KITO CORPORATION

Six-Year Summary/Milestones during Fiscal 2017Years ended March 31

Financial Information

Results of Operations (Consolidated) Millions of yen

2013/3 2014/3 2015/3 2016/3 2017/3 2018/ 3

Net sales ¥35,501 ¥41,855 ¥49,968 ¥55,821 ¥51,141 ¥55,168 Operating income 2,510 4,006 3,395 5,221 4,208 4,698 Operating income ratio (%) 7.1 9.6 6.8 9.4 8.2 8.5 Ordinary income 2,440 4,094 3,423 4,576 3,249 3,791 Net income attributable to owners of parent 1,023 2,361 2,026 2,497 1,897 2,836 Total assets 34,760 41,108 63,183 60,639 60,137 61,854 Net assets 18,012 22,003 25,626 26,040 21,239 23,697 Shareholders’ equity ratio (%)*1 49.8 51.2 38.9 41.2 33.8 36.7 Return on equity (%) 6.3 12.3 8.9 10.1 8.4 13.2 Number of employees 1,898 2,094 2,495 2,365 2,364 2,169

Financial Soundness

Total assets ¥34,760 ¥41,108 ¥63,183 ¥60,639 ¥60,137 ¥61,854 Net assets 18,012 22,003 25,626 26,040 21,239 23,697 Interest-bearing debt 5,391 6,425 21,343 19,281 24,178 21,449 Shareholders’ equity ratio (%) 49.8 51.2 38.9 41.2 33.8 36.7 Debt/equity ratio (Times) 0.30 0.29 0.83 0.74 1.14 0.91 Cash flow from operating activities (515) 4,056 3,338 4,502 3,981 7,044 Interest paid 87 178 224 450 397 386 Interest coverage ratio (Times)*2 — 22.8 14.9 10.0 10.0 18.2

Valuation

Net assets per share (Yen)*3 ¥670.19 ¥806.32 ¥936.83 ¥952.43 ¥1,001.60 ¥1,114.03Net income per share (Yen) 39.71 91.25 77.52 95.13 82.38 139.52Cash dividends per share (Yen) 10.00 20.00 25.00 28.00 28.00 33.00Payout ratio (%)*4 25.2 21.9 32.3 29.4 34.0 23.7 Price/earnings ratio (Times)*5 13.0 11.6 15.7 8.8 14.4 14.2Price book value ratio (Times)*6 0.77 1.31 1.30 0.88 1.19 1.78Free cash flow (Millions of yen) (2,261) 1,327 (5,064) 930 1,839 4,853

Milestones during Fiscal 2017

U.S. subsidiary Peerless Industrial Group celebrates its 100th anniversaryMajor U.S. chain manufacturer Peerless Industrial Group, Inc., which became a Kito Group company in 2014, marked the 100th anniversary of its found-ing.

Global production of hoist chainsKito began local production of the chains for electric chain hoists used in wind power generation in the U.S.

Award as an excellent organization for employing the disabledKito received the top Ministry of Health, Labour and Welfare Minister’s Award, earning praise for its organizational and ongoing efforts, including individual and systematic support tailored to individual needs, and initiatives for mutual commu-nication and career advancement.

KITO Global One system goes into full operationKito completed a full-scale renewal of its IT infrastructure for the first time in 34 years, establishing a common founda-tion for the corporate group that will enhance customer service and opera-tional efficiency.

Kito University 2017 programKito University is a training program for all Group employees focused on instill-ing the “KITO Spirit,” the philosophy, and values of the Company. In 2017, 24 members participated in the “Global Leadership” program, representing 11 companies in 9 countries.

5 6 7 8 9 102017

Financial Information

Results of Operations (Consolidated) Millions of yen

2013/3 2014/3 2015/3 2016/3 2017/3 2018/ 3

Net sales ¥35,501 ¥41,855 ¥49,968 ¥55,821 ¥51,141 ¥55,168 Operating income 2,510 4,006 3,395 5,221 4,208 4,698 Operating income ratio (%) 7.1 9.6 6.8 9.4 8.2 8.5 Ordinary income 2,440 4,094 3,423 4,576 3,249 3,791 Net income attributable to owners of parent 1,023 2,361 2,026 2,497 1,897 2,836 Total assets 34,760 41,108 63,183 60,639 60,137 61,854 Net assets 18,012 22,003 25,626 26,040 21,239 23,697 Shareholders’ equity ratio (%)*1 49.8 51.2 38.9 41.2 33.8 36.7 Return on equity (%) 6.3 12.3 8.9 10.1 8.4 13.2 Number of employees 1,898 2,094 2,495 2,365 2,364 2,169

Financial Soundness

Total assets ¥34,760 ¥41,108 ¥63,183 ¥60,639 ¥60,137 ¥61,854 Net assets 18,012 22,003 25,626 26,040 21,239 23,697 Interest-bearing debt 5,391 6,425 21,343 19,281 24,178 21,449 Shareholders’ equity ratio (%) 49.8 51.2 38.9 41.2 33.8 36.7 Debt/equity ratio (Times) 0.30 0.29 0.83 0.74 1.14 0.91 Cash flow from operating activities (515) 4,056 3,338 4,502 3,981 7,044 Interest paid 87 178 224 450 397 386 Interest coverage ratio (Times)*2 — 22.8 14.9 10.0 10.0 18.2

Valuation

Net assets per share (Yen)*3 ¥670.19 ¥806.32 ¥936.83 ¥952.43 ¥1,001.60 ¥1,114.03Net income per share (Yen) 39.71 91.25 77.52 95.13 82.38 139.52Cash dividends per share (Yen) 10.00 20.00 25.00 28.00 28.00 33.00Payout ratio (%)*4 25.2 21.9 32.3 29.4 34.0 23.7 Price/earnings ratio (Times)*5 13.0 11.6 15.7 8.8 14.4 14.2Price book value ratio (Times)*6 0.77 1.31 1.30 0.88 1.19 1.78Free cash flow (Millions of yen) (2,261) 1,327 (5,064) 930 1,839 4,853

Trends in Stock Price

(Yen)

0

2,500

2,000

1,000

1,500

500

2018/32017/92017/32016/92016/32015/92015/32014/92014/32013/92013/3

*1 Net assets applicable to common stock/total assets × 100*2 Cash flow from operating activities/Interest paid*3 Net assets applicable to common stock/average outstanding shares*4 Cash dividends/net income (consolidated)*5 Stock price (year-end)/EPS*6 Stock price (year-end)/BPSNote: Effective April 1, 2013, Kito conducted a 100-for-1 stock split of its common stock and a 2-for-1 stock split on

October 1, 2014. Accordingly, the Net assets per share, the Net income per share, the Cash dividends per share, and stock price of all fiscal years are calculated the same way as after the stock split.

Thai subsidiary Siam Kito celebrates 20 yearsEstablished in 1997, Siam Kito marked the 20th anniversary of its establishment. The company current-ly has a staff of 240 employees, working together to explore new growth potential.

85th anniversary of Kito’s founding on November 8, 2017

Finnish light crane manufacturer ERIKKILA joins Kito GroupKito strengthened its business in Europe by acquiring ERIKKILA’s crane manufacturing function and sales network, while also expanding the line-up of crane products.

11 12 1 2 3 42018

About this reportThis report presents Kito Corporation’s management strategies, business performance, relationship with the environment and society, and other information to help stakeholders better understand the content of Kito’s business operations. Through our business operations, in the workplaces for material handling throughout the world, we will continually maintain a customer-oriented perspective, and by proposing new ideas and achieving them by providing products and services, gain the trust of the market, supporting cus-tomer safety and the efficient functioning of society.

DisclaimerThese materials are prepared for the purpose of providing information concerning Kito Corporation’s performance in fiscal 2017 ended March 31, 2018, and are not intended to solicit investment in securities issued by the Company. In addition, these materials have been compiled based principal-ly on data current as of March 31, 2018. All opinions, forecasts, and other forward-looking state-ments stated in the materials reflect the Company’s judgments at the time these materials were prepared. No guarantees or promises can be made with regard to the accuracy or completeness of the information, which may be revised at any time without prior notice.

Kito Annual Report 2018 1

Profile

Since its founding in 1932, Kito Corporation has been a

leading manufacturer of material handling equipment,

supplying safe and high quality products and service to

customers in a wide variety of industries. From basic prod-

ucts such as chain hoists, lever hoists, wire rope hoists,

and cranes, to chain slings and other below-the-hook

devices, Kito products enhance customer safety and

productivity at a wide range of worksites where heavy

objects are handled. Kito equipment plays vital roles in

many different workplaces, including construction sites,

industrial factories, power plants, and entertainment

facilities, as well as in the agriculture, forestry, and

fishery industries.

Global Business Development

Kito established a U.S. subsidiary, Harrington Hoists, Inc. in

1990, and has since expanded its business globally through

M&A and other means. The Group currently has 18 major

overseas subsidiaries in 14 countries, including in North

America, Asia, Europe, and South America, with a sales

network that extends to more than 50 countries. Non-

Japan sales accounted for 76.0% of revenue in fiscal 2017.

Japan 24.0%

The Americas 48.4%

Net sales of fiscal year ended

March 2018(Millions of yen)

55,168Sales from non- Japan markets 76.0%

Europe 3.7%

Others 4.4%

China 10.7%

Asia 8.8%

Kito Annual Report 20182

Kito Management (As of July 1, 2018)

President & CEO

Yoshio KitoChief Executive Officer

Executive Vice President

Edward W. HunterCo–Chief Market Officer KITO Americas, Inc. Chariman

Managing Director

Shigeki OsozawaSenior Executive Officer Chief Financial Officer General Manager of Corporate Management Division and General Manager of Financial Management Division

Managing Director

Tsuneo YuzuriharaSenior Executive Officer Chief Quality Officer Chief Manufacturing Officer General Manager of Quality Assurance Division

Outside Director

Katsumi NakamuraOutside Director

Keizo TannawaOutside Director

Takashi Hirai

Contents

Six-Year Summary/ Milestones during Fiscal 2017 1

Profile 2

Management 3

Message from the President 4

Corporate Governance 8

Sustainability

Innovation 10

Environment 11

Society 12

Financial Section

Management's Analysis of Financial Position and

Operating Results 14

Consolidated Balance Sheets 18

Consolidated Statements of Income 20

Consolidated Statements of Comprehensive Income 21

Consolidated Statements of Changes in Net Assets 22

Consolidated Statements of Cash Flows 24

Stock Information 26

Corporate Profile 27


Message from the President

We are accelerating our shift to the

growth phase through business

expansion and proactive investment.


Review of Fiscal 2017

The economies of Japan, U.S., Europe, and China re-

mained on a recovery track overall during fiscal 2017

(ended March 31, 2018), though the uncertainty continued

in relation to the U.S. administration and the situation in

East Asia. The business environment for Kito was positive,

with steady growth in infrastructure spending in Japan and

the U.S., along with private sector capital investment.

Kito completed a full-scale renewal of its IT infrastructure

for the first time in 34 years, upgrading everything from

order handling to production, shipping, and accounting,

resulting in enhanced productivity and greater efficiency

in business activities. Immediately after the new system

started operation in July 2017 we experienced temporary

delays in production and shipping, but through a concerted

effort to stabilize production, regular shipments were

restored by the close of the term. In March 2018, monthly

production volume reached record high levels.

As a result, net sales in the year ended March 31, 2018

increased 7.9% from the previous fiscal year to ¥55.2

billion amid proactive investment trends, with continued

steady increases in demand from public sector investment

for infrastructure both in Japan and overseas, and private

sector capital expenditure. In terms of earnings, as a result

of capturing rising global demand, and improved profitabili-

ty at overseas subsidiaries in China and other areas of

Asia, operating income was up 11.6% to ¥4.7 billion.

Ordinary income increased 16.7% to ¥3.8 billion, with net

income attributable to owners of parent rising 49.4% to

¥2.8 billion.

Assessing the Second Year of the Mid-Term Management Plan

Our current five-year business plan started from April 2016

with the aim of expanding EBITDA and operating income

by regaining a high-margin structure in existing business-

es, and broadening our business portfolio. Fiscal 2017, the

second year of the plan, was the “platform enhancement

phase,” during which we took proactive measures to

solidify our foundations for growth. In Japan, we complet-

ed the renewal of our IT infrastructure, which had been a

pending issue. In Thailand, where business had been

focused on large-scale crane projects, we concentrated

more on increasing the proportion of hoists sales. In India,

we shifted the focus from crane manufacturing to the

hoist business. In Europe, Kito strengthened its business

by expanding the product lineup and differentiation through

acquisition in January 2018 of light crane manufacturer

Three Key Directives

Operational Goals

1 Return to a high-margin business structure2 Growth through product portfolio expansion3 Evolve into a globally integrated enterprise

The Mid-Term Management Plan (Fiscal 2016 through Fiscal 2020)

Enhance Customer

Experience

Create Efficient

Organization

Invest in People


Message from the President

Financial Goal EBITDA (Billions of Yen)

Earnings before interest, tax, deprecia-tion and amortization (EBITDA) is the balance of operating profit and deprecia-tion costs, showing how much cash the firm can earn over a year through its operations.

7.4

13.0

FY2015 FY2020

ERIKKILA of Finland, followed in April by investment in

Van Leusden of the Netherlands, specializing in customiza-

tion technology, particularly anti-corrosion treatment of

hoists. In the United States, Kito utilized its chain produc-

tion capacity to strengthen sales of chain-related products,

and streamline the supply chain for hoist products. We

also completed a similar renewal of the IT infrastructure

previously conducted in Japan, and began utilizing the new

system to improve customer service.

Shift from the “Platform Enhancement” to “Full Growth” Stage

In the fiscal year ending March 31, 2019, the third year of

Kito’s five-year management plan, we will accelerate the shift

from platform enhancement to a full-fledged growth stage.

In March 2018, Kito achieved its highest monthly pro-

duction volume ever. We have since continued to increase

operating capacity and production in order to steadily

capture growing global demand. Going forward, in antici-

pation of future demand growth, we will make proactive

capital investments aimed at improving our supply chain,

enhancing production efficiency, and rebuilding our pro-

duction structure.

We will also utilize the fully renewed IT infrastructure as

an effective management system to support the future

expansion of production activities. We will shorten the

lead time to improve customer service, and expand pro-

ductivity through cost reductions and streamlining of the

supply chain.

While we expect the mainstay Japanese and U.S. busi-

nesses to provide stable growth, we are also positioning

the European business as a new growth area for the Kito

Group, and making up-front investments to increase brand

recognition, as well as taking steps to expand our product

lineup, and differentiate ourselves from the competition. In

January 2018 we concluded an M&A deal to add ERIKKILA

to our business portfolio, launching new products for the

Japanese market in August, with plans for expansion to

the U.S. and global markets in the future. Further, we will

fully utilize the Italian chain and below-the-hook business

acquired in 2016 to accelerate our European strategy by

improving the supply chain and expanding the product

lineup.

Capital Policy and Shareholder Returns

Kito’s policy for the distribution of management resources

is to maintain a balance of a stable financial base with

Approxi- mately double compared with

FY2015


continued growth investments to enhance future profit-

ability, including capital expenditures to implement the

production strategies outlined above.

For shareholder returns, our basic policy is to pay a stable

and sustained dividend, while ensuring sufficient retained

earnings to support future business expansion. In accordance

with this policy, Kito determines the dividend payment

through a comprehensive consideration of consolidated

results and the company’s financial condition, with a target

payout ratio of 20% or higher on a consolidated basis, while

striving to maintain and increase this level. Retained earnings

are utilized taking into consideration needs to strengthen

business foundations and future business expansion, as well

as investment efficiency from a longer term perspective in

accordance with the mid-term management plan.

Dividends for the fiscal year ended Mach 31, 2018, in

line with the increase in net income attributable to owners

of parent, was increased by three yen from the initial

forecast, comprising a year-end dividend of 18 yen per

share, which together with the interim dividend of 15 yen,

makes an annual dividend of 33 yen. This makes the

consolidated payout ratio 23.7%.

Aiming to Be a Globally Integrated Enterprise

As Kito pursues its proactive program of international

business expansion, strengthening corporate governance is

an important matter in terms of achieving growth over the

longer term. Auditing teams from within and outside Kito

conduct regular operational and accounting audits of over-

seas subsidiaries, but we also enhance the effectiveness of

group governance overall through regular, close communi-

cation with local management. We also focus on instilling

the KITO Spirit, our corporate philosophy and values, in all

group employees, and are working to prevent misconduct

through employee education as well as corporate systems.

We also consider securing human assets to be an

important issue. We focus on retaining and developing

talented personnel globally, both Japanese and non-Japa-

nese, who share our corporate vision, and will work hard

for the customers.

Kito’s business centers on products closely related to

the “old economy,” but so long as gravity continues to be

a factor on Earth, the need for these products will not

cease. We seek to be the most trusted anti-gravity equip-

ment manufacturer in every market, eagerly capturing the

needs of the global market to counter this relentless force.

Kito has a long future ahead.

Yoshio Kito President & CEO

Cash Dividends per Share (Yen)/Dividend Payout Ratio (%)

28

33

FY2015 FY2017

28

FY2016

29.4

23.7

34.0

An increase of ¥3 from

initial forecast


Basic Concept

The Company will, with the aim of achieving sustainable

growth and improvement of corporate value on a medium to

long-term basis, make efforts to enhance corporate gover-

nance based on the belief that the essence of corporate gov-

ernance lies in increasing the dynamism of management by

securing the transparency and fairness thereof and making

management decisions in a prompt and decisive manner.

Kito Corporation is working to establish corporate gover-

nance in accordance with the following basic concepts:

respect the rights of shareholders and secure equality

among them; consider the interests of stakeholders,

including shareholders and cooperate with them in an

appropriate manner; disclose corporate information in an

appropriate manner and secure transparency of manage-

ment; strengthen management supervision functions by

separating the execution and management roles of man-

agement and by electing outside directors; hold construc-

tive dialogue with shareholders.

Corporate Governance Structure

Kito Corporation has adopted the Company with a Board

of Company Auditors system as its governance system

under the Companies Act.

The Board of Directors comprises seven members (three

of whom are outside directors), and makes decisions on

material matters. Kito has also introduced an executive offi-

cer system to provide for the flexible conduct of duties by

separating the decision-making and oversight function from

business execution. The Board of Corporate Auditors, as an

organization independent from the Board of Directors, con-

ducts audits of the execution of duties by directors.

In addition, the Nominating and Compensation

Committee, comprising five directors (three of whom are

outside directors), has been established as an advisory body

to the Board of Directors. This committee reviews the can-

didates for director, auditor, and senior executive officer,

and makes recommendations to the Board of Directors.

Effectiveness Evaluations of the Board of Directors

Kito conducts an opinion survey of ten directors and audi-

tors, including a five-grade evaluation for each question,

and space for free comment. The evaluation conducted in

December 2017 gave high marks overall for the structure

of the Board of Directors and the systems that support it,

affirming sufficient effectiveness. However, the survey

also identified issues for consideration, such as the diversi-

ty of the Board of Directors in terms of nationality, gender,

and other aspects, and the need to focus on discussions

regarding longer-term themes. Kito is working to make

improvements regarding these issues, in order to further

enhance the deliberations of the Board of Directors.

Compensation of Directors and Auditors

Compensation for directors is determined by the Board of

Directors, apportioned from the total amount for directors’

remunerations (¥300 million or less (including ¥30 million

or less for outside directors)), approved at the General

Meeting of Shareholders held on June 26, 2007.

Compensation for auditors is determined through consul-

tation among the corporate auditors, apportioned from the

total amount for corporate auditors’ remuneration (¥80 mil-

lion or less) approved at the General Meeting of

Shareholders held on June 26, 2007.

Amounts of Compensation of Directors and Auditors

Position Number of persons Amount (¥ million)

Directors (Outside Directors) 8 (4) 179 (21)

Auditors (Outside Auditors) 3 (2) 28 (14)

Total 11 208

* There were seven directors and three auditors as of March 31, 2018. The staff allow-ance for the above directors and auditors includes one outside director who retired at the conclusion of the 73rd General Meeting of Shareholders held on June 21, 2017.

Corporate Governance


Basic Policy of Officers’ Compensation System and Method of Determining Compensation 1) The Company positions officers’ compensation as one of the

important means to achieve sustainable growth and an increase in medium and long-term corporate value of the Group.

2) The compensation for Directors, excluding Outside Directors, and Executive Officers shall reflect the level of achievement of consolidated business performance targets and level of the indi-vidual officer’s contribution to the business performance of the Company. The higher the position and responsibility of an officer, the greater the ratio of the officer’s performance-based compen-sation to his/her total compensation.

3) The Company ensures the transparency and objectivity of the compensation of Directors and Executive Officers by deliberating on the compensation of Directors and Executive Officers at the Nomination & Compensation Committee, a voluntary committee which a majority of the members are Outside Directors, and making recommendations to the Board of Directors.

4) Based on the above recommendations by the Nomination & Compensation Committee, the officers’ compensation will be approved by the Board of Directors.

Fixed compensation (base com-pensation)

The Company determines an appropriate level of base compensation, comprehensively taking into account the size of the Company and the duties of Officers, referring to external databases, etc.

Performance-based compen-sation (annual bonuses)

The Company calculates the standard annual bonuses by position, with a range of 25 to 50% of base com-pensation for each position. Then we determine bonus-es for individual Director/Executive Officers within a range of 0 to 200% of standard annual bonus by com-prehensively evaluating individual Director/Executive Officer’s level of achievement of his/her targets and the level of his/her contribution to the business perfor-mance of the Company, using consolidated net sales and EBITDA (income before income taxes, to which extraordinary income, interest expenses and deprecia-tion and amortization are added) of the Company as the evaluation indicators.

Performance-based compen-sation (retirement benefits for Directors)

The Company calculates the standard annual reserve for retirement benefits for each position, within a range of 10 to 25% of base compensation. Then, the Company determines annual reserves for retirement benefits for individual Directors/Executive Officers with a range of 50 to 200% of the standard annual reserves by comprehensively evaluating the level of achieve-ment of their targets and the level of their contribution to the business performance of the Company, using consolidated net sales and EBITDA of the Company as the evaluation indicators.

Outside Directors

Kito’s outside directors oversee the execution of duties by

directors, offer opinions regarding business policies and

plans, and monitor transactions involving conflict of interest

with directors or major shareholders. In the execution of

their duties, outside directors hold regular meetings among

themselves, and strive to exchange and share information

from an objective perspective. In addition, as the principal

members of the Nominating and Compensation

Committee, outside directors make recommendations to

the Board of Directors regarding compensation based on

evaluations of the performance of the president, directors,

and executive officers, and recommend candidates for

director, auditor, and senior executive officers.

Selection of outside directors, in accordance with separately

determined “Standards for the Independence of Out side

Direc tors,” is based on personality, judgement, and experience.

Recommendations for outside director are made to the Board

of Directors by the Nominating and Com pensation Com mittee,

in an effort to ensure highly transparent management.

Reasons for the Selection of Outside Directors and the Number of Directors’ Meetings Attended

Title NameAttendance at Board of

Directors’ Meetings

Outside Director Keizo Tannawa 11 of 12Reasons for Selection: Mr. Tannawa has extensive experience as a management con-sultant on organizational and personnel matters as well as in corporate management. He was selected by the Company based on these qualifications.



Outside Director Katsumi Nakamura 12 of 12Reasons for Selection: Mr. Nakamura has served and gained experience for many years as a technician and member of management in the rapidly globalizing automo-bile industry. He was selected by the Company based on these qualifications.



Outside Director Takashi Hirai*1 10 of 10Reasons for Selection: Mr. Hirai has experience as a consultant in an international consulting firm, and as a member of management in U.S. and Japanese business companies. He was selected by the Company based on these qualifications.

Note: The Company has notified the Tokyo Stock Exchange of the independent status of all outside directors.

*1 Takashi Hirai was appointed at the General Meeting of Shareholders held June 21, 2017.


Sustainability

Innovation

R&D Policy

In the field of material handling, the Kito Group regards the

delivering of unmatched satisfaction to customers on an

ongoing basis as the reason for its existence as a compa-

ny and is constantly searching to make enhancements in

terms of quality, price, customer service, and innovation to

achieve that purpose. In its R&D activities, the Company is

constantly striving for technological innovation and ener-

getically taking on the challenges involved in the develop-

ment of original products that offer benefits to its

customers.

Promotion Framework

Mainly consisting of the Development Department, the

R&D framework efficiently responds to conditions, for

example, by adopting a project structure in cases where,

depending on the nature of the development theme, a

cross-organizational structure is required. Development

themes are divided into elemental research and product

development themes, the former being undertaken prior

to the latter. Research on what will become the core tech-

nologies of products has an important role to play in under-

pinning the Company’s future.

Innovation Efforts

Kito’s R&D activities in fiscal 2017 focused on improving

the cost performance of existing core products, as well as

basic and applied research to support product develop-

ment and the upgrades to current models, with a view to

future business expansion.

As a result, for the Japanese market, Kito launched a

double-rail type model of its RY Wire-rope Hoist, as well as

Kito Lifting Point, connecting fittings offering exceptional

safety and a wide range of applications, and the PK Radio

Remote Control System Series, incorporating a more-com-

pact receiver, and transmitter with significantly improved

time of continuous use compared to the previous model.

For the North American market, Kito launched EQ Electric

Chain Hoists for three-phase and single-phase power sup-

plies.

We believe that engaging in socially-responsible activities, at both the local and inter-national levels, is essential to build and contribute to a more harmonious world.

The Kito Lifting Point features a structurally indepen-dent bolt and shackle, allowing the shackle to move freely without loosening the bolt. This construction provides greater safety, and allows for the product’s use in a wide range of rigging applications.

The PK Radio Remote Control System Series features a compact receiver one-third the size and weight of the previous version, allowing for fewer restrictions on installation.


Environment

Basic Policy

Kito strives for clean manufacturing with minimum envi-

ronmental impact in our comprehensive in house produc-

tion of everything from parts to final products. An action

principle in our effort to protect the environment is to

reduce our carbon footprint and prevent pollution in daily

operations and throughout the lifecycles of our products

through goal directed management systems. This is how

we contribute to help build a rich, sustainable society in

harmony with the earth.

Code of Conduct

1. Response to climate change We reduce energy consumption and greenhouse-gas emis-sions.

2. Chemical management We continuously reduce the use of substances that have a sig-nificant effect on people and the earth, and replace them with non-toxic alternatives.

3. Sustainable use of resources We understand the limits of natural resources and apply con-servation and recycling to use them more effectively.

4. Attention to biodiversity We work to reduce impact on species diversity and preserve the biosphere.

5. Legal compliance We strictly comply with all environment-related laws and other rules we have agreed to follow.

Environmental Efforts

Our Main Plant in Japan and our plant in Jiangyin, China

achieved international ISO 14001 certification for environ-

mental management. At our Main Plant we promote pro-

duction processes that are efficient and have minimal

impact on the environment. This is achieved through

improving production equipment and waste procedures

and through the establishment of in-house regulations for

harmful substances and green procurement guidelines.

A good example of our results in this area is the intro-

duction of our powder coating system in the period ended

March 2018. This system enabled us to successfully cut

the use of organic solvents by 90% compared to the vol-

ume in fiscal 2015 (see data below). One of our main prod-

ucts, the EQ hoist (capacity: 980kg), acquired the EcoLeaf

environmental label. Under this program the Japan

Environmental Management Association for Industry

(JEMAI) quantifies the environmental impact of a given

product throughout its life cycle, publishes the data and

certifies products considered environment friendly.

Kito is a member of the Nijumaru Project, which works

to achieve the Aichi Biodiversity Targets, a world goal

adopted at the tenth Conference of the Parties (COP 10)

to the Convention on Biological Diversity. Throughout

our operations, Kito works continuously to preserve

biodiversity.

The powder coating system introduced in the period ended March 2018


Sustainability

Kito utilizes UDTalk software as a secure, barrier-free means of sharing information with people with hearing disabilities.

Society

Initiatives on Quality

To provide products and services that can deliver

unmatched satisfaction to all its customers, the Kito Group

strives to improve the level of quality assurance through-

out the Group as a whole based on its Quality Policy.

Quality Policy

1. Further enhance product safety, durability, and operability, while engaging in production and sales activities that prioritize improvements in quality and function,

2. Satisfy the demands of society, in areas such as laws and regu-lations, and create well-balanced, superior products,

3. Ensure that each and every Kito employee remains aware of his or her role and responsibility with regard to quality and cre-ates products imbued with quality in a wholehearted manner.

Efforts to Obtain ISO 9001 Certification

To improve the quality assurance level of the Group as a whole, each company is promoting the acquisition of ISO 9001 international quali-ty assurance certification. Including Kito Corporation, we have already obtained certification at 10 bases, and the plan is to gain cer-tification across all our other bases.

Initiatives for the Employment of People with Disabilities

Kito focuses particularly on employing people with disabili-

ties. Based on our policy to “create a corporate culture

where the disabled work alongside others in a completely

natural way, and establish a workplace environment open to

people of different individual personalities,” we endeavor to

be an easy place to work for everyone. In September 2017,

Kito received first prize in the Ministry of Health, Labour and

Welfare Minister’s Award for a positive example of a dis-

abled-friendly work environment. Kito’s employment rate

for people with disabilities is 6.79% as of April 2018, greatly

exceeding the statutory employment rate of 2.2%.

Sponsorship Agreement with the Japan Para-Ski Federation

Kito has concluded a sponsorship agreement with the

Japan Para-Ski Federation, an organization that supports

public participation for persons with disabilities through

efforts to popularize and promote skiing for the disabled,

and organizing competitive ski events. As an official spon-

sor of the JPS Alpine Ski Team, Kito is supporting athletes

competing on the world stage.

Contributing to Local Communities

The Kito Group, as a good corporate citizen, contributes to

the development of society through its social contribution

activities in a proactive and on-going manner with distinc-

tively Kito businesses and in a spirit of appreciation for

everything that surrounds us. Business offices in other

countries also conduct activities adapted to the conditions

in their country or region.

Kito has been supporting Japanese skiers since 2016.


Siam Kito – Mangrove Tree Planting Event

Thailand subsidiary Siam Kito held a tree planting event in

a mangrove forest around five kilometers from its

Chonburi Factory. Mangrove forests are home to many

organisms and support diverse ecosystems, while also

serving as breakwaters and windbreaks during periods of

high waves or tropical cyclones. Around 60 employees and

family members participated in the event, working togeth-

er to plant mangrove trees.

Kito Europe – Donation to NPO Supporting Childhood

Cancer Patients

Kito Europe in Germany has made a donation to

Elterninitiative Kinderkrebsklinik e.V., an NPO that has

been supporting to childhood cancer patients and their

families for nearly 40 years. This donation is scheduled for

winter 2018, and will be used to take children with cancer

on a ski trip.

Factory Tours for Elementary and Junior High

Students

Kito Japan held summer break factory tours for children of

employees. High students visited the factory in

Yamanashi, and participated in a workshop for assembly

and disassembly. The children enjoyed this unique experi-

ence, and had an opportunity to better understand the Kito

products that lift heavy objects.

Classes for Making Planters and Planting Bitter Melon

Kito Japan has held classes for making planters and planting

bitter melon (Momordica charantia). The planters are made

of recycled wood from wooden crates shipped from

abroad. The bitter melon grown in the planters will create

“green curtains” to reduce the effects of climate change.


Financial SectionManagement’s Analysis of Financial Position and Operating ResultsYears ended March 31

Net Sales

(Billions of yen)60.0

40.0

30.0

20.0

0

50.0

10.0

55.849.9 51.1

55.1

41.8

Mar. 2014 Mar. 2015 Mar. 2016 Mar. 2017 Mar. 2018

Selling, General and Administrative Expenses(Billions of yen)16.0

8.0

4.0

0

12.0

13.414.7 15.115.0

10.8


Research and Development Expenses(Billions of yen)

1.0

0.5

0.25

0

0.75

0.870.77 0.79

0.940.9


Financial Report (All figures presented on a consolidated basis)

Net Sales(This page provides information on the Company and its subsidiar-ies by geographical segment.) Net sales in fiscal 2017 (ended March 31, 2018) amounted to ¥55,168 million, up 7.9% from ¥51,141 million in fiscal 2016. Net sales in Japan totaled ¥24,886 million, up 3.5% from ¥24,036 mil-lion in the previous fiscal year, while net sales overseas amounted to ¥41,694 million, up 10.2% from ¥37,823 million.

Cost of Sales, Selling, General and Administrative ExpensesCost of sales rose ¥3,114 million from the previous fiscal year, to ¥35,286 million. The ratio to net sales increased 1.1 percentage points, to 64.0%, from 62.9% in fiscal 2016. Selling, general and administrative (SG&A) expenses rose ¥423 million, to ¥15,182 million, with the ratio to net sales decreasing to 27.5%, from 28.9% in the previous fiscal year. Total research and development (R&D) expenditures during fis-cal 2017 amounted to ¥793 million, comprising ¥705 million in Japan, ¥26 million in the Americas, and ¥61 million in China. Research activities focused on maximizing the cost performance of existing mainstay products, along with basic and applied research through to product development and the renewal of existing models with a view to future business expansion.

Segment Information• JapanDemand remained robust for both infrastructure-related invest-ments and private-sector capital investment in both the domestic and export markets. Production activities declined temporarily in the second quarter due to the introduction of core systems, but produc-tion was stabilized from the third quarter to meet robust demand.

As a result, net sales in Japan amounted to ¥24,886 million (an increase of 3.5% from the same period of the previous fiscal year). Operating income was ¥4,639 million (a decrease of 3.9%), due mainly to depreciation and other costs associated with introduction of the new IT infrastructure, and a temporary increase in costs to catch up production and shipment delays.• The Americas:The U.S. economy, despite the lack of clarity in government poli-cy, was marked by firm private-sector capital expenditure, while investment demand related to natural resources improved on an upturn in market conditions. As a result, net sales in theAmericas amounted to ¥26,785 million (an increase of 8.0% from the same period of the previous fiscal year). Operating income, because of the increase in selling costs due to sales expansion measures, amounted to ¥1,242 million (a decrease of 5.7%).• ChinaDeceleration of the Chinese economy came to a halt, and demand bottomed out. As a result, net sales in China amounted to ¥6,264 million (an increase of 13.4% from the same period of the previ-ous fiscal year), with operating income of ¥695 million (an increase of 27.4%).• Asia (excluding Japan and China):Demand continued in South Korea for clean room cranes and other products, and in Thailand and other regions the Company focused on meeting firm demand and improving earnings. As a result, while net sales in Asia (excluding Japan and China) were mostly on a par with the previous fiscal year at ¥4,681 million (a decrease of 1.3% from the same period of the previous fiscal year), operating income improved to ¥504 million (an increase of 100.0%).• Europe:Net sales amounted to ¥1,916 million (an increase of 37.9% from the same period of the previous fiscal year) as a result of proac-tive sales promotion measures to capture rising demand for capi-


Cash Dividends per Share

(Yen)35

25

10

0

30

20

5

15

2828 282825

3333

20

Mar. 2014 Mar. 2015 Mar. 2016 Mar. 2017 Mar. 2018Note: Effective April 1, 2013, Kito conducted a 100-for-

1 stock split of its common stock and a 2-for-1 stock split on October 1, 2014. Accordingly, the Cash dividends per share of all fiscal years are calculated the same way as after the stock split.

Operating Income Operating Income Ratio(Billions of yen) (%)6.0

4.0

3.0

2.0

0

5.0

1.0

18.0

12.0

9.0

6.0

0

15.0

3.0

5.2

3.3

4.24.6

4.0

9.4

6.88.2 8.5

9.6


L Operating Income P Operating Income Ratio

Net Income Attributable to Owners of Parent (Billions of yen)3.0

1.5

1.0

0.5

0

2.0

2.5 2.4

2.01.8

2.82.8

2.3


tal investment throughout the region. In terms of earnings, the segment posted an operating loss of ¥104 million (compared to an operating loss of ¥27 million in the previous fiscal year), mainly due to the increase in sales-related costs.• Other:Net sales amounted to ¥2,048 million (an increase of 51.1% from the same period of the previous fiscal year), with an operating loss of ¥52 million (compared to an operating loss of ¥29 million in the previous fiscal year). In Australia, Kito Australia Pty. Ltd. and its sub-sidiaries were acquired and included in the scope of consolidation at the end of June 2016 (results included from July 1, 2016).

Operating IncomeOperating income amounted to ¥4,698 million, up 11.6% from ¥4,208 million in the previous fiscal year. The operating margin was 8.5%, up 0.3 percentage points from 8.2% in fiscal 2016.

Income before Income TaxesAs a result, income before income taxes amounted to ¥3,791 mil-lion, a increase of ¥213 million from ¥3,578 million in the previous fiscal year.

Income TaxesIncome taxes decreased ¥850 million from the previous fiscal year, to ¥845 million. The ratio of income taxes to income before income taxes was 22.3%.

Net Income Attributable to Owners of ParentAs a result, net income attributable to owners of the parent com-pany increased ¥939 million, or 49.5%, to ¥2,836 million.

Dividend PolicyKito Corporation’s basic shareholder returns goal is to maintain a consolidated dividend payout ratio of 20%. In determining its basic policy on profit distribution, the Company takes into consideration such factors as paying an appropriate return to shareholders in con-

sideration of performance and the need for sufficient internal reserves to strengthen its operations and pursue future business growth and development. For fiscal 2017, Kito Corporation declared an annual dividend of ¥33 per share, comprising an interim dividend of ¥15 per share and a year-end dividend of ¥18 per share, which represented a dividend payout ratio of 23.7%.

Outlook for the Fiscal Year Ending March 31, 2019The business environment for the Company contained concerns over U.S. government policies, a geopolitical risk observed in many areas around the world, and the prospect for structural reform in the Chinese economy. Despite these concerns, the global economy overall is expected to continue to expand at a moderate pace, supported by the economies of developed coun-tries. In Japan and the North American market, infrastructure- related investment and corporate capital investment demand are expected to grow steadily. In China, demand has already bottomed out, and, in the Asian region overall, a moderate tone of recovery is expected. Amid such business environment, the Company, during the third year of its five-year mid-term management plan, will acceler-ate a shift from a platform enhancement phase to a full growth phase. It will continue to broaden its business operations through expansion in products and services, enhance the productivity and efficiency of existing businesses, and maximize earnings and cash flow. To increase the synergistic effect among the Kito Group, the Company will enforce measures to improve its supply chain, to reduce costs through streamlining operations, and expanding its product lineup with the addition of chain products, below-hook devices, and other lifting equipment. It will also invest proactively to enhance product and regional strategies.


Financial Section

> Management’s Analysis of Financial Position and Operating Results

The Company has mostly settled the issues related to the intro-duction of new IT infrastructure, and, going forward, will enhance productivity through stabilizing the system’s operations to firmly capture steady global demand. As a result, for the fiscal year end-ing March 31, 2019, the Company is forecasting consolidated net sales of ¥58,000 million, with operating income of ¥5,500 million, ordinary income of ¥5,100 million, and net income attributable to owners of the parent company of ¥3,500 million. The foreign cur-rency exchange rate assumption for these forecasts is US$1=¥105.0.

Financial PositionAssets, Liabilities, and Net AssetsTotal assets amounted to ¥61,854 million, an increase of ¥1,717 million compared to the end of the previous fiscal year. The main factors were a ¥1,711 million increase in cash and deposits; a ¥572 million increase in investment securities; and a ¥436 million decrease in goodwill. Total liabilities amounted to ¥38,157 million, a decrease of ¥740 million compared to the end of the previous fiscal year. The main factors were a ¥5,223 million decrease in short-term loans pay-able; a ¥1,063 million increase in current portion of long-term loans payable within one year; and a ¥1,432 million increase in long-term loans payable. Net assets amounted to ¥23,697 million, an increase of ¥2,457 million compared to the end of the previous fiscal year. The main factor was a ¥2,246million increase in retained earnings. As a result, the Company’s shareholders’ equity ratio increased to 36.7%. Return on equity increased 4.8 percentage points, from 8.4% at the end of the previous fiscal year to 13.2% as of March 31, 2018.

Capital Expenditure and DepreciationCapital expenditure totaled ¥1,607 million in fiscal 2017. The Group spent ¥796 million of this in Japan, mainly on renewal of power distribution equipment and metal molds.

Cash FlowsNet cash provided by operating activities amounted to ¥7,044 mil-lion, an increase of ¥3,063 million compared to the previous fiscal year. The main factors were ¥3,791 million in income before income taxes; ¥2,116 million in depreciation and amortization; and ¥732 million in changes in trade payables. Net cash used in investing activities amounted to ¥2,191 mil-lion, an increase of ¥48 million compared to the previous fiscal year. The main factors were ¥1,030 million in payments for the acquisition of property and equipment; ¥380 million in payments for the acquisition of intangible assets; and ¥498 million in pay-ments of stocks of subsidiaries and affiliates. Net cash used in financing activities amounted to ¥3,083 mil-lion, an increase of ¥1,934 million compared to the previous fiscal year. The main factors were ¥8,600 million in repayments of short-term loans payable and ¥6,723 million in proceeds from long-term loans payable. As a result of these activities, as of March 31, 2018, cash and cash equivalents stood at ¥10,769 million, an increase of ¥1,710 million from March 31, 2017. Free cash flow was ¥4,853 million, an increase of ¥3,014 mil-lion from the end of the previous fiscal year.

Risk FactorsRisk factors that have the potential to affect the Kito Group’s operating performance and financial position are as follows.

Working Capital* Current Ratio(Billions of yen) (%)25.0

15.0

10.0

5.0

0

20.0

300

180

120

60

0

240

249236

17.921515.3

22.523.323.3

189

21.5222


L Working Capital P Current Ratio* Current assets minus current liabilities

Total Net Assets Shareholders’ Equity Ratio(Billions of yen) (%)30.0

18.0

12.0

6.0

0

24.0

60

36

24

12

0

4826.025.6

21.2

36.7

22.0

41.238.933.8

23.623.651.2


L Total Net Assets P Shareholders’ Equity Ratio

Interest-Bearing Debt Debt/Equity Ratio(Billions of yen) (Times)25.0

15.0

10.0

5.0

0

20.0

1.5

0.9

0.6

0.3

0

1.219.221.3

24.1

6.4

0.74

0.83

1.1421.4

0.91

0.29


L Interest-Bearing Debt P Debt/Equity Ratio


Trends in Economic Conditions and the Operating EnvironmentDemand for the Group’s products is substantially affected by changes in economic conditions, including capital investment. Not only in Japan, but also in the Americas and Asia, including China, where the Group generates considerable sales, trends in the operating environment have the potential to impact the Group’s operating performance and financial position.

The Kito Group’s Sales StructureAlthough Kito sells certain of its specialty and other products direct-ly to end users, it is dependent on sales agents for the marketing and sale of its other products and provides these agents with com-missions and other incentive payments. The Kito Group has main-tained fruitful and cooperative ties with sales agencies for many years, and, thereby, has created sales and service networks cover-ing many countries. Kito understands the customer base using its products, which comprises a range of companies in many indus-tries. The Kito Group is confident in its ability to build and maintain positive relationships with these agents. However, since the Company’s sales are highly dependent on the marketing activities of its agents, in the event that relationships with these agents dete-riorate or there are difficulties in maintaining ongoing ties, the potential exists for the Group’s financial position and operating per-formance to be negatively affected. Please note, however, that, during fiscal 2017, there were no sales agents that accounted for more than 10% of the Group’s consolidated net sales.

Country RiskThe Kito Group conducts business in many countries around the world in addition to Japan, including in the Americas, China and other parts of Asia, and Europe. These foreign countries and regions encompass different economic, social, and political fac-tors than those in Japan.

Accordingly, there is a possibility for unforeseeable situations to occur, due not only to foreign currency exchange risk, but risks arising from trade friction and other economic factors, social risks such as labor problems caused by differences in culture or cus-toms, or endemic illnesses, and risks related to international poli-tics such as war and terrorism, as well as unexpected risks in building relationships with trading partners due to differences in business practices. Should these risks become manifest, there could be an impact from such factors as productivity decline in the manufacturing pro-cess or suspension of sales activities, with the possibility of a nega-tive effect on the Group’s business results or financial condition.

Percentage of Overseas SalesThe ratio of the Group’s overseas sales to consolidated net sales was 76.0%. Dependence for sales on the Americas and the Asian region, including China, is high, with 48.4% of sales made in the Americas and 19.5% in Asia. In the event that sales in these regions stagnate, the potential exists for the Group’s financial position and operating performance to be negatively affected.

The Impact of Factors such as Foreign Currency Exchange RatesWhile the principal production centers of the Kito Group are locat-ed in Japan, in recent years, sales in overseas markets have expanded. Since the Group includes overseas subsidiaries with sales and assets denominated in foreign currencies, the potential exists for fluctuations in foreign currency values to have a major impact on the Group’s performance and financial condition. In addition, the potential also exists for fluctuations in foreign curren-cy rates to have an effect on the prices of materials that the Group procures from overseas. Other risks are identified as follows.• Competition • Product defects• Impact attributable to the procurement of principal raw materials

and components, etc.

ROA

(%)6

4

3

2

0

5

1

4.1

3.2 3.2

5.7

4.6


Capital Expenditure Depreciation


1.5

1.0

0.5

0

2.0 2.0

1.4

2.42.2

2.1

1.61.8

1.3

1.7

0.9


L Capital Expenditure L Depreciation

Free Cash Flow*


2.0

4.0

-4.0

-6.0

0

-2.0


-5.0

1.31.3 1.81.80.9

4.8

* Cash flow from operating activities + Cash flow from investing activities


Financial Section

Consolidated Balance SheetsAs of March 31

Millions of yen

2017 2018

(Assets)

Current assets Cash and deposits ¥ 9,069 ¥10,780

Notes and accounts receivable—trade 11,139 11,447

Merchandise and finished goods 12,130 12,209

Work in process 2,019 1,815

Raw materials and supplies 1,251 1,478

Deferred tax assets 1,099 1,155

Other current assets 1,309 1,287

Allowance for doubtful receivables (60) (43)

Total current assets 37,960 40,130

Fixed assets Property and equipment Buildings and structures 10,560 10,833

Accumulated depreciation (6,052) (6,359)

Buildings and structures (net) 4,507 4,473

Machinery, equipment, and vehicles 18,179 18,403


Machinery, equipment, and vehicles (net) 5,224 4,823

Land 1,484 1,497

Construction in progress 266 284

Others 6,162 6,264


Others (net) 465 469

Total property and equipment 11,948 11,549

Intangible assets Goodwill 2,363 1,926

Software 1,731 1,705

Other intangible assets 3,564 3,209

Total intangible assets 7,658 6,841

Investments and other assets Investment securities 739 1,312

Deferred tax assets 598 572

Net defined benefit assets 28 81

Other investments and other assets 1,203 1,366

Total investments and other assets 2,569 3,332

Total fixed assets 22,177 21,724

Total assets ¥60,137 ¥61,854


Millions of yen

2017 2018

(Liabilities)

Current liabilities Notes and accounts payable—trade ¥ 5,438 ¥ 6,143

Short-term loans payable 6,730 1,506

Current portion of long-term debts payable within one year 3,149 4,212

Accrued expenses 2,411 2,949

Income taxes payable 128 795

Provision for bonuses for employees 601 803

Provision for product warranties 34 33

Provision for sales returns 309 290

Other current liabilities 1,221 1,884

Total current liabilities 20,023 18,619

Long-term liabilities Long-term loans payable 14,298 15,731

Provision for directors’ retirement benefits 190 211

Net defined benefit liabilities 2,441 2,407

Deferred tax liabilities 1,795 1,083

Other long-term liabilities 147 103

Total long-term liabilities 18,874 19,537

Total liabilities 38,897 38,157

Net assetsShareholders’ equity Capital stock 3,976 3,976

Capital surplus 5,226 5,210

Retained earnings 16,427 18,674

Treasury stock (5,816) (5,749)

Total shareholders’ equity 19,814 22,111

Accumulated other comprehensive income Valuation difference on other available-for-sale securities 0 0

Deferred gains or losses on hedges 33 106

Foreign currency translation adjustment 847 724

Remeasurements of defined benefit plans (351) (228)

Total accumulated other comprehensive income 529 602

Subscription rights to shares 45 48

Non-controlling interests 850 935

Total net assets 21,239 23,697

Total liabilities and net assets ¥60,137 ¥61,854


Financial Section

Consolidated Statements of IncomeYears ended March 31

Millions of yen

2017 2018

Net sales ¥51,141 ¥55,168

Cost of sales 32,172 35,286

Gross profit 18,968 19,881

Selling, general, and administrative expenses Selling expense 10,631 11,440

General and administrative expense 4,128 3,742

Total selling, general, and administrative expenses 14,759 15,182

Operating income 4,208 4,698

Non-operating income Interest income 20 29

Rents received 32 31

Proceeds from the sales of scrap 34 52

Debt status of limitations gain 20 —

Other 91 90

Total non-operating income 199 204

Non-operating expenses Interest expense 392 395

Equity in losses of affiliates 422 245

Foreign exchange losses 118 212

Other 225 257

Total non-operating expenses 1,158 1,111

Ordinary income 3,249 3,791

Extraordinary income Gain on negative goodwill 489 —

Total extraordinary income 489 —

Extraordinary loss Impairment loss 161 —

Total extraordinary loss 161 —

Income before income taxes 3,578 3,791

Income taxes – current 1,106 1,124

Income taxes – deferred 589 (278)

Income taxes (current and deferred) 1,695 845

Net income 1,882 2,945

Net income attributable to non-controlling interests (15) 109

Net income attributable to owners of parent 1,897 2,836


Financial Section

Consolidated Statements of Comprehensive Income Years ended March 31

Millions of yen

2017 2018

Net income ¥1,882 ¥2,945

Other comprehensive income Valuation difference on other available-for-sale securities 0 (0)

Deferred gains or losses on hedges 166 72

Foreign currency translation adjustment (660) (160)

Remeasurements of defined benefit plans 144 122

Share of other comprehensive income of entities accounted for using equity method (77) 74

Total other comprehensive income (426) 109

Comprehensive income ¥1,456 ¥3,054

(Comprehensive income attributable to) Owners of the parent 1,544 2,908

Non-controlling interests (87) 146


Financial Section

Consolidated Statements of Changes in Net AssetsYears ended March 31

Millions of yen

Shareholders’ equity Accumulated other comprehensive income

Capital stock Capital surplus Retained earnings Treasury stockTotal shareholders’

equity

Valuation difference on

other available-for-sale securities

Deferred gains or losses

on hedges

Foreign currency translation

adjustment

Remeasurements of defined

benefit plans

Total accumulated other

comprehensive income

Stock acquisition

rights to sharesNon-controlling

interests Total net assets

Fiscal year ended March 31, 2017 (April 1, 2016 to March 31, 2017)

Balance as of the beginning of the period ¥3,976 ¥5,226 ¥15,279 ¥ (354) ¥24,128 ¥0 ¥(132) ¥1,512 ¥(496) ¥883 ¥36 ¥991 ¥26,040

Changes during the period Dividends from surplus (652) (652) (652)

Net income attributable to owners of parent 1,897 1,897 1,897

Purchase of treasury stock (5,462) (5,462) (5,462)

Disposal of treasury stock — —

Change of scope of equity method (98) (98) (98)

Changes of items other than shareholders’ equity during the period (net) 0 166 (665) 144 (353) 8 (141) (486)

Total changes during the period 1,147 (5,462) (4,314) 0 166 (665) 144 (353) 8 (141) (4,800)

Balance as of the end of the period ¥3,976 ¥5,226 ¥16,427 ¥(5,816) ¥19,814 ¥0 ¥ 33 ¥ 847 ¥(351) ¥529 ¥45 ¥850 ¥21,239

Millions of yen



equity




on hedges


adjustment


benefit plans



Stock acquisition



Fiscal year ended March 31, 2018 (April 1, 2017 to March 31, 2018)Balance as of the beginning of the period ¥3,976 ¥5,226 ¥16,427 ¥(5,816) ¥19,814 ¥0 ¥ 33 ¥847 ¥(351) ¥529 ¥45 ¥850 ¥21,239



Purchase of treasury stock (0) (0) (0)

Disposal of treasury stock (16) 67 51 51

Change of scope of equity method — —

Changes of items other than shareholders’ equity during the period (net) (0) 72 (122) 122 72 2 84 160

Total changes during the period (16) 2,246 67 2,297 (0) 72 (122) 122 72 2 84 2,457

Balance as of the end of the period ¥3,976 ¥5,210 ¥18,674 ¥(5,749) ¥22,111 ¥0 ¥106 ¥724 ¥(228) ¥602 ¥48 ¥935 ¥23,697


Millions of yen



equity




on hedges


adjustment


benefit plans



Stock acquisition



Fiscal year ended March 31, 2017 (April 1, 2016 to March 31, 2017)

Balance as of the beginning of the period ¥3,976 ¥5,226 ¥15,279 ¥ (354) ¥24,128 ¥0 ¥(132) ¥1,512 ¥(496) ¥883 ¥36 ¥991 ¥26,040



Purchase of treasury stock (5,462) (5,462) (5,462)

Disposal of treasury stock — —

Change of scope of equity method (98) (98) (98)

Changes of items other than shareholders’ equity during the period (net) 0 166 (665) 144 (353) 8 (141) (486)

Total changes during the period 1,147 (5,462) (4,314) 0 166 (665) 144 (353) 8 (141) (4,800)

Balance as of the end of the period ¥3,976 ¥5,226 ¥16,427 ¥(5,816) ¥19,814 ¥0 ¥ 33 ¥ 847 ¥(351) ¥529 ¥45 ¥850 ¥21,239

Millions of yen



equity




on hedges


adjustment


benefit plans



Stock acquisition



Fiscal year ended March 31, 2018 (April 1, 2017 to March 31, 2018)Balance as of the beginning of the period ¥3,976 ¥5,226 ¥16,427 ¥(5,816) ¥19,814 ¥0 ¥ 33 ¥847 ¥(351) ¥529 ¥45 ¥850 ¥21,239



Purchase of treasury stock (0) (0) (0)

Disposal of treasury stock (16) 67 51 51

Change of scope of equity method — —

Changes of items other than shareholders’ equity during the period (net) (0) 72 (122) 122 72 2 84 160

Total changes during the period (16) 2,246 67 2,297 (0) 72 (122) 122 72 2 84 2,457

Balance as of the end of the period ¥3,976 ¥5,210 ¥18,674 ¥(5,749) ¥22,111 ¥0 ¥106 ¥724 ¥(228) ¥602 ¥48 ¥935 ¥23,697


Financial Section

Consolidated Statements of Cash FlowsYears ended March 31

Millions of yen

2017 2018

Cash flows from operating activities

Income before income taxes ¥3,578 ¥3,791

Depreciation and amortization 1,792 2,116

Impairment loss 161 —

Depreciation of goodwill 338 327

Gain on negative goodwill (489) —

Changes in allowance for doubtful receivables (8) (17)

Changes in reserve for bonuses for employees 115 138

Changes in reserve for retirement benefits for officers 13 21

Changes in net defined benefit liabilities (80) 86

Interest and dividends income (20) (29)

Interest expense 392 395

Equity in earnings of affiliates 422 245

Loss on the retirement of noncurrent assets 10 17

Gain on sales of noncurrent assets (4) (5)

Changes in trade receivables 633 (441)

Changes in inventories (855) (445)

Changes in accounts receivable 64 (36)

Changes in prepaid expense (152) 13

Changes in trade payables 0 732

Changes in accrued expenses (413) 717

Changes in advances received 322 354

Others 199 91

Subtotal 6,021 8,073

Cash received from interest and dividends 20 29

Interest paid (397) (386)

Income taxes paid (1,662) (672)

Net cash provided by operating activities 3,981 7,044


Millions of yen

2017 2018

Cash flows from investing activities Payments for the acquisition of property and equipment ¥ (1,740) ¥ (1,030)

Proceeds from the sales of property and equipment 58 27

Payments for the acquisition of intangible assets (653) (380)

Payments of stocks of subsidiaries and affiliates — (498)

Payments for investments in capital of subsidiaries and affiliates — (178)

Proceeds from the collection of guarantee money deposited 7 16

Changes in investments and other assets 160 (134)

Purchase of investments in subsidiaries resulting in change in scope of consolidation 33 —

Others (7) (11)

Net cash used in investing activities (2,142) (2,191)

Cash flows from financing activities Proceeds from short-term loans payable ¥10,169 ¥ 3,421

Repayments of short-term loans payable (5,112) (8,600)

Proceeds from long-term loans payable 3,000 6,723

Repayments of long-term loans payable (2,973) (3,779)

Cash dividends paid by parent company (651) (588)

Cash dividends paid for non-controlling interests (53) (96)

Purchase of treasury stock (5,462) (0)

Others (64) (162)

Net cash used in financing activities (1,148) (3,083)

Effect of exchange rate change on cash and cash equivalents (152) (59)

Net increase (decrease) in cash and cash equivalents 538 1,710

Cash and cash equivalents at the beginning of the year 8,521 9,059

Cash and cash equivalents at the end of the year 9,059 10,769


Stock Information

Stock Code 6409 Total Number of Shares Issued 27,048,200

Date of Listing August 9, 2007 Trading Unit of Shares 100

Stock Exchange Listing Tokyo Stock Exchange, First Section Number of Shareholders 4,404, excluding one treasury stockholderTransfer Agent and

Administrator of Special Account

Sumitomo Mitsui Trust Bank, Limited 1-4-1, Marunouchi, Chiyoda-ku, Tokyo

Major Shareholders (top 10) (As of March 31, 2018)

Name of shareholdersNumber of shares (shares)

Percentage of owner-ship (%)

MISAKI ENGAGEMENT MASTER FUND 2,019,500 9.91

The Master Trust Bank of Japan, Ltd. (Trust Account) 1,573,800 7.72

Japan Trustee Services Bank, Ltd. (Trust Account 9) 1,309,200 6.42

Japan Trustee Services Bank, Ltd. (Trust Account) 1,188,200 5.83

THE BANK OF NEW YORK MELON 140042 794,800 3.90

YK Capital Co., Ltd. 740,000 3.63

Sumitomo Mitsui Banking Corporation 670,400 3.29

GOVERNMENT OF NORWAY 514,100 2.52

GOLDMAN, SACHS & CO REG 507,500 2.49

Trust & Custody Services Bank, Ltd.( Securities Investment Trust Account) 476,400 2.34

Notes: 1. Share ownership percentages were calculated after the deduction of treasury shares (6,659,133 shares).

2. The names of shareholders have been adjusted to those shown on the Company’s Shareholder Registry which is maintained by the Administrator of Shareholder Registry as of the end of fiscal 2017.

Trends in Kito’s Stock PriceStock Price (Yen)

0

4,500

3,000

1,500

2,500

2,000

1,500

1,000

500

0

2018/12017/102017/72017/42017/12016/102016/72016/42016/12015/102015/72015/42015/12014/102014/72014/4

2017/12016/102016/72016/42016/12015/102015/72015/42015/12014/102014/72014/42014/12013/102013/72013/4

2-for-1 stock split

Note: Effective October 1, 2014, Kito conducted a 2-for-1 stock split of its common stock. Accordingly, the past stock prices of all fiscal years are calculated the same way as after the stock split.

Individuals, etc.15.71%

Treasury stock24.62%

Foreign-Affiliated Corporations and Foreigners 26.91%

Other Corporations

4.76%

Securities Firms 0.84%

Shareholders’ Composition by Category (As of March 31, 2018)

Trading Volume (Thousands of shares)

Financial Institutions 27.14%


Corporate Profile

Company Name KITO CORPORATION

Head Office & Factory 2000, Tsuijiarai, Showa-cho, Nakakoma-gun, Yamanashi 409-3853, Japan

Tokyo Head Office SHINJUKU NS Building 9F, 2-4-1, Nishi-Shinjuku, Shinjuku-ku, Tokyo 163-0809, JAPAN Tel: +81-3-5908-0155

President & CEO Yoshio Kito

Established July 1944 (started Nov. 1932)

Number of Employees (March 31, 2018)

Consolidated: 2,169Non-consolidated: 673

Capital ¥3,976 million

Net Sales (March 31, 2018)

Consolidated: ¥55,168 millionNon-consolidated: ¥24,886 million

Principal Offices and Factories (As of July 1, 2018)

L Domestic Offices/Factories and Bases of Subsidiaries

Name of Business Office Location

Head Office & Factory Showa-cho, Nakakoma-gun, Yamanashi

Tokyo Head Office Shinjuku-ku, Tokyo

Sapporo Office Sapporo, Hokkaido

Sendai Office Sendai, Miyagi

Shin’etsu Office Niigata, Niigata

Kita Kanto Office Ota, Gunma

Yokohama Office Yokohama, Kanagawa

Nagoya Sales Group Nagoya, Aichi

Shizuoka Office Hamamatsu, Shizuoka

Hokuriku Office Toyama, Toyama

Osaka Sales Group Moriguchi, Osaka

Chubu and Shikoku Office Okayama, Okayama

Fukuoka Office Fukuoka, Fukuoka

SCC Japan Godo Kaisha Kashiwa, Chiba

L Bases of Overseas Subsidiaries

Company Name Country

KITO Americas, Inc. U.S.A.

Harrington Hoists, Inc. U.S.A.

Har Ki, Inc. U.S.A.

PEERLESS INDUSTRIAL GROUP, INC. U.S.A.

Peerless Chain Co., Inc. U.S.A.

KITO CANADA INC. Canada

KITO DO BRASIL COMÉRCIO DE TALHAS E GUINDASTES LTDA.

Brazil

Kito Europe GmbH Germany

Kito Chain Italia S.r.l. Italy

JIANGYIN KITO CRANE CO., LTD. China

KITO HOISTS & CRANES (SHANGHAI) CO., LTD. China

KITO TAIWAN CO., LTD. Taiwan

KITO KOREA CO., LTD. Korea

SIAM KITO CO., LTD. Thailand

SUKIT BUSINESS CO., LTD. Thailand

KITO PHILIPPINES, INC. Philippines

PT. KITO INDONESIA Indonesia

KITO HOISTS & CRANES ASIA PTE. LTD.

Singapore

ARMSEL MHE PVT. LTD. India

Kito Australia Pty. Ltd. Australia

Anchor Nominees Pty. Ltd. Australia

PWB Anchor Ltd. Australia

ERIKKILA OY Finland

Note: KITO PHILIPPINES, INC. ceased operations as of March 31, 2014 and is currently undergoing liquidation proceedings.


KITO CORPORATIONSHINJUKU NS Building 9F, 2-4-1, Nishi-Shinjuku,

Shinjuku-ku, Tokyo 163-0809, JAPAN

https://kito.com

Printed in Japan

Documents

KITO CORPORATION Annual Report 2018