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Medium-term Management Plan( 2019 - 2021 )
May 11, 2018
Tekka Kuba
Overview of the 2018
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Million yen 2017 2018 Overview Topics
Industrial Materials
Net Sales 29,833 30,262 + 429Achieved sales growth due to steady demand. But, decreased profit due to declining gross profit ratio and the increased expenses.
・Opened E-commerce Group・Opened Okinawa resident
officeOperating income
2,261 2,030 △ 231
Structural Steel Materials
Net Sales 12,432 14,410 + 1,977Achieved sales and profit due to the big demand
・Prepared for openingthe Okayama office(Opened in April 2018)Operating
income1,052 1,338 + 285
Electrical Equipment
Net Sales 8,144 8,138 △ 6 Decreased sales and profit due to the lack demand and competition with other companies in the same business
・Opened Aihoku officeOperating income
202 183 △ 19
Total(Consolidated)
Net Sales 50,410 52,811 + 2,400・Kondotec and N-PAT Co.,
Ltd. in Business,Capital Tie-up
・Released the IntegratedReport
Operating income
3,516 3,537 + 21
The segment of Structural Steel Materials were solid by big demand. As a result, KONDOTEC’s earnings were expanded.We were promoted the organic growth strategies, such as cultivation of
distribution routes / expansion of operating sites, and the non-core growth strategies, such as increasing presence in foreign markets / concluding a business capital alliance.
Recognition of the Business Environment
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For the time being, favorable conditions are expected to continue due to inbound demand, and demand in anticipation of the 2020 Tokyo Olympic and Paralympic Games, etc. Regarding risks, we expect changes in the business
environment in which demand for construction investment in Japan, which is the existing core business, will decrease while demand for maintenance and repair will increase.
・Higher need for anti-disaster, disaster mitigation and earthquake resistance against natural disasters・Response to labor shortages and work style reform
・Increase in maintenance/repair construction work due to the aging of social infrastructure
・Expansion of inbound demand・Construction work for facilities related to the 2020 Tokyo Olympic and Paralympic Games・Increase in private capital investment due to improved corporate earnings・Construction work related to the Linear Chuo Shinkansen and projected Shinkansen lines
Future (2020 and after)Present
Japan
Overseas
CSR
・Economic growth of ASEAN countries
・Shrinkage of domestic markets due to population decrease・Restraint in public investment due to fiscal constraint
Decrease in construction investment demand and increase in maintenance and repair demandRobust construction investment demand
・Response to SDGs and ESG
Basic Policy
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While a favorable environment continues, we will strive for sustainable growth and improvement in long term corporate value by responding to changes in the business
environment through investment in areas expected to grow going forward (overseas, maintenance and repair, and labor-saving).
2018
Net sales 52 billion yen
ROE 10.7%
DOE 2.7%
Growth strategy
Reinforcement of management base
Establishment of target indicators
Appropriate allocationof funds
・Maintain and expand the current earnings, which have been breaking past profit records
・Growth investment with conscious of capital costs
Changes in the business environment
Net sales100 billion yen(during 2020s)
Growth Strategy
【M&A strategy】 Four perspectives in pursuing M&ANeighboring industryPursue M&A with companies associated with industries other than the construction industry and promote business expansion
Deepening the businessPursue M&A with material manufacturers, etc.
Expansion of business areaPursue M&A with companies that maintain overseas sites to promote business area expansion
Amplifying sales patternsPursue M&A with companies that operates different sales patterns from those of KONDOTEC, such as retail, catalog-based selling, and online sales.
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・Four growth strategies(Cultivation of new customers, Offer of new merchandise, Adoption of flexible sales methods and cultivation of distribution routes)
・Response to natural disasters・Expansion of operating sites
Organic growth
strategies
・Increasing presence in foreign markets・M&A strategy(Corporate acquisitions and business/capital tie-ups)
Non-core growth
strategies
We will enhance our earnings capability in the existing core business and expand into
areas expected to grow going forward.
Expansion of distribution channels
Entry into the online business
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2
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3Full-scale deployment in ASEAN countries(e.g. Thailand, Indonesia)
Reinforcement of materials that support buildings
and structures
Shipbuilding, transport, land and sea cargo handling, manufacturing & production facilities, fisheries, cultivation, agriculture, etc. M&A
Strategy
Neighboring industry Deepening of business
Amplifying sales patternsExpansion of business area
Reinforcement of management base
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We fulfill our social responsibility through business activities while taking the initiatives which are conscious of SDGs and ESG.
Moreover, we will strive for sustainable growth and improvement in long term corporate value.
・Reinforcement of corporate governance and thorough compliance・Expanding into areas expected to grow going forward(Increasing presence in foreign markets, M&A strategy)
・Investment with conscious of capital costs
Governance
・Capital investment for quality improvement and labor-saving・Promoting constructive dialogues with shareholders and Investors・Creating a platform on which diverse human resources can keep working free from anxiety
Social
・Expansion of the handling of environment-related products and merchandiseand Response to natural disasters
・Environmental protection and Energy-saving initiatives・Management of emissions
Environment
Target Indicators
Capital efficiency target
ROE is a major management indicator for KONDOTEC.We aim for an ROE of 10% or higher by striving to improve capital efficiency as well as working to strengthen our financial
position and take other steps to enhance our earnings capability in pursuing strategic investment by M&A and other means, as well as actively expanding business investment aimed at growth.
Shareholder return target
In terms of dividends, while fully taking into account both consolidated operating results and the dividend payout ratio, we have the basic policy of distributing
dividends to shareholders continuously and stably, targeting a dividend on equity (DOE) of 2.5% or higher.
Capital efficiency target ROE 10% or more
Shareholder return target DOE 2.5% or more
DOE is an indicator that takes into account both a dividend payout ratio, which is appropriation for shareholders and ROE, which is capital efficiency. That is an indicator that contributes to the creation of shareholder value we set.
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We set “capital efficiency target” and “shareholder return target”.
Financial Target
Consolidated target(million yen)
2018(Actual) 2019(Plan) 2020(Plan) 2021(Plan)
Net sales 52,811 55,316 58,056 58,674
Operating income 3,537 3,733 4,013 4,089
Ordinary income 3,655 3,833 4,112 4,191
Profit attributable to owners of parent
2,523 2,626 2,818 2,873
The Medium-term Management Plan adopts the rolling method which responds to changes in the business environment while verifying
the outcome and issues every year in an effort to realize the mid-to-long vision.
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We will aim to achieve increase in net sales and income by financial target based on the Existing sales structure
《Medium-term Target》
《Long-term target》
During 2020s Net sales(Consolidated) 100 billion yen
Allocation of funds
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Operating CF8,400
million yen(*)
Funds on hand9,893
million yen
We maintain high capital efficiency through growth investment with conscious of capital costs and stable shareholder returns.
Stable and continuous dividendsDividends2,300
millionyen
Execution of M&AStrategic investment
3,600million
yen
Equipment replacement, introduction of new equipment to factories, etc.
Capital investment
2,800million
yen
Transformation of lump-sum retirement allowance to defined-benefit corporate pension plan
Investment in people
1,200million
yen
Investment for growth
Shareholder return
(*) Temporary increase in contributions due to the transformation of lump-sum retirement allowance to defined-benefit corporate pension plan is not included.
【 Supplement 】 Transition in dividends(Plan to increase dividends for the 8th consecutive period)
◆ Transition in dividends
9
0yen
5yen
10yen
15yen
20yen
25yen
30yen
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019
Commemorative dividendIncrease in ordinary dividendsOrdinary dividend
Since the initial listing: No decrease in dividends
We have the basic policy of distributing dividends to shareholders continuously and stably. Moreover, we are targeting dividend on equity(DOE) 2.5% or more.
We executed a 2-for-1 stock split of common stock on January 1, 2012.Dividend per share is all figures taking into consideration the impact of stock split.
5.5yen
6.0yen
10.0yen
5.0yen
11.0yen
13.0yen
13.5yen
14.0yen
15.5yen
20.0yen
22.0yen
23.0yen
26.0yen
(Plan)
24.0yen
10
◆ Notes on forward-looking statements
This document contains forward-looking statements including operating forecasts andbusiness plans.Future operating performance projections that the Company releases are based on dataavailable at the time of making the release. Actual results may differ considerably fromprojections due to various factors and changes.
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