Business Overview

Business Overview Suminoe at a Glance

Business Overview 2017

president yoshikawa

Consolidated financial result

During the consolidated fiscal year ended May 31, 2017 under review, the Japanese economy saw consumer spending lose momentum, although the employment and income environment gradually improved due to the government's economic policy, and the growth of corporate earnings stagnated due to the further appreciation of the yen. The global economy continued to be unstable and uncertain, due to economic slowdown in emerging countries in Asia, including China, Brexit (the U.K.'s withdrawal from the E.U.), and policy developments under a new administration in the U.S.
Meanwhile, Suminoe Textile substantially postponed the announcement of financial results for the previous year and the first quarter of the current year due to improper accounting treatments by Suminoe Textile of America Corporation (STA), a subsidiary in U.S. We deeply apologize for the inconvenience and anxiety caused to all our shareholders and other parties concerned including our customers and business partners. We are determined to thoroughly implement measures to prevent the recurrence of such improper accounting to become a valuable enterprise that is needed by society.
In the current fiscal year, sales decreased from the previous year due to the yen's appreciation. On the other hand, operating income, ordinary income, and net income attributable to owners of the parent declined over the last year due to the following factors: expenses were incurred by STA for measures to prevent the recurrence of improper accounting and for improving productivity; expenses were incurred by us for relocating our offices and distribution center due to seismic retrofitting of our head office building; and share of profit of entities accounted for using equity method and real estate rent decreased.
Consequently, our consolidated net sales for the fiscal year under review were ¥96,038 million (U.S.$865,207 thousand, down 1.5% year-on-year), with operating income, ordinary income and net income attributable to owners of parent of ¥1,298 million (U.S.$11,694 thousand, down 49.2%), ¥1,365 million (U.S.$12,293 thousand, down 52.7%), and ¥26 million (U.S.$234 thousand, down 89.2%), respectively.

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Dividend policy

The Company has positioned shareholder return as a key management issue and distributes profits appropriately by taking into account stable dividend payments and business results. Based on this basic dividend policy, for this fiscal year, we have paid an annual dividend of ¥7.0 (U.S.$0.06) per share (¥3.5 (U.S.$0.03) per share for both year-end and interim dividends).
In addition, it plans to pay an annual dividend of ¥7.0 per share (an interim dividend of ¥3.5 and year-end dividend of ¥3.5) for the fiscal year ending May 2018.

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Outlook for the next term

The fiscal year ending May 31, 2018 was scheduled to be the last year of “Advance Ahead 2018,” our three-year medium-term management plan, which started in June 2015. However, we reviewed the plan and formulated our 5th three-year medium-term management plan, “2020,” which started in June 2017, because the business environment had fundamentally changed. In FY2018, the initial year of our new management plan, we forecast sales and operating income to increase from FY2017, since the Interior Fittings and Automotive Textiles and Traffic Facilities Segments are expected to perform steadily. In addition, we project that operating income, ordinary income and net income attributable to owners of the parent will be pushed up because there will be no special factors like those which weighed on FY2017, including expenses for measures to prevent the recurrence of improper accounting by STA and expenses for relocating our offices and distribution center due to seismic retrofitting of our head office building.
Considering these circumstances, we plan to post net sales of ¥97,500 million, operating income of ¥2,800 million, ordinary income of ¥2,950 million, and net income attributable to owners of the parent of ¥1,500 million for the fiscal year ending May 31, 2018.

Suminoe at a Glance

Suminoe at a Glance

Interior Fittings

Interior Fittings

At the Vanguard of Lifestyle Creation

Ever since 1891, when its carpets were supplied to the Imperial Diet Building on the occasion of its opening, the Suminoe Textile Group has created comfortable and safe living spaces as a pioneer in the Japanese interiors industry. Currently, our curtains and carpets are primarily marketed by SUMINOE Co., Ltd. and our wallpaper and paper for sliding doors by RUNON CO., LTD. The Suminoe Textile Group is committed to providing environmentally friendly products that feature both excellent design and functionality, and serving diverse customers by offering a wide variety of interior products for public facilities, hotels, schools, hospitals, and office buildings, as well as for general households.
In recent years, we have worked on the production of eco-friendly products, under the theme of KKR+A, or Kenko (Health), Kankyo (Environment), Recycle and Amenity.

Environmentally Friendly Product at World's Highest Level

ECOS® is a series of recycled carpet tiles produced using horizontal recycling technology. ECOS® has achieved a post-consumption recycled material usage rate of 83% and a CO2 emission reduction rate of 44%. * Through our proprietary recycling system, recycled materials are created from old carpet tiles. * Figures for ECOS® EX-7000, in comparison to our conventional products, according to LCA results.

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Business overview for the fiscal year ended May 31, 2017

Sales of commercial-use carpets fell from the previous year due to the dearth of large-scale orders, although the export of ECOS®, eco-friendly carpet tiles under the horizontal recycling system, grew robustly and orders for carpets related to the construction and remodeling of hotels were strong in Japan. Sales of curtains as a whole (including ones for general households, such as mode S® Vol.8 and U Life® Vol.8) decreased over the last year, although sales of Face, curtains for medical and welfare institutions, continued to increase steadily. Sales of carpets, rugs and mats for general households declined from the previous year since consumer spending hit a plateau. Sales of wall coverings remained flat from the last year due to poor sales of the mass-production type Runon Mark Ⅱ, although Runon Fresh Premium sold strongly.
Consequently, the Interior Fittings Segment posted operating income of ¥721million (U.S.$6,495 thousand, down 26.6% year-on-year) on net sales of ¥35,411 million (U.S.$319,018 thousand, down 2.9%).

Automotive Textiles and Traffic Facilities

Automotive Textiles and Traffic

Our Expertise in Proposing Optimal Solutions as a Total Supplier

In 1931, Suminoe Textile supplied carpets and seat covering materials for automobiles assembled and manufactured in Japan for Ford Motor Company and General Motors. After World War Ⅱ, the production of domestic automobiles increased, with our products adopted in these Japanese-made cars one after another. At present, Suminoe Textile supplies its products to all Japanese automobile manufacturers.
The greatest feature of our Company is that we can supply a total line of automotive textiles, from floors to ceilings, including headliners, seat covering materials, car mats, and floor carpets.
Outside Japan, the Suminoe Textile Group has now expanded its overseas presence by setting up 11 manufacturing and sales sites in six countries (the United States, Mexico, China, Thailand, Indonesia, and India), aiming at the creation of a globally optimized supply system.

Automotive Textiles and Traffic

Confidence Based on Our Experience as a Pioneer

In 1896, we succeeded in producing hand-woven moquette as a seat covering for the first time in Japan. This domestic moquette was adopted by Japan National Railways (now Japan Railways (JR)) for its seat coverings in 1899. Since then, we have supplied our products to JR, private railways and publicly operated transportation services, maintaining the top market share for more than a century. Currently, Suminoe Textile offers total proposals for seat coverings, curtains, wall materials, flooring materials and other interior materials for public transportation systems, such as Shinkansen bullet trains and other trains, buses, ships, and aircraft. We also deliver environmentally friendly products, including SUMICUBE® seat cushion material, which excels in terms of both safety and environmental performance.

Business overview for the fiscal year ended May 31, 2017

In the area of automotive textiles, sales increased from the previous year in Japan, since sales of floor carpets and car mats grew robustly and we steadily received orders for new components and new models. Meanwhile, our overseas sales, mainly to China, Thailand, and Indonesia, grew against the backdrop of strong demand. STA saw their efforts to lower labor costs and to improve productivity pay off to some extent. In automotive textiles as a whole, sales exceeded those of the previous year, thanks to the expansion of sales channels for new products and the establishment of a global production system, despite the impact of the yen's appreciation.
In the area of traffic facilities, railway vehicle-related sales increased, supported by orders related to new vehicle production and remodeling from the Japan Railways (JR) Group and other private railway companies, including orders for luxury sleeping limited express trains. Orders for new buses remained strong, along with a rise in demand for high value-added products for optional accessories and a growth in orders for floor display films, resulting in a sharp increase in both sales and operating income. Orders for seat covering materials for airplanes also grew steadily. In traffic facilities as a whole, both sales and operating income exceeded those of the previous year substantially.
Consequently, the Automotive Textiles and Traffic Facilities Segment posted operating income of ¥3,035 million (U.S.$27,343 thousand, up 22.8% year-on-year) on net sales of ¥56,377 million (U.S.$507,901 thousand, up 0.8%).

Functional Materials

In Pursuit of Endless Business Possibilities

Transcending the boundaries of our traditional business segments, such as interior fittings and automotive textiles and traffic facilities, we have embarked on business targeting other fields and industries. Suminoe Textile has offered products that incorporate the unique technologies we have accumulated, such as TRIPLE FRESH® deodorizing filters and olefin bathroom flooring. In addition, the Company offers new value in the field of functional materials (SUMINOE BIOTECH®) based on biotechnology, in keeping with the theme of KKR+A, or Kenko (Health), Kankyo (Environment), Recycle and Amenity.

Tispa Deodorization Related Brand

The Tispa Series, Real Odor Deodorization without Disguising with a Scent, is stationary deodorizers for home use, making use of a deodorant filter.

Functional Materials

Air-filter Products

TRIPLE FRESH® Bio is a concept of deodorizing filter where a biomimetic enzyme is invested in to a corrugate carrier. It continuously decomposes and deodorizes unpleasant odor components by oxidation-reduction reaction. This technology is incorporated into deodorizing filters used in air purifiers and other household appliances.

Functional Materials

SUMITRON®

Continuous fiber made from recycled PET bottles.

Functional Materials

Electric Carpet

The main unit is produced by Suzhou Suminoe Textiles Co., Ltd.

Functional Materials

Floor Material for Bathrooms

We have developed bath flooring made of eco-friendly olefin materials.

Functional Materials

SUMINOE BIOTECH®

Functional materials based on biotechnology, and foods, processed foods, cosmetics, etc., making effective use of these materials.

Functional Materials

Business overview for the fiscal year ended May 31, 2017

In the electric carpet business, orders exceeded those in the previous year, while floor materials for bathrooms sold well. Therefore, both businesses saw sales and operating income grow from last year. In the areas of deodorizing filters for air conditioners, heating equipment, and refrigerators, carpets for airplanes, and mats for school children (on an OEM basis), both sales and operating income decreased from the previous year.
In the current fiscal year under review, we excluded Suminoe Nakacho Device Technology Corporation, which engages in slicing silicon ingots for solar cells, from the scope of consolidation, since we sold some of their shares held by us to Nakamura Choukou Co., Ltd., a partner in a joint venture.
Consequently, the Functional Materials Segment posted operating income of ¥126 million (U.S.$1,135 thousand, down 7.1% year-on-year) on net sales of ¥4,087 million (U.S.$36,820 thousand, down 17.8%).