medium_aa2020

2017/7/14 Notice Regarding Formulation of 5th Three-Year Medium-Term Management Plan "2020"(223KB)

Summary

As a result of improper accounting treatments by Suminoe Textile of America Corporation (STA), its subsidiary in the U.S., Suminoe Textile experienced a series of negative events unprecedented since its foundation, including a substantial delay in announcement of financial results for the fiscal year ended May 2016, retrospective adjustment of financial statements for the prior four accounting periods, a delay in announcement of financial results for the first quarter of the fiscal year ended May 2017, and incurrence of expenses for preventing the recurrence of inappropriate accounting.
Under its 5th three-year medium-term management plan, reflecting on STA’s improper accounting treatments, the Company will focus not only on expanding its business but also on thoroughly implementing measures to prevent the recurrence of improper accounting treatments, such as strengthening compliance with rules and laws, reviewing its management system, and restructuring its main system.
The 5th three-year medium-term management plan "2020" started in the fiscal year ended May 2018. This fiscal year is the second year.

Themes
Restructuring of corporate governance
Growth of business

Restructuring of corporate governance

Suminoe Textile believes that not only the growth of business but also fair business activities and transparent organizational operation based on corporate ethics are essential for the continuation of an enterprise. In the fiscal year ended May 2017, the Company invited outside experts, and the Recurrence Prevention Committee formulated a medium-and long-term plan for thorough compliance with rules and laws.
Under its new three-year medium-term management plan, the Company will implement the following measures according to the roadmap.

Review of financial results management system

  • The Company will restructure its main system for the entire group and improve its information infrastructure for efficient and effective monitoring.
  • The Company will strengthen its management system for local firms and physical inventories including on-site inspections of overseas subsidiaries.

Restructuring internal control system

  • The Company will enhance the appro­priateness and effectiveness of its internal control system by reconfirming the operation and improvement of the internal control system, disseminating the whistle blowing system, and upgrading auditing functions.
  • The Company will promote interactive in-house communication, through top manage­ment’s frequent visits to workplaces, the enhanced communications between the management and workplaces, and the identification of risk factors initiated by middle management.

Growth of business

In Japan, demand for the renovation of hotel rooms and remodeling of railway vehicles is expected to pick up in the short term in preparation for the Tokyo 2020 Olympic and Paralympic Games. However, the market is forecast to shrink over the medium and long term because of the decreasing population, especially the decline in the working-age population caused by the falling birthrate. Overseas, the economies of emerging countries, mainly in the Asian region, are expected to continue to grow steadily. But, in recent years, the outlook for the global economy has become more uncertain, since protectionist political movements, which are rising in reaction to globalization, have cast a shadow over global economic activity.
Suminoe Textile will strengthen its foothold and wrestle with the undermentioned issues to grow business in the coming three years, since the management finds it difficult to expand business at home and abroad without a reform of the Company.

Expansion of product lineups

The Company will expand its product lineups for existing customers.

  • Expand the intake of orders for new automobile products and promote new components.
  • Expand sales of hard floor materials with high functionality and quality.
  • Expand lineup of products for improvement of vehicle safety and ones with environmental performance including non-textile products.
  • Expand sales of all kinds of functional products through development of applications.

Strengthening of globalization

The Company will horizontally promote existing business in the global market.

  • Expand the adoption of products in Japanese automobiles that are marketed globally.
  • Transplant know-how fostered in the domestic automotive textiles business to overseas subsidiaries.
  • Establish new cushion materials that satisfy combustion test standards of overseas railways.
  • Develop and export deodorizing filters that satisfy international standards.

Development and sales of high value-added products

The Company will uncover needs, and develop and market high value-added products.

  • Expand sales of ECOS® at home and abroad, a recycled carpet tile, which has achieved one of the world’s highest material recycling rates (83%).
  • Produce small lots of a variety of products to meet diversified needs for general household carpets and curtains.
  • Add new functions to electric heating devices including electric carpets to develop and expand sales of differentiated products.
  • Develop new products using its film lamination technique.
  • Conduct research and development of smart fabrics.

Consolidated numerical targets

(Millions of Yen) FY2017 FY2018 FY2019 FY2020
Result Original Forecast Result Original Forecast Revised Forecast Original Forecast
Net sales 96,038 97,500 97,872 100,000 97,500 102,000
% change from the previous year 98.5% 101.5% 101.9% 102.6% 99.6% 102.0%
Operating income 1,297 2,800 2,247 3,100 3,100 3,450
Ratio of operating income to net sales 1.4% 2.9% 2.3% 3.1% 3.2% 3.4%
Ordinary income 1,364 2,950 2,358 3,350 3,350 3,750
Profit attributable to owners of parent 26 1,500 1,083 1,900 1,900 2,200
ROE 0.1% 4.5% 3.2% 5.5% 5.5% 6.0%

Note: The figures in the results for the fiscal year 2017 and 2018 are based on Japanese GAAP.

Targets of each business segment

The Company has set the following targets for its main businesses.

Net sales by business segment

Note: The figures in the results for the fiscal year 2017 and 2018 are based on Japanese GAAP.

Automotive Textiles and Traffic Facilities Segment

In the area of automotive textiles, the Company will strengthen its internal control system including at its overseas bases to steadily promote global expansion.

  • Expand the intake of orders for new components and materials to promote the diversification of its business.
  • Transplant know-how fostered in Japan to overseas subsidiaries with the aim for improving their quality, cost competitiveness, and delivery systems (QCD).

In the area of traffic facilities, the Company will develop and expand sales of new products, including products for improvement of vehicle safety amid the growing demand for new vehicle production and remodeling of railway vehicles toward the Tokyo 2020 Olympic and Paralympic Games.

(Millions of Yen) 5th Three-Year Medium-Term
Management Plan "2020"
FY2017 FY2018 FY2019 FY2020
Result Result Revised
Forecast
Original
Forecast
Net sales 56,377 59,758 58,140 59,680
Operating income 3,034 3,331 4,180 3,960

Note: The figures in the results for the fiscal year 2017 and 2018 are based on Japanese GAAP.

Interior Fittings Segment

The Company will strive to improve profitability through enhancement of products and cost competitiveness.

  • Actively capture demand from the construction of hotels toward the Tokyo 2020 Olympic and Paralympic Games.
  • Strengthen the lineup of differentiated products to meet diversified needs for general household carpets and curtains.
  • Expand sales of high value-added wall coverings to meet rising demand for home improvement.
  • Promote sales through the Internet.
  • Expand sales of hard floor materials with high functionality and quality.
(Millions of Yen) 5th Three-Year Medium-Term
Management Plan "2020"
FY2017 FY2018 FY2019 FY2020
Result Result Revised
Forecast
Original
Forecast
Net sales 35,410 34,329 35,450 38,120
Operating income 720 33 210 670

Note: The figures in the results for the fiscal year 2017 and 2018 are based on Japanese GAAP.

Functional Materials Segment

The Company will strengthen its existing businesses, while energetically exploring new markets both at home and abroad.

  • Add new functions to electric heating devices including electric carpets to develop and expand sales of differentiated products.
  • Develop and export deodorizing filters that satisfy international standards.
  • Develop new products using its functional materials, and functional processing techniques, and film lamination techniques.
  • Develop aircraft carpets that have international competitiveness with overseas marketing in view against the backdrop of the recent growing demand for air travel and freight around the world.
  • Promote the functional food business.
(Millions of Yen) 5th Three-Year Medium-Term
Management Plan "2020"
FY2017 FY2018 FY2019 FY2020
Result Result Revised
Forecast
Original
Forecast
Net sales 4,087 3,647 3,780 4,020
Operating income 125 176 140 200

Note: The figures in the results for the fiscal year 2017 and 2018 are based on Japanese GAAP.

Changes in net sales by region

Note: The figures in the results are based on Japanese GAAP.

  • Net sales in Japan are projected to exceed 70,000 millions of yen, the level the Company recorded before the Lehman shock in September 2008.
  • With an eye toward overseas growth in the next period, the Company will restructure its main system to strengthen its foothold and to improve profitability.
  • The Company aims to achieve net sales of 100,000 millions of yen in its new management plan.

Capital expenditure plan

During the three-year period of its new management plan, the Company plans to invest 6,800 millions of yen in total to expand business and to restructure its main system.

(Millions of Yen)
5th Three-Year Medium
-Term Management Plan "2020"
Japan Overseas IT
3,100 2,200 1,500

The plan presented in this document was prepared on the basis of currently foreseeable and reasonable prospects. Actual results may differ from the plan, due to various factors.