Overview of Business Results for the Fiscal Year Under Review

During FY2018, the overall global economy remained firm, as the U.S. economy steadily grew, and the economies in Japan and the euro zone also continued to recover moderately, despite the expected slowdown in the Chinese economy due to the growing impact of trade friction between the U.S. and China. In the foreign exchange market, the dollar yen exchange rate generally showed a trend of a yen depreciation, moving within the range of the upper ¥105 to the lower ¥114 per US$1, amid uncertainties about the future due mainly to the trends in trade issues.

In the air transportation industry, while fierce competition continues due to aggressive efforts of low cost carriers (LCCs), major airlines are launching various strategies such as securing new flight routes, enhancing passenger cabin services, and enteri ng into LCC business as a result of growing global demand for air transportation. Backed by rising aircraft demand, aircraft manufacturers, both Boeing and Airbus , delivered a record number of aircraft in 2018. With plans to increase production of some mod els, along with progress toward the development of new models aiming at improved fuel efficiency, the aircraft market is expected to remain robust. Furthermore, historic realignment movements, such as strategic acquisitions of regional jet manufacturers by Boeing and Airbus, are progressing.

Under such circumstances, in the aircraft interiors business, the Group worked to improve production efficiency, while proceeding with the development of lavatories for Boeing 777X. We also embarked on the development o f galleys for Boeing 777X upon receipt of orders from major airlines. 

In the aircraft seat business, we worked to further expand order receipt following order receipt of standard seats for KLM Royal Dutch Airlines, while conducting initiatives to improve p roduction efficiency and reduce cost. We also started shipment of first class seats for a major airline. 

In the aircraft components business, we promoted initiatives to improve productivity, while proceeding with initiatives to increase production of aircraft engine parts. We also began in house production of interiors and seat parts applying the metal processing technolog ies we have accumulated over the years.

In the aircraft maintenance business, we continued with initiatives to ensure flight safety and enhance quality, while also taking initiatives to expand the range of services and improve earnings. We also conducted capital participation in MRO Japan Co., Ltd. of the ANA Group, in order to expand the business fields of aircraft maintenance.

As a result, on a consolidated basis, during FY2018, the Company posted net sales of ¥84,068 million (up ¥6,276 million compared to the previous fiscal year), operating income of ¥4,321 million (down ¥144 million compared to the previous fiscal year), ordinary income of ¥3,290 million (down ¥213 million compared to the previous fiscal year) and net income attributable to shareholders of parent company of ¥1,910 million (up ¥229 million compared to the previous fiscal year).

Provision for loss on construction contracts of ¥3,781 million for construction to be completed in or after the next fiscal year was recognized at the end of FY2018. The impact of this provision for loss on construction contracts on income (loss) for the fourth quarter of FY2018 was a n in crease of ¥842 million in cost of sales (provision for loss on construction contracts as of December 31, 2018 was ¥2,938 million) and, for FY2018, an increase of ¥1,714 million in cost of sales (provision for loss on con struction contracts at the end of FY2017 was ¥2,066 million).

Selling, general and administrative expenses were ¥9,321 million (an increase of ¥633 million compared to the previous fiscal year) due mainly to increases in research and development expenses and sales commissions.

In terms of non operating income (expenses), an expense of ¥1,030 million was reported due mainly to recogni tion of compensation expenses, despite an increase in foreign exchange gains (an expense of ¥962 million in the previous fiscal year).

As for extraordinary income (loss), a loss of ¥263 million was reported due mainly to loss related to quality and loss on disposal of non current assets (a loss of ¥49 million in the previous fiscal year).

The inappropriate inspections at the Company and Miyazaki JAMCO Corporation, to which the Company outsources production, were announced on March 26, 2019. After these inappropriate inspections came to light, we immediately confirmed the safety and promptly took measures. We also apologized to our customers and explained to them that there was no direct impact on product quality and safety, and we are currently working to obtain their understanding. In addition, we are proceeding with an investigation, covering Group companies, to identify th e cause and verify the validity of the preventive measures through the establishment of an in house quality and service improvement team and the Special Investigation Committee comprising third parties who do not have a relationship of interest with the Company.

The Group takes these quality issues seriously and will make efforts to raise our quality first awareness, while earnestly undertaking corrective/preventive measures based on thorough analysis of the cause.

(Amounts are rounded down to the nearest million yen.)

Net sales

Operating income

Ordinary income

Net income attributable
to shareholders of
parent company

Full year

84,068

4,321

3,290

1,910