During FY 2019, the global economy faced increasingly difficult circumstances due to the impact of the spread of COVID-19 going into the fourth quarter, amid growing signs of an economic slowdown due mainly to concerns on the trade issue between the U.S. and China as well as confusion stemming from Brexit. Under these circumstances, the dollar-yen exchange rate moved within the range of the lower ￥112 to the lower ￥103 per US$1.

In the air transportation industry, owing to the impact of the global spread of COVID-19, travel bans were issued in each country, causing a sharp decrease in passenger demand which had been robust until the outbreak. This resulted in a significant deterioration of the business environment. As for aircraft manufacturers too, both Boeing and Airbus plan to substantially reduce production due to the sharp decline in demand for air transportation.

Under such circumstances, in the aircraft interiors business and the aircraft seat business, we worked to identify the cause and verify safety in response to the inappropriate quality issues announced on March 26, 2019, and implemented corrective/preventive measures, while proceeding with efforts to raise awareness of both compliance and quality to a higher level.

In the aircraft components business, we took initiatives to improve productivity, while proceeding with in-house production of interiors and seat parts by applying the metal processing technologies we have accumulated over the years.

In the aircraft maintenance business, we continued with initiatives to ensure flight safety and enhance quality, while also endeavoring to expand aircraft maintenance for airlines.

As a result, on a consolidated basis, during FY 2019, the Company posted net sales of ￥91,535 million (up ￥7,467 million compared to the previous fiscal year), operating income of ￥1,807 million (down ￥2,513 million compared to the previous fiscal year), ordinary income of ￥1,178 million (down ￥2,112 million compared to the previous fiscal year) and net income attributable to shareholders of parent company of ￥605 million (down ￥1,304 million compared to the previous fiscal year).

Provision for loss on construction contracts of ￥3,607 million for construction to be completed in or after the next fiscal year was recognized at the end of FY 2019. The impact of this provision for loss on construction contracts on income (loss) for the quarterly fourth quarter of FY 2019 was a decrease of ￥460 million in cost of sales (provision for loss on construction contracts as of December 31, 2019 was ￥4,068 million) and, for FY 2019, a decrease of ￥173 million in cost of sales (provision for loss on construction contracts at the end of FY 2018 was ￥3,781 million).

Selling, general and administrative expenses, non-operating income (expenses), and extraordinary income (loss) are as follows:

Selling, general and administrative expenses were ￥8,636 million (a decrease of ￥684 million compared to the previous fiscal year), due mainly to decreases in warranty expenses and sales commissions.

In terms of non-operating income (expenses), an expense of ￥629 million was reported due mainly to a deterioration in foreign exchange gains (losses) resulting from the appreciation of the yen in the foreign exchange market from the end of the previous fiscal year, despite a decrease in compensation expenses (an expense of ￥1,030 million in the previous fiscal year).

As for extraordinary income (loss), although insurance income related to quality issues of ￥60 million was recognized due to liability insurance, a loss of ￥279 million was reported due mainly to loss related to quality (a loss of ￥263 million in the previous fiscal year).

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