JAMCO deeply appreciates the valued support of shareholders.
Can you summarize the business results for fiscal year 2016?
During fiscal year 2016 (from April 1, 2016 through March 31, 2017), unfortunately both net sales and ordinary income of JAMCO sharply decreased in comparison with the previous fiscal year. The aircraft interiors business and the aircraft seat business became a separate business segment with the reorganization of the Company that took place on June 28, 2016. Although shipments of aircraft seats increased, costs grew due to the posting of provision for loss on construction contracts and one-time processing of expenses following partial cancellation of seat programs. In addition, there was a decrease in U.S. dollar-denominated net sales resulting from appreciating yen on the foreign exchange market compared to the previous fiscal year and a decrease in net sales of galleys for Boeing 777s due to the transition to the Boeing 777X under development by Boeing. In the aircraft components business, both net sales and ordinary income slightly decreased as a result of a relative decrease in U.S. dollar-denominated net sales and a decline in production volume of carbon fiber reinforced plastic (CFRP) structure parts for the Airbus A380, despite increased production volume due to robust order receipt of engine parts for commercial aircraft. In the aircraft maintenance business, both net sales and ordinary income fell due in part to a decrease in completed construction compared to the previous fiscal year, when order receipts for special work and completed construction remained relatively brisk. As a result, on a consolidated basis, JAMCO posted net sales of ¥81,834 M [$729 M] (down ¥9,726 M [$86 M] compared to the previous fiscal year), operating income of ¥2,132 M [$19 M] (down ¥6,661 M [$59 M] compared to the previous fiscal year), ordinary income of ¥1,285 M [$11 M] (down ¥6,959 M [$62 M] compared to the previous fiscal year), and net income attributable to shareholders of the parent company of ¥1,014 M [$9 M] (down ¥4,155 M [$37 M] compared to the previous fiscal year). With respect to the dividends of surplus for this term, we regret to say that we have decided to reduce dividends and pay an annual dividend of ¥10 per share (a 26.4% consolidated dividend payout ratio).
Please tell us about the medium-term (three-year) management plan, including your forecast for the full-year business results for fiscal year 2017.
In the aircraft interiors business, we expect net sales to decrease by about ¥6,500 M [$57 M] and ordinary income to fall by about ¥1,400 M [$12 M] in fiscal year 2017 mainly due to a decline in sales of galleys to airlines for the current Boeing 777s which are facing transition to the new model and declines in order prices. However, we expect ordinary income to grow from fiscal year 2018 due to cost reduction and a gradual recovery in sales of galleys. In the aircraft seat business, net sales are expected to increase in fiscal year 2017 by about ¥3,200 M [$28 M] from the previous fiscal year as shipments of products under new programs begin. We expect gross profit to achieve a surplus through promotion of cost reduction and having addressed the issue of unprofitable construction contracts through the provision for loss on construction contracts at the end of the previous fiscal year. However, a loss is expected to remain in terms of ordinary income. We are aiming to restore profitability from fiscal year 2018. Since aircraft seats are important products, indispensable to our interiors business along with galleys and lavatories, we are striving to foster them as main sources of earnings in the future, with the entire Group working together. We will endeavor to improve profitability by continuing to drive ahead with improvement, although we seem to be still laying the foundations for a future in the throes of creation. In the aircraft components business, we expect both net sales and ordinary income to increase from fiscal year 2017 onward, primarily due to advances in cost reductions associated with CFRP structure parts for the Airbus A350XWB, which were a factor for decreased income in the previous fiscal year, as well as increases in net sales of engine parts for commercial aircraft and heat exchangers, despite a decline in production volume of CFRP structure parts for the Airbus A380. In the aircraft maintenance business, we aim to create new business models by promoting initiatives for new aircraft maintenance business, with flight safety and quality enhancement as the norm, and through orders for onboard accessories maintenance, with overseas customers also in view. We expect defense-related orders to increase in fiscal year 2017 and those for aircraft renovation and regional jets to grow from fiscal year 2018 onward. We will also focus on sale of parts, which started in the previous fiscal year. In summary, we forecast net sales of ¥79,400 M [$707 M], operating income of ¥3,800 M [$33 M], ordinary income of ¥3,470 M [$30 M], and net income attributable to shareholders of the parent company of ¥2,280 M [$20 M] for fiscal year 2017. In addition, we anticipate a dividend of ¥20 per share (a 23.5% consolidated dividend payout ratio) for the next fiscal year.
Finally, please convey your message to our shareholders.
Despite uncertainty over economic trends and geopolitical risks, the aircraft industry is expected to expand in the medium- to long-term, in line with global economic growth. Needless to say, global competition will further intensify for both airlines and aircraft manufacturers and the business environment is also far from reassuring for suppliers, like us. However, demand for air transportation is expected to steadily increase. By grasping this trend, JAMCO Group will strive to realize its medium-term vision: “JAMCO’s objective is to position itself as the foremost aircraft-related company in its field to focus its primary business on the aircraft interiors segment with capabilities in both component production and aircraft maintenance.” I would like to ask our stakeholders for their continued support to the JAMCO Group.