Year Ended March 31, 2017 ANNUAL REPORT

Transcription

1 Year Ended March 31, 2017 ANNUAL REPORT 2017

2 To Our Shareholders Chairman and CEO Akiji Makino President Mitsuhiro Tanimoto Based on our corporate philosophy, Become a person needed by society, as those needed by society can prosper, the Iwatani Group delivers various forms of gas and energy to support people s lives and society. The Energy Business, which supports people s lives mainly through LPG, and the Industrial Gases & Machinery Business, which supports industry, form our core business. Through these businesses, we strive for sustainable growth and the enhancement of corporate value. We follow the slogan Creation of a more comfortable space on the Earth is what Iwatani wishes and strives for, and pursue the reduction of the environmental load by, for example, trying to popularize hydrogen, which is the ultimate form of clean energy. To aid in the realization of a hydrogen society, we are installing hydrogen refueling stations nationwide to facilitate the adoption of fuel cell vehicles that do not emit CO 2, and we are producing CO 2-free hydrogen using electricity from renewable sources as part of the Fukushima Plan for a New Energy Society, one of the biggest projects of its kind in the world. As a result of the liberalization of the electric power and gas retail markets in Japan, the situation surrounding gas and energy is undergoing major changes. Looking toward the future, we aim to continue to provide new value and foster sustainable growth as a comprehensive energy company. Materials 19.6% Contents To Our Shareholders... 1 What is Iwatani?... 2 Business Overview... 5 Corporate Governance Financial Highlights Company Information Industrial Gases & Machinery 28.3% 1

3 What is Iwatani? Our Foundation Corporate Philosophy Become a person needed by society, as those needed by society can prosper. Our corporate philosophy, Become a person needed by society, as those needed by society can prosper, represents the business philosophy of Naoji Iwatani, founder of the Iwatani Corporation. Inspired by Darwin s theory of evolution, we pursue the fulfillment of the needs of society and individuals. This corporate philosophy, which lies at the root of all businesses of the Iwatani Group, has been handed down to this day. The iconic example is the LPG business. Iwatani s LPG has instigated a revolution in household fuel while easing the burden of domestic kitchen labor. It is now being widely used as a source of reliable clean energy in daily living, business, the outdoors, and in times of emergency. Agri-bio & Foods 4.6% Others 1.2% Founder, Naoji Iwatani First sale of Marui Propane for household use (1953) Corporate Concept Consolidated Net Sales (FY2016) Gas & Energy Responding to society s needs with our core business of Gas and Energy Energy 46.3% 2

4 What is Iwatani? Our Path to Future Growth In its five medium-term management plans spanning the years from fiscal 2000 to fiscal 2015, the Iwatani Group initiated efforts towards enhancement of capacity for sustained growth and strengthening of the financial standing with gas and energy as our core business. Through enhancing our capacity for sustained growth, ordinary income in fiscal 2016 has risen to eight times the amount in fiscal 2001, which is an average annual growth rate of 15%. Through addressing our financial standing, we have steadily shrunk interest-bearing debt each year while also building additional equity so that in fiscal 2016 the debt/equity ratio (DER) reached 1.0, the culmination of a major transformation. The Iwatani Group is now entering a new revolutionary era. Our theme for fiscal 2017 is growth. With initiatives for entering the city gas market and realizing a hydrogen society, we are aggressively promoting a growth strategy that grasps current trends from a long-term perspective and carrying out management with a strong intention to expand the business scale (FY) 5.5 Debt/equity ratio (DER) Debt/equity ratio (DER): Reduced to 1.0 Strengthening financial standing PLAN (FY) Ordinary income Profit attributable to owners of parent Ordinary income up 8x, maintaining 15% annual growth Enhancing capacity for sustained growth Basic Policies Implement strategies for growth Expand our business foundation Medium-term management plans VD 2002 PLAN 05 PLAN 08 PLAN 12 PLAN 15 To a new stage of growth (FY) 3

5 Important Indicators Ordinary income ( ) Profit attributable to owners of parent ( ) FY2016 Ordinary income 8x (vs. FY2001) 15% average annual growth (FY2001 FY2016) (FY) (FY) Equity capital ( ) Interest-bearing debt ( ) Debt/equity ratio (DER) Debt reduced to 2/3 in FY (vs. FY2001) Operating cash flows ( ) Promoting strategic investment for growth Depreciation ( ) Investment ( ) (FY)

6 Principal focus on LPG Business Overview Energy Gas supply facilities, gas machinery, etc. 26% Segment Net Sales Petroleumrelated 10% LPG (overseas) 10% (FY2016) LPG (industrial use) 7% LPG (consumer use) 47% Features of the Energy Business Nationwide platform Iwatani, which has a system for supplying LPG from importation through to retail sales, is Japan s sole integrated LPG operator. In addition, from 300 business sites nationwide, we make use of this system of sales, distribution, and safety to supply high-quality service with great attention to detail throughout Japan. Nationwide users: 3.1 million households Middle East The US Importation Production Distribution 300 business sites nationwide Sales network Distribution network Safety network Largest domestic customer base Marui Gas, the LPG brand of Iwatani, is used by about 3.1 million households nationwide and occupies the largest market share in the wholesale field. Within that share, direct-sales customers comprise 880,000 households, the largest domestic share in the retail sector. Iwatani LPG Sales Results Industry ranking Retail 1st/ 19,024 companies Wholesale 1st/ 1,100 companies Market share 3.5% 12.5% Households using Marui Gas 880,000 About 3.1 million (Note) As of March 31,

7 Current Status and Future Outlook Looking back on fiscal 2016 Sales prices fell as a result of the fall in LPG import prices, leading to lower revenues LPG import prices rose again from August, leading to higher profits Net Sales 386, , , , ,500 Initiatives for fiscal 2017 Expand the number of LPG household consumers through M&A Increase LPG sales volumes through expanded sales of LPG for industrial use by promoting fuel conversion Develop gas-related equipment and new products related to portable gas cooking stoves, enhance sales of B-to-C products such as Fuji no Yusui natural mineral water Enter the city gas market (FY) Operating Income 12,075 2, , (Forecast) 15,939 13,700 (FY) (Forecast) Our Focused Approaches Enhancing the LPG business With our nationwide platform, Iwatani boasts the No. 1 industry shares in both the wholesale and retail fields. However, these shares are not that high, and we believe there is large room for growth. There are approximately 20,000 retail LPG operators across Japan with most of them small-scale operators. We intend to strengthen our retail business through M&A of retail LPG operators. Growth of Iwatani Direct Sales Customers (Units: 10,000 households) /3 2005/3 2010/3 2015/3 2017/3 Evolving as a comprehensive energy business operator Entry into the city gas market In conjunction with the full-scale retail liberalization of city gas in April 2017, we entered the city gas market in collaboration with Kansai Electric Power and Chubu Electric Power. We have begun providing gas equipment and safety services to city gas users. In particular, we have established Kanden Gas Support with Kansai Electric Power and are organizing a total support system for customers, which covers everything from gas sales to safety services. Kanden Gas Support Shop (Hommachi, Osaka) Toward Rationalization of the LPG Industry LPG is a form of energy used by about 40% of households in Japan. The retail operators that sell this LPG to individual households number about 20,000 companies across Japan. Most of these companies are small-scale operators serving 600 or fewer households, making the prospect of significant growth through rationalization a feature of the LPG industry. Japanese Household Energy Use by Type (million households) City gas All-electric 6.53 FY2015 LPG LPG Retailers by Size of Customer Base 11.9% 10.8% 4.9% 4.7% FY % 45.2% About 68% serve 600 households or fewer Number of customers households households 601 1,000 households 1,001 2,500 households 2,501 4,999 households 5,000 households or more 6

8 Slightly over half of sales are in various industrial gases Air-separation gases 20% Business Overview Industrial Gases & Machinery Gasrelated facilities 46% Segment Net Sales (FY2016) Other gases 13% Specialty gases 21% Features of the Industrial Gases & Machinery Business Hydrogen and helium businesses have No. 1 domestic market shares 1. Hydrogen business Iwatani s initial involvement with hydrogen was in We hold a lot of hydrogen business experience and know-how based on this long history. Especially in recent years, we have steadily increased our sales volumes of liquid hydrogen in Japan, where we now hold a 100% share. Our total domestic share of hydrogen (compressed and liquid) has doubled to 70% over the last 10 years. 2. Helium business Helium is a scarce resource produced from a limited number of natural gas fields. Securing a supply source is a key objective. Procuring supply from two countries, the US and Qatar, we have reached an 8% global share. By capitalizing on our procurement capabilities and logistics network, we strengthened sales in the Japan market, where we hold a 50% share, as well as sales in China and Southeast Asia. Japan Hydrogen Sales Volumes and Iwatani Share (million Nm 3 ) Iwatani share 35% Plant No. 1 enters service Plant No. 2 enters service Hydrogen Iwatani share 70% (Liquid hydrogen share 100%) Compressed hydrogen Liquid hydrogen Plant No. 3 enters service Helium 50% domestic share (Global share 8%) Status of Iwatani liquid hydrogen plants Synergy of gas and machinery Iwatani's business is not limited to industrial gases, but also includes an abundant lineup in machinery and facilities, including welding robots and semiconductor production equipment. By coming up with optimal proposals for combining industrial gases with machinery and facilities, we achieve synergies between gas and robotics and develop businesses not found at rivals. 7

9 Current Status and Future Outlook Looking back on fiscal 2016 Healthy sales in air-separation gases and liquid hydrogen Machinery and facilities sales firm in Japan, falling overseas Net Sales 151, , , , ,000 Initiatives for fiscal 2017 Expand sales of air-separation gases and liquid hydrogen Expand sales and improve profits of helium in Japan and overseas Expand machinery and facilities sales through synergy with industrial gases (FY) (Forecast) Operating Income 8,200 7,624 6,324 6,771 4,753 (FY) (Forecast) Our Focused Approaches Expanding overseas business by leveraging domestic know-how Building upon its long-cultivated technology and know-how and overseas network, Iwatani plans to expand business not only in Japan but overseas as well. We will aim for synergy between our other businesses through crossorganizational collaboration of divisions. Overseas network 61 locations in 16 countries Technology and know-how cultivated in Japan Leading the hydrogen society Expanding overseas business 1. Expanding liquid hydrogen production capacity Iwatani s liquid hydrogen production plant system currently consists of two lines in Osaka, one line in Chiba, and one in Yamaguchi. With a long-term view towards realizing a hydrogen society, we are undertaking the expansion of liquid hydrogen production capacity, with planned expansion of one line each in Yamaguchi (November 2017) and Osaka (July 2019). 2. Installing hydrogen stations To assist the adoption of fuel cell vehicles, Iwatani has built hydrogen stations at 22 domestic locations so far. We will found a new company comprising infrastructure companies, such as Iwatani, and automakers for promoting the installation of hydrogen stations. 3. Initiatives towards CO 2 -free hydrogen Our aggressive initiatives towards the production of the CO 2-free hydrogen, which is essential for the future, include a project to produce liquid hydrogen from Australian lignite and import it to Japan, and verification of hydrogen production using renewable energy. Hydrogen refueling station (Ariake, Tokyo) Lignite mine in Latrobe Valley, Australia 8

10 Electronic materials 13% Functional plastics 23% Metals 31% Segment Net Sales (FY2016) Business Overview Materials Resources/ advanced materials 33% Features of the Materials Business Moving toward the top in niche fields In the Materials division, Iwatani is focusing on fields in which most other companies cannot compete and is aiming to be No. 1 in those fields. For example, we hold 50% of the global market share in the category of functional plastic films for organic EL smartphones because of our films high impact absorptive properties. In heat-resistant coatings, we have been concentrating our attention on motorcycle muffler applications, a market for which Iwatani has captured 50% of global share. Procurement and development backed by strong sales capabilities Iwatani s strength lies in its sales capabilities. A relationship of trust with suppliers leads to procurement capabilities and development capabilities, which in turn are backed by sales capabilities. Based on our strong relationships of trust with our customers, we pursue the value they are truly looking for and can create new businesses and products that our competitors lack. Functional plastic films for organic EL smartphones Heat-resistant coating for motorcycle mufflers Global share 50% Global share 50% Procurement capabilities Development capabilities 9 Sales capabilities

11 Current Status and Future Outlook Looking back on fiscal 2016 Higher sales of materials for PET resins Resource markets in weak shape, including titanium and zircon Lower sales of functional plastic films for smartphones in China Net Sales 126, , , , ,000 Initiatives for fiscal 2017 Strengthen the profit foundation of existing businesses Promote businesses where growth looks promising such as biomass fuels, bio-based PET resins, and nano-nickel Develop other new businesses and products (FY) (Forecast) Operating Income 3,846 3,900 3,179 2,683 2,647 (FY) (Forecast) Our Focused Approaches Expanding biomass fuel share In Japan, construction plans for biomass power generation plants are emerging one after another amidst the promising outlook for higher demand for biomass fuels. Iwatani is procuring palm kernel shells (PKS) and other biomass fuels from Indonesia and other countries to supply the Japanese market. Because ensuring a steady supply of biomass fuels will become more important, we aim to expand our share of the Japanese market from 10% to 20% over the next three years by taking advantage of our strong procurement capabilities based on alliances with our suppliers. Expanding sales of eco-friendly PET resins Based on cooperation with the world's largest PET resin maker, Iwatani has been engaged in development and sales of bio-based PET resins derived from sugarcane, along with aluminum catalyst PET resins with superior recycling properties. In recent years, these products have been highly regarded from an environmental point of view; in the future, sales expansion is expected. Pulp Seed PKS Palm kernel shells (PKS) Bio-based PET resins derived from sugarcane 10

12 Environmental sanitation 8% Livestock 18% Segment Net Sales 26.8 (FY2016) Foods 49% Business Overview Agri-bio & Foods Agriculture 25% Current Status and Future Outlook Looking back on fiscal 2016 Healthy sales of frozen vegetables, which is a response to customers need to save labor Increased shipment of breeding stock Decreased large-scale projects for agricultural and livestock facilities Net Sales 26,378 27,286 28,567 26,859 32,000 Initiatives for fiscal 2017 Expand sales of safe and secure food products, both in Japan and abroad, based on thorough and consistent quality control Develop new businesses like the freezing of traditional Kyoyasai vegetables from Kyoto Enhancing the business in breeding stock Development and sales of equipment for saving labor in agriculture and livestock (FY) (Forecast) Operating Income ,246 1,209 1,300 (FY) (Forecast) Features of the Agri-bio & Foods Business Iwatani has started offering frozen foods, the main products of the Agri-bio & Foods Business, as part of an initiative to develop businesses and products by harnessing cold thermal energy from liquid nitrogen. Iwatani currently sells frozen vegetables and frozen prepared foods, sesame seeds processed using freeze shattering technology, softshelled turtle products, and dietary supplements and also engages in the breeding stock business, and the sale of plant factories, agricultural machinery, and agricultural equipment. Our Focused Approaches Expanding sales of frozen vegetables by utilizing our own technology Our sales expansion initiatives make use of our proprietary freezing technology, the Fresh-I method, to preserve the freshness and taste of vegetables. Future initiatives will include developing products that help save labor, and cultivating new sales channels. Strengthening the breeding stock business Domestic share In breeding stock, we opened a new facility in November 2016 in line with plans to expand production capacity. Our stated target is to use this production capacity to increase our domestic market share to 20% from its current 10%. 11

13 Corporate Governance To ensure sound management and fulfill our corporate responsibilities to society, we maintain our corporate governance structure and raise employee awareness on governance. Corporate Governance Structure General Meeting of Shareholders Appointment and dismissal Appointment and dismissal Appointment and dismissal Board of Directors (17 directors total, including 2 outside directors) Appointment, dismissal and supervision Audit Board of Corporate Auditors (4 corporate auditors total, including 2 outside corporate auditors) Independent Auditors Direction Direction Management Committee Representative Directors Executive Officers Direction Direction Audit Risk Management Committee Liaison Direction Direction Security and Export Management Committee Personal Information Control Committee Compliance Committee Factory Security Control Committee Disaster Response and Environment Control Committee Overseas Security Control Committee CS (Customer Satisfaction) Committee Product Safety & Brand Management Committee Internal audit Internal audit Audit Department Direction Business divisions and related companies 12

14 Financial Highlights (Years ended March 31) For the year million US$ thousand Net sales 657, , , , ,045 $ 5,241,509 Gross profit 139, , , , ,592 1,440,342 Operating income 16,709 18,518 11,174 20,496 25, ,174 Ordinary income 17,406 19,258 12,761 21,584 26, ,183 Income before income taxes and minority interests 15,465 18,302 12,468 20,781 26, ,711 Profit attributable to owners of parent 8,026 10,466 6,199 12,365 16, ,481 Comprehensive income 13,691 16,384 16,100 8,281 22, ,534 R&D expenses 683 1,368 1,250 1,173 1,302 11,605 Ratios % % Net income to net sales* ROE (net income to net assets) ROA (ordinary income to total assets) Equity ratio Per share data US$ Profit attributable to owners of parent Shareholders equity Cash dividend applicable to the period At year-end million US$ thousand Total assets 386, , , , ,690 3,874,587 Fixed assets 207, , , , ,226 2,230,377 Interest-bearing debt 151, , , , ,287 1,205,873 Net assets 90, , , , ,879 1,291,371 (Note) The U.S. dollar amounts have been translated at the prevailing exchange rate as of March 31, 2017, which was to US$1.00. *1 The basis for calculation of Net income to net sales is Profit attributable to owners of parent. Net Sales Operating Income Profit Attributable to Owners of Parent 800,000 30,000 20, , , ,000 25,000 20,000 15,000 10,000 5,000 16,000 12,000 8,000 4, Total Assets 500, , , , ,000 Net Assets 150, ,000 90,000 60,000 30,

15 Company Information (As of March 31, 2017) Company Information Name Formal establishment February 2, 1945 Headquarters Osaka Head Office 6-4, Hommachi 3-chome, Chuo-ku, Osaka , Japan Tel: Tokyo Head Office 21-8, Nishi-Shimbashi 3-chome, Minato-ku, Tokyo , Japan Tel: Company directors and auditors Chairman and CEO* 1 Akiji Makino Vice Chairman* 1 Toshio Watanabe President* 1 Mitsuhiro Tanimoto Executive Vice President* 1 Hisato Ueha Senior Executive Director* 1 Takashi Funaki Senior Executive Director* 1 Hiroshi Majima Executive Director* 1 Masanori Watanabe Executive Director* 1 Naoki Iwatani Executive Director* 1 Akira Ohta Executive Director* 1 Satoshi Watanabe Executive Director* 1 Makoto Horiguchi Director* 1 Yutaka Yamamoto Director* 1 Kazumasa Inada Director* 1 Hideki Tainaka Director* 1 Itaru Ookawa Director* 2 Mitsuaki Naitou Director* 2 Shinji Murai Corporate Auditor Toyofumi Ohama Corporate Auditor Yoshiaki Fukuzawa Corporate Auditor* 3 Masahiro Horii Corporate Auditor* 3 Yoshinori Shinohara *1 Director and executive officer *2 Outside director *3 Outside auditor (As of June 28, 2017) Paid-in capital 20,096 million Number of employees 9,174 (consolidated) Website Share Information Share listing Agent to manage shareholders registry Distribution of shares by type Tokyo, Nagoya Shares of common stock issued and outstanding Mitsubishi UFJ Trust and Banking Corporation Individuals and others 34.1% Financial institutions 29.5% Other institutions 26.4% Foreign institutions and others 8.9% Securities companies 1.1% 246,306,100 (5,058,928 shares of treasury stock excluded) Shares of common stock issued and outstanding (Treasury stock excluded) 246,306,100 Major shareholders* 4 Name Number of shares held (Thousand shares) Shareholding ratio (%) The Iwatani Naoji Foundation 20, The Master Trust Bank of Japan, Ltd. (Trust Account) 7, Japan Trustee Services Bank, Ltd. (Trust Account) 7, Tetsu Iwatani Co. Ltd. 6, The Bank of Tokyo-Mitsubishi UFJ, Ltd. 6, Resona Bank, Ltd. 5, Nippon Life Insurance Company 4, Iwatani Enyukai 4, Iwatanisangyou Senyukai 4, Japan Trustee Services Bank, Ltd. (Trust Account 5) 4, *4 In addition to the above, the Company holds 5,058,928 shares of treasury stock. Share Price ( ) 1,000 Trading Volume (Thousand shares) 300,000 Change in share price , , , ,000 50,000 0 May Apr. Mar. Feb. Jan. Dec. Nov. Oct. Sept. Aug. Jul. Jun. May Apr. Mar. Feb. Jan. Dec. Nov. Oct. Sept. Aug. Jul. Jun. Jun. May Apr. Mar. Feb. Jan. Dec. Nov. Oct. Sept. Aug. Jul. Jun. May Apr. Mar. Feb. Jan. [2014] [2015] [2016] [2017] 0 14

16 Osaka Head Office 6-4, Hommachi 3-chome, Chuo-ku, Osaka , Japan Tel: Fax: Tokyo Head Office 21-8, Nishi-Shimbashi 3-chome, Minato-ku, Tokyo , Japan Tel: Fax: Corporate Website Disclaimer Regarding Forward-looking Statements: This report contains forward-looking statements regarding the Company s plans, outlook, strategies and results for the future that are based on management s estimates, assumptions and projections at the time of publication. Certain risks and uncertainties could cause the Company s actual results to differ materially from any projections presented in this report. These risks and uncertainties include, but are not limited to, the domestic and international economic circumstances surrounding the Company s businesses, competitive activity, related laws and regulations and exchange rate fluctuations. FSC LOGO Printed in Japan