To Our Shareholders and Investors

(May 2020)

Fiscal 2019 Results

Exceeded Full-Year Forecasts for Net Sales, Operating Income and Ordinary Income, and Posted Historic Highs, including for Net Income Attributable to Owners of the Parent

In fiscal 2019, the first year of our Third Medium-Term Management Plan, we achieved our full-year targets for net sales, operating income, and ordinary income, driven mainly by domestic business. We have also steadily strengthened our base as a major global player, which includes posting record highs for net sales and for every profit indicator. By geographic segment, Sanwa Shutter Corporation, our business in Japan, recorded increases in sales and profit on the back of a solid performance in core products, such as heavy-duty shutters, and in our maintenance and service business following the completion of large-scale properties. In North America, although sales volume did not reach the level of our forecast, sales and profit were up due to the strong showing in our core door and door opener businesses, while rising steel costs were passed on to the selling prices. In Europe, even though operating income was below the level of the previous year on a yen basis due to the effect of foreign currency exchanges, sales and profit increased and operating income exceeded our forecast due to steady progress in existing businesses and the benefits of consolidation with Robust AB.

Outlook for Fiscal 2020

COVID-19 Projected to Severely Impact Ability to Achieve Medium-Term Targets in Final Year of Third Medium-Term Management Plan

For our performance outlook for fiscal 2020, we are forecasting significant declines in sales and profit in Japan, the United States, and Europe. Although it is difficult to predict the impact of COVID-19, lockdowns are gradually being lifted based on the expectation that the spread of the virus will subside around June 2020. Nonetheless, we have calculated and announced forecasts based on the assumption that the effects of the virus will linger for the rest of the year.
Based on these market conditions, in Japan in fiscal 2020, the final fiscal year of our Third Medium-Term Management Plan, we will focus on strategic products such as partitions as well as our service business as measures to establish a firm position in each business field. We will also strive to strengthen our revenue base by securing marginal profit through the enhancement of the gross profit ratio and curbing variable expenses. In addition, we will concentrate on boosting compliance awareness and establishing product quality and safety while also reinforcing our supply structure. In North America, we will concentrate on expanding the market share of our core businesses and entering peripheral business fields. In Europe, we will continue to focus on expanding existing businesses and strive to promote digitization with a view to bolstering operational efficiency. Through these measures, we expect performance in fiscal 2019 to continue improving and sales to grow in Japan, the United States and Europe.

The Third Medium-Term Management Plan

Two Years to Establish the Foundations for Becoming the Top Brand as a Major Global Player

In the Third Medium-Term Management Plan (FY2019-2020) aimed at achieving our long-term management vision “Sanwa Global Vision 2020,” we have positioned the next two years as a period for establishing the foundations for becoming the top brand as a major global player. Specifically, we have formulated five basic policies, namely: (1) Expand and strengthen business areas in core businesses in Japan, the United States and Europe; (2) Strengthen service segments and expand business model; (3) Enhance the operational bases of the China Business and Asia Business; (4) Reform work styles and improve productivity; and (5) Promote ESG (Environment, Social, Governance) to develop a corporate structure that is more trusted by society.
In particular, we will draw up and execute a clear strategy to expand and strengthen business areas in our core businesses in Japan, the United States and Europe. In Japan, we will continue establishing a position in respective business fields, strengthen synergies at domestic Group companies, and take advantage of the periodic inspection reporting system for fire prevention equipment to expand our maintenance and service businesses. In North America, we will concentrate on expanding the market share of our base businesses and entering peripheral business fields. In Europe, we will seek to further strengthen the industrial door business and to increase efficiency through digitization. In China/Asia, we will work to strengthen integrated operations in each area and expand our business through consolidation.

Shareholder Returns

We forecast dividends per share of ¥34 for fiscal 2020, on par with the previous year.

The Sanwa Group considers returns to shareholders a key management priority. Our policy is to maintain a stable payout ratio and distribute profits in proportion to consolidated results while continuing to improve our corporate fundamentals, strengthen our management infrastructure, and implement management policies designed to increase corporate value. Since fiscal 2015, our target payout ratio has been 35% of earnings per share.
For the fiscal 2019 dividend, we raised total dividends for the year by ¥2 from fiscal 2018 to ¥34 per share. The full-year dividend for fiscal 2020 is projected to be unchanged from fiscal 2019 at ¥34, as we expect the effects of COVID-19 to be temporary, even though sales and profit are forecast to decline sharply. In addition, while there is no change to our fund allocation policy of prioritizing free cash flow for strategic investments, there is also no change to our policy of share repurchases, which we undertake as appropriate in consideration of our fund position and other factors. We implemented share repurchases of ¥5.0 billion each in fiscal 2014, 2015 and 2017, and subsequently retired the repurchased shares. The Sanwa Group will continue to push toward its goal of becoming a "Major Global Player" to further increase our corporate value.