To Our Shareholders and Investors

(May 2019)

Fiscal 2018 Results

Achieved Full-Year Forecasts for Net Sales, Operating Income and Net Income, and Posted Historic Highs including for Ordinary Income

In fiscal 2018, the final year of our Second Three-Year Plan, we achieved our full-year targets for net sales, operating income and net income. Despite missing the initial targets of the Plan, we have steadily strengthened our base as a major global player, which includes posting record highs in net sales and each profit indicator.
By geographic segment, Sanwa Shutter Corporation, our business in Japan, recorded increases in sales and profit on the back of solid performance in core products such as heavy-duty shutters and in our maintenance and service business. Operating income fell short of our forecast, however, as steel prices, installation expenses, distribution expenses and other costs rose more than expected. In North America, sales and profits were up due to the strong showing in our core door and door opener businesses, while rising steel costs were passed on to selling prices. Nonetheless, the sales volume increase fell short of our forecast and operating income dipped below projections. In Europe, sales and profits increased and operating income exceeded our forecast due to steady progress in existing businesses and the synergy from integration with Bolton Gate Services Ltd.

Outlook for Fiscal 2019

Forecasting New Historic Highs in Sales and Profits in the First Fiscal Year of our Third Medium-Term Management Plan

In terms of the external environment in fiscal 2019, increasing uncertainty is expected to erode business confidence globally due to trade friction between the United States and China and continued concern over such matters as the United Kingdom’s withdrawal from the European Union. In Japan, the climate surrounding the construction market is projected to remain stable due to the continued abundance of non-residential construction projects, despite the end of expansion in domestic demand on account of the Olympics and Paralympics due to be in held in 2020. In the United States, even though the speed of growth in housing starts has slowed down slightly, we expect the market to be solid thanks to private-sector led self-sustained economic recovery as well as the positive effect of tax reforms and other factors. In Europe, economic growth and the housing market are slowing down throughout the region and we expect demand to be relatively weak.
Based on these market conditions, in Japan in fiscal 2019, the first 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 plan to increase dividends by ¥2 to ¥34 per share for fiscal 2019.

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 2018 dividend, we raised total dividends for the year by ¥2 from fiscal 2017 to ¥32 per share. For the fiscal 2019 dividend, we plan to raise total dividends for the year by ¥2 from fiscal 2018 to ¥34 per share. 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.

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