Through the second quarter of the fiscal year ending March 31, 2017, from April 1, 2016 through September 30, 2016, the business environment for the Toyobo Group (hereinafter referred to as the "Group") was characterized by continued uncertainty about the future of the global economy due to concerns about the impact of the United Kingdom's decision to leave the European Union in Europe, economic slowdown in China and other factors while the economy in the United States continued to expand at a moderate pace backed by the domestic demand. Meanwhile, in Japan, the economy enjoyed a mild recovery supported by steady consumer spending.
Amid this operating environment, the Group continued its activities aimed at becoming "The category leader, continuing to create new value that contributes to society in the environment, healthcare, and high-function products fields." Accordingly, the Group is expanding its businesses in Japan and overseas markets through developing specialty products. Also, during the second quarter of the fiscal year under review, the Group promoted business activities in accordance with the five action plans set forth in the Medium-Term Management Plan for the four years covering the period through the fiscal year ending March 2018, namely "accelerating overseas business development," "developing new products and creating new businesses," "increasing competitiveness of domestic businesses," "improving asset efficiency," and "strengthening global Group management."
Furthermore, as part of "improving asset efficiency," the Company has decided to terminate its textile operations in Brazil. In addition, the Company has recognized a reversal of foreign currency translation adjustments accompanying the merging and consolidation of foreign subsidiaries. The expenses accompanying the termination and the loss on the reversal of foreign currency translation adjustments have been recorded as extraordinary losses in the six months ended September 30, 2016.
As a result, consolidated net sales for the second quarter decreased ¥15.0 billion (8.4%) over the same quarter of the previous fiscal year, to ¥164.7 billion. Operating income increased ¥0.2 billion (1.5%), to ¥10.7 billion, ordinary income decreased ¥0.9 billion (9.4%) to ¥8.7 billion, and profit attributable to owners of parent decreased ¥1.7 billion (31.7%), to ¥3.7 billion.
In fiscal 2016, ending March 31, 2017, the business environment in Japan is viewed as likely to remain on a moderate recovery trend of economy, with a stable trend of raw materials prices. However, considerable uncertainty in conditions is forecast to prevail overseas, due to the United Kingdom's decision to leave the European Union in Europe, deepening economic slowdown in China and other issues.
In view of this outlook for the operating environment, the Toyobo Group will continue to strengthen its earnings base to cope successfully with changes in the external environment. The Group aims to become "the category leader that continues to create new value that contributes to society in the environment, healthcare, and high-function products fields." The Group works for further enhancing its profitability by focusing its management resources on businesses that are profitable and have high growth potential, as it aggressively expands its business activities in Japan and overseas and improving its business portfolio, such as increasing the efficiency of its capital, strengthening its financial position, and other factors.
Through the second quarter of the fiscal year, because of the deteriorating market condition of a certain product for consumer and industrial uses business, the effect of anti-dumping policies in China on the acrylic fiber business, the termination of textile operations in Brazil, and other factors, forecasts of performance through the second quarter was below forecasts released previously. From the third quarter onward, expansion in sales of film new products and other factors are expected, but this will not be sufficient to offset the shortfall below targets, and forecasts of performance through the full fiscal year ending March 31, 2017 is below forecasts released previously.
Considering such factors, for fiscal 2016 the Toyobo Group is forecasting consolidated net sales of ¥340.0 billion (down ¥7.8 billion year on year), with operating income of ¥23.0 billion (down ¥0.1 billion), ordinary income of ¥20.0 billion (down ¥0.4 billion) and profit attributable to owners of parent of ¥10.0 billion (down ¥0.1 billion).
Toyobo considers providing returns to shareholders to be one of its highest priorities. Our basic policy is to continually provide a stable dividend, in a comprehensive consideration of such factors as profits levels, retention of earnings for future investment, and improving the financial position to provide shareholders returns, including the acquisition of treasury shares, with a target total return ratio* of 30%. For fiscal 2016, we currently expect to pay a dividend of ¥3.50 per share. However, this will be reviewed in the future based on the policy above.
*Total return ratio = (total dividend + total amount of share buybacks) ÷ profit attributable to owners of parent
I would like to offer my most sincere appreciation to our shareholders and investors, and ask for your continued support.
