Message from the President

President, Atsushi Hirochi President, Atsushi Hirochi

We will execute the second phase of "CAN20" with accelerate action.

Reviewing the economic conditions during the first six months of the current fiscal year (April 1 – September 30, 2017), the Japanese economy generally showed signs of mild recovery, supported by the economic policy packages and easy monetary policy set forth by the government and the Bank of Japan. However, overall business prospects remained uncertain due partly to heightening political risks in the U.S. and European countries, and increasing geopolitical risks in Asia. Other factors that caused uncertainties include a slowdown in emerging economies, and depressed consumer confidence resulting in sluggish consumption.

Faced with this situation, the GUNZE Group’s medium-term management plan, called “CAN 20” has entered the initial year of its second phase (fiscal 2017 through fiscal 2020). With the key concept of “Focus and Concentration,” the GUNZE Group promoted the pivotal strategies: implementation of segment-specific business strategies, creation of new businesses, and reinforcement of the management foundation.

The GUNZE Group’s functional solutions business suffered a decline in electronic component sales due to business downsizing as part of its business structure reformation. However, plastic film enjoyed solid performance. The apparel business remained firm thanks to the sales expansion of its core brands and stronger efforts made toward high-growth sales channels.

Consequently, the GUNZE Group’s consolidated net sales for the first six months of the current fiscal year amounted to ¥67,792 million (a year-over-year increase of 2.7%). Consolidated operating income amounted to ¥3,370 million (a year-over-year increase of 33.9%). Consolidated ordinary income amounted to ¥4,006 million, compared with an ordinary loss of ¥3,080 million recorded in the same period of the previous fiscal year. As a result, GUNZE posted consolidated net income attributable to owners of the parent amounting to ¥2,537 million, compared with a consolidated net loss attributable to owners of the parent of ¥2,688 million posted in the same period of the previous fiscal year.

Results by Business Segment

<Functional Solutions>
In plastic film, mainstay shrink films enjoyed robust sales in Japan as well as strong exports to Asia. Engineering plastics sales remained strong in the favorable semiconductor market and for office automation applications. As for electronic components, structural reforms are underway through reorganizing and streamlining the Group’s production facilities. In medial materials, products destined for China and the new product DURAWAVE performed strongly.
Consequently, the functional solutions business posted net sales of ¥24,289 million (a year-over-year increase of 0.7%) and operating income of ¥2,704 million (a year-over-year increase of 40.5%).

<Apparel>
The innerwear category performed well due to expanded sales of differentiated products mainly in the women’s innerwear category, and expansion of high-growth channels. In legwear, socks such as foot cover, in-sneaker socks, and room shoes showed impressive performance, but pantyhose sales were sluggish.
Consequently, the apparel business posted net sales of ¥36,291 million (a year-over-year increase of 4.5%) and operating income of ¥1,741 million (a year-over-year increase of 13.3%).

<Lifestyle Creations>
In the real estate category, the shopping mall business continued to perform well through local community-based operations. New properties contributed to the strong performance of the housing lease business. In the sports club category, initial expenses incurred for the two new clubs opened this April had a negative impact on the category’s performance.
Consequently, the lifestyle creation business recorded net sales of ¥7,408 million (a year-over-year increase of 0.8%), while operating income was ¥474 million (a year-over-year decrease of 13.2%).

We will continue to seek sustained enhancement of our corporate value toward meeting the goals specified for the second phase of the CAN 20 plan (fiscal 2017 through fiscal 2020). To this end, we will clarify the key strategic issues related to each business segment. The continued support and patronage of our shareholders will be greatly appreciated.

November 2017

President
GUNZE LIMITED
President, Atsushi Hirochi