Message from the President

President, Atsushi Hirochi President, Atsushi Hirochi

We will promote the second phase of the “CAN 20” medium-term management plan with utmost effort and speed.

Reviewing the economic conditions during the first six months of the current fiscal year (April 1 – September 30, 2020), the Japanese economy suffered from considerable reductions in personal spending and corporate activities, caused by the spread of COVID-19. This situation arose from the need to avoid going out in public, along with the Japanese government’s requests for closures. Even after the state of emergency was lifted, the end of COVID-19 is still nowhere in sight, leading to expectations of a prolonged negative impact on the economy.

In the second phase of the GUNZE Group’s “CAN 20” medium-term management plan, the Group has been promoting three pivotal strategies, based on the key concept of “Focus and Concentration.” They are: implementation of segment-specific business strategies, creation of new businesses, and reinforcement of the management foundation. However, because of the heavy impact of the COVID-19 pandemic on the GUNZE Group’s business, we have decided to place top priority on measures to minimize the impact of COVID-19 in fiscal 2020. As such, we are extending the period of the second phase of “CAN 20” up to the fiscal year ending March 31, 2022.

GUNZE’s functional solutions business was adversely impacted by the spread of COVID-19, mainly for overseas sales. In the apparel business, although GUNZE worked hard to promote sales on the fast-growing e-commerce channel, the sales increase in this channel was not enough to offset the slump in in-store sales and the sales decline caused by the closure of stores. The lifestyle creation business was also adversely affected by the temporary closure of sports clubs.

Consequently, the GUNZE Group’s consolidated net sales for the first six months of the current fiscal year amounted to ¥58,067 million (a year-over-year decrease of 18.2%). Consolidated operating income amounted to ¥1,271 million (a year-over-year decrease of 61.4%). Consolidated ordinary income amounted to ¥1,484 million (a yearover-year decrease of 55.8%). Consolidated net income attributable to owners of the parent was ¥222 million (a year-over-year decrease of 89.7%).

Results by business segment are as follows:

In plastic film, sales of packaging films were strong because of increasing demand related to home cooking. However, shrink label films for beverage bottle applications experienced slow sales due to the need for avoiding outings or events to contain the spread of COVID-19. In engineering plastics, products for general industrial applications performed strongly, but COVID-19 negatively impacted products for office equipment, causing a significant drop in sales. In electronic components, touch screen sales decreased due to the stagnation of the supply chains in China. Medical materials suffered from a prolonged adverse impact from COVID-19, which caused restricted access to medical institutions. As a result, medical material sales decreased both inside and outside of Japan. Consequently, the functional solutions business posted net sales of ¥23,623 million (a year-over-year decrease of 16.4%) and an operating income of ¥1,946 million (a year-over-year decrease of 30.3%).

In innerwear, e-commerce and drugstore channels performed strongly. In legwear, opportunities to wear stockings decreased because people refrained from going out, which resulted in decreased sales. However, leggings generally performed well. The apparel business as a whole was heavily impacted by the slump of in-store sales caused by the closure of stores and people’s avoidance of going out. However, after the lifting of the state of emergency, the apparel business is showing a recovery trend. Consequently, the apparel business posted net sales of ¥29,257 million (a yearover-year decrease of 18.0%) and an operating income of ¥633 million (a year-overyear decrease of 60.9%).

In the real estate category, the shopping center business suffered from a decrease in the number of visitors, caused by the prolonged effects of COVID-19. However, the property leasing business enjoyed robust performance. The sports club business suffered from a slow recovery in members, even after closure requests by the government were cancelled. Consequently, the lifestyle creation business recorded net sales of ¥5,490 million (a year-over-year decrease of 24.8%) and an operating income of ¥170 million (a yearover-year decrease of 61.8%).

We will continue to implement our plans through speedy action until they reach fruition. Our aim is to become a company that contributes to society, with a firm determination to provide customers with a "feeling of comfort."

Your continued support and guidance will be greatly appreciated.

November 2020

President, Atsushi Hirochi
President
GUNZE LIMITED