Shinwa : Supplementary Materials for Consolidated Financial Results for the Three Months Ended June 30, 2020

August 07, 2020 at 07:04 am

(Securities code: 3447)

FY2020 Q1

Supplementary Document

(August 7, 2020)

Part 1: Financial Overview for FY20-Q1

Part 2: Company Overview about Shinwa Co., Ltd.

Part 1

Financial Overview for

FY20-Q1

Financial Highlights

Revenue

Gross profit

2,756 million yen (year on year rate ▲ 36.1％)

Demand from the construction industry decreased due to the COVID-19 state of emergency.
Temporarily closed branch offices and plants to prioritize the protection of employees' health.

667 million yen	(year on year rate ▲ 35.3 ％)

Gross profit declined along with decreased revenue.
Gross profit ratio increased year on year from 23.9% to 24.2%.

Operating profit

Profit

attributable to

owners of parent

205 million yen	(year on year rate ▲ 56.7％)

Operating profit increased year-on-year; gross profit absorbed increases in personnel expenses and in shipping and delivery prices.

121 million yen	(year on year rate ▲ 59.6 ％)

• Decreased by about 40% compared to the year-earlier period.

Economic Circumstances & Shinwa's Initiatives in Q1

Circumstances are harsh because of the significant social and economic slowdown due to the COVID-19 pandemic.

External/Economic

Circumstances

• In the construction industry:

 Projects are suspended/postponed.

 Investments in new projects are shelved due to concerns about uncertainty.

Measures/Efforts Made by Shinwa

We prioritized employees' and customers' health.

Temporarily closed the Tokyo office, considering the high infection risk in the region
Shut down production sites temporarily
Promoted working from home
Voluntarily stopped visiting customers

We implemented measures to prepare for revenue decline.

Reduced executive salaries and other fixed expenses
Revised new investment plans

Summary of Consolidated P/L Statement

(IFRS-based; million yen)

	FY2019 Q1	FY2020 Q1	Increase/	Year-on-year
	Decrease	rate
(IFRS-based; million yen)


Revenue	4,313	2,756	▲1,556	▲36.1％

Cost of sales	3,283	2,089	▲1,193	▲36.3％

Gross profit	1,030	667	▲363	▲35.3％

Selling, general and	556	461	▲94	▲16.9％
administrative expenses, etc.


Operating profit	474	205	▲269	▲56.7％

Profit before tax	456	188	▲267	▲58.7％

Profit	299	121	▲178	▲59.6％

Gross Profit & Operating Profit

Operating profit decreased along with revenue, despite all possible measures taken, including the reduction of fixed expenses and the revision of new investment projects, apart from other efforts to improve the gross profit ratio.

	Gross Profit			Operating Profit & Gross Profit Ratio

			10.6%	11.0%	15%
	24.2%	26%	7.4%

23.9%				10%
	24%
22.5%		（ million yen ）

（ million yen ）								500					5%
1,200								22%
							400		474
1,000
			1,030	667		300	436					0%

800		923
						205

600
								200
400									100
200

									0
													-10%
0								16%
							FY2018 Q1	FY2019 Q1	FY2020 Q1
	FY2018 Q1	FY2019 Q1	FY2020 Q1


		Gross profit			Gross profit ratio		Operating profit			Gross profit ratio	5


						COPYRIGHT© SHINWA CO., LTD. ALL RIGHTS RESERVED.

Performance by Division: Scaffolding Equipment

Despite the demand slump due to the economic slowdown, the revenue by the Division did not suffer as heavily as initially anticipated.

	Revenue by the Scaffolding Equipment Division		 Many construction projects, including
						those by major construction firms, were
(million yen)
		suspended or postponed across Japan
4,000			3,730

					after the issuance of the COVID-19

				3,132		state of emergency. Many new
3,000					investment projects were also shelved.

				2,290		 However, the decrease in construction
2,000					projects was less severe than initially
				anticipated, and the demand for our

						products remained rather robust given
1,000					the circumstances.

0					Revenue by the Scaffolding

				FY2018 Q1 FY2019 Q1 FY2020 Q1		Equipment Division decreased by
						38.6% year on year, as opposed to the
						initially anticipated 50% decrease.	6
				COPYRIGHT© SHINWA CO., LTD. ALL RIGHTS RESERVED.

Performance by Division: Logistics Equipment

Revenue by the Division was more severely affected than initially anticipated due to larger demand contraction, suffering a large decrease.

	Revenue by the Logistics Equipment Division	 The COVID-19 pandemic noticeably
							affected the demand for products that are
(million yen)
			widely used in the global distribution of
1,200
					goods, such as car-use pallets and liquid

1,000		967				transportation bulk containers.

800						 Domestic investment projects, including
					those for distribution warehouses, were

600			583			postponed due to concerns about uncertain
			466	future economic conditions.

400
200						Revenue by the Logistics Equipment

0						Division suffered a 20.1% decrease year
					on year, as opposed to the initially
	FY2018 Q1	FY2019 Q1	FY2020 Q1

				anticipated 10%-level decrease, as a

							result of demand contraction that was
							more severe than expected.	7
						COPYRIGHT© SHINWA CO., LTD. ALL RIGHTS RESERVED.

Business Forecast for FY2020

・Demand for our products from the construction industry will gradually recover and be back to the previous fiscal year's level by Q4.

・Vibrancy will return to the Logistics Equipment Division in H2, with large-scale projects scheduled in the term.

Our forecast is based on these outlooks.

(IFRS-based; million yen)

	FY2019	Forecast for	Increase/	Year-on-year
	FY2020	Decrease	rate

Revenue	17,081	13,900	▲3,181	▲18.6％
Operating profit	2,210	1,230	▲980	▲44.3%
Profit before tax	2,139	1,158	▲981	▲45.9％
Profit for FY2019	1,467	804	▲663	▲45.2％
Profit attributable to	1,467	797	▲670	▲45.7％
owners of parent
EPS (yen)	104.21	56.57	▲47.64	▲45.7%
	COPYRIGHT© SHINWA CO., LTD. ALL RIGHTS RESERVED.	9

Business Forecast for FY2020 (H1 & H2)

					(IFRS-based; million yen)

	FY2019	FY2020	YoY	FY2019	FY2020	YoY
	1H	2H
	1H	rate	2H	rate
	(Forecast)	(Forecast)


Revenue	9,370	6,130	▲34.6％	7,711	7,770	＋0.8％

Operating	1,222	367	▲70.0％	987	863	▲12.6%
profit


Operating	13.0%	6.0％	▲7.0pt	12.8%	11.1%	▲1.7pt
profit ratio

The forecast values for FY2020 (H1, H2, and full year) ending March 2021 remain the same as those announced on May 15, 2020.

The above-shown forecast values are based on the information that is available as of today, and hence contains not a few uncertainties, such as the time when the COVID-19 pandemic comes to an end and the demand or other business trend. The actual results may therefore turn out to be deviated from the forecast values.

Business Forecast: Scaffolding Equipment Division
Revenue by the Scaffolding Equipment Division will decrease by 24.2% year on year.
Revenue by the Scaffolding Equipment Division	Forecast Change in Revenue by the Division
(million yen)				(y-o-y rate)

15,000	14,275	14,544		0%


			11,018
10,000				-20%
					Gradual recovery
					toward Q4
5,000				-40%
					Initial forecast
					Current forecast
0				-60%
	FY2018	FY2019	FY2020
			(Forecast)
		COPYRIGHT© SHINWA CO., LTD. ALL RIGHTS RESERVED.	11
	Business Forecast: Logistics Equipment Division
Revenue by the Logistics Equipment Division will increase by 13.6% year on year.
Revenue by the Logistics Equipment Division	Forecast Change in Revenue by the Division
(million yen)				(y-o-y rate)
	3,236			60%	The completion of
			construction projects


3,000			2,882		will delay from
			September to
			40%
		2,536		October.

2,000				20%

				0%
1,000
				-20%
					Initial forecast
0				-40%	Current forecast

	FY2018	FY2019	FY2020
			(Forecast)
		COPYRIGHT© SHINWA CO., LTD. ALL RIGHTS RESERVED.	12

Return to Shareholders

In Shinwa's Group, redistribution of profits to shareholders is positioned as an important task in business management.

Basic principle on dividends

Based on our basic policy to secure internal reserves required for stable corporate growth in the future and respond to changes in the business environment, and carry out profit re-distribution according to

business performance, we are aiming for

a consolidated dividend payment ratio of 40% or more.

Estimated dividend for FY2020

We are planning to pay the dividend below to take into consideration the potential impact of the COVID- 19 pandemic on our business performance for FY2020 and to nonetheless stick to the "dividend payment ratio of 40% or more" principle.

23.00 yen per share (payout ratio: 40.7%)

The above is subject to change depending on the future impact of the COVID-19 pandemic on our business, the economic condition, and our business performance.

Use of internal reserves

For internal reserves, we are planning to reinforce our financial structure, and use internal reserves as effective investment funds such as facility investments and toward personnel development for further expanding our business, with the aim to enhance corporate value.

PersonnelFacility

DevelopmentInvestment

Reinforcement of Financial

Infrastructure

Enhancement of Corporate Values

Part 2

Company Overview

about Shinwa Co., Ltd.

Features of Shinwa
		Leader of scaffolding
		equipment technology
		Top share in Japan for
system scaffolding products
	High flexibility and quality
owing to first-class production
		capacity in Japan
		COPYRIGHT© SHINWA CO., LTD. ALL RIGHTS RESERVED.	15
Corporate Outline
Top share company in the system scaffolding market	2018
Name	Shinwa Co., Ltd.		Listed on the Tokyo
	Stock Exchange and

Head office	30-7 Hiratacho Bushigawa, Kaizu-shi,		the Nagoya Stock
	Exchange
Gifu 503-0311 Japan

President and
Representative	Hiroshi Yamada
Director
Founded	September 1977
Established	August 1979
Capital	150 million yen
Employees	161 (As of March 31, 2020)
Number of shares 14,089,200 shares
issued	(As of March 31,2020)		2016	2017
1978		1988	2003
Started manufacture of	Forayed in the system	Launched the Logistics	Started manufacture/sales	Started manufacture/sales
of next generation	overseas
"Jack Base" scaffolding	scaffolding market	Equipment Division
scaffolding "SPS"
		Shinwa Catcher	"Hanging pallet"	next generation	Partner plant in Vietnam

				scaffolding "SPS"
1977
Founded
1978		1988	2003	2010	2017
Scaffolding Equipment Division
			Logistics Equipment Division	16
		COPYRIGHT© SHINWA CO., LTD. ALL RIGHTS RESERVED.

Company Network

Eleven in Japan and three overseas

In Japan		Overseas

Tsuchikura Plant & Tsuchikura

Equipment Center

					Philippine
					Representative Office
		Sugito Equipment			(Manila)

		Center & Satte Office
	Kansai Equipment	Tokyo Branch
				GUANGDONG NISSHIN-
	Center		Subcontract factory in
	Yokohama	CHUANGFU ADVANCED
Fukuoka Branch			Vietnam
	Equipment Center		CONSTRUCTION
		(Ho Chi Minh City)
			MATERIALS Co., Ltd.

					(Foshan, Guangdong)
		HQ office			(Established in November 2019)
Nagasaki	Osaka	Shinwa Co., Ltd.
	: Sales offices
Branch	Branch
Kumamoto Equipment	Nagoya			Six in Japan, one overseas
Office
Center

				: Production sites and Equipment Centers
				Five in Japan, two overseas
					17
		COPYRIGHT© SHINWA CO., LTD. ALL RIGHTS RESERVED.

Business Activities

The Scaffolding Equipment Divisionthat produces and sells the system scaffolding products is our main revenue earner.

	Scaffolding Equipment Division		Logistics Equipment Division

Manufacture/sales/rental of scaffolding equipment used in construction sites

Large-scale warehouse/roof forming construction work

Manufacture/sales of logistics equipment used for storing/conveying, etc. goods at plants, warehouses, construction sites, etc.

Logistics

Equipment

Division

14.8%

Wedge

binding type

scaffolding March 2020

Rental

Bulk Container Cage

51.2%

term

scaffolding

for Liquid

Shipping

equipment,

17,081 Mil. yen

etc.

21.4%

Shin-Tomei Expressway

generation

pier construction

Scaffolding

scaffolding

Equipment

12.6%

Pallets for automobile

Racks for large-scale

Scaffolding Equipment Division's

Division

manufacturers

warehouses

Consolidated Revenue

81.5%

Consolidated Sales Revenue of

Logistics Equipment Division

(Mil. yen)

14,275

14,545

4,000

3,236

13,000

3,000

2,536

2,000

8,000

1,000

FY2018

FY2019

FY2018

FY2019

* IFRS

Scaffolding Equipment Division
What is System Scaffolding?
COPYRIGHT© SHINWA CO., LTD. ALL RIGHTS RESERVED.	19
Work Site with System Scaffolding: Housing Construction
COPYRIGHT© SHINWA CO., LTD. ALL RIGHTS RESERVED.	20

Work Site with System Scaffolding︓ Renovation

Work Site with System Scaffolding︓

Large-scale Residential Building Repair

Work Site with System Scaffolding︓

Plant Maintenance

Work Site with System Scaffolding︓

Civil Engineering Work

Work Site with System Scaffolding︓

Road Construction, Maintenance, and Repair

Work Site with System Scaffolding︓ Inspection of Important Cultural Property

Work Site with System Scaffolding ︓

National Stadium, Japan

System scaffolding is indispensable at construction sites

System scaffolding sales share:

No. 1

In terms of the total amount of shipments in FY2018 according to our survey

.28

Tsuchikura Plant, our factory behind "Sales Share No. 1"
(Kaizu City, Gifu Prefecture)
	10-ton cargo truck
	Approx. 4,280
	trucks
	(FY2019)
	Number of welding robots
	132
	robots￥(As of May 1, 2020)
Site area: 40,642 m2
Boasts leading production ability through
production of diverse products and speedy
launch of products
Reduces	Able to respond
flexibly to customer
procurement costs	orders
of raw materials and
outsourcing costs
	COPYRIGHT© SHINWA CO., LTD. ALL RIGHTS RESERVED.	29
About the Logistics
Equipment Division
	COPYRIGHT© SHINWA CO., LTD. ALL RIGHTS RESERVED.	30

Expansion of Logistics Equipment Division

Aim at further growth by expanding to a wide variety of businesses

Pallets for resin material transportation Liquid transportation bulk container cage

Pallets for transporting engines, transmissions, etc.

Glass transportation pallets

Functional film pallets

Electrical

Distribution/Wamachinery/Chemical

rehousePrecision machinery

Transport			Agriculture/

equipment			Fishery



Pallets for automatic warehouses		Development/sale of multi-shelves for plant factories
Racks for large-scale warehouses		with artificial light
				31
	COPYRIGHT© SHINWA CO., LTD. ALL RIGHTS RESERVED.

[Car] Engine/Transmission Transport Pallets

[Chemical] Liquid Bulk Containers

(For illustrative purpose only)

Capable of containing a five-drum bulk in a four-drum area

[Logistics/Warehouse] Storage Racks for E-commerce Retailers

(For illustrative purpose only)

[Agriculture] Artificial Light Racks for Plant Factories
(For illustrative purpose only)
COPYRIGHT© SHINWA CO., LTD. ALL RIGHTS RESERVED.	35

Making Our Way into the

Chinese Market

Making our Way into the Chinese Market:

Launch of Joint Venture Company

November 2019: Launch of a joint venture company "GUANGDONG NISSHIN-CHUANGFU

ADVANCED CONSTRUCTION MATERIALS Co., Ltd."

Guangdong

Foshan Guangzhou

Shenzhen

Hong Kong

Macau

A joint venture company launched in Foshan, Guangdong
Foshan is part of the Chinese government's economic development and promotion area called "Guangdong-

Hong Kong-Macau Greater Bay Area"

It's one of the most economically growing areas in China, with the area population of 67 million and GDP amounting to

$1,340 billion (in 2018)

Outline of the Joint Venture Company in China

Company

name

Representative

Location

Established

Business

GUANGDONG NISSHIN-CHUANGFU ADVANCED CONSTRUCTION MATERIALS CO., LTD.

Kurio Noritake (Executive Vice President and Director, Shinwa Co., Ltd.)

Foshan, Guangdong, China

November 5, 2019

Import, manufacture and sale of scaffolding equipment used at construction sites

Registered	RMB 25 million
capital	(Equivalent to approx. 400 million yen)

	Shinwa Co., Ltd.	51.0%
Major	Guangdong Chuangfu Metal	34.0%
shareholders	Products Co., Ltd.
	ALCONIX CORPORATION	15.0%

Heightened safety	Local manufacture
standards for	and sales of system
construction sites in	scaffolding products
China	excelling in safety

Contributing to

safety at

construction sites in China

The company's production lines started up in June 2020 with

some delay due to the COVID-19 pandemic.

Disclaimer

The plans, estimates, strategies, etc. stated in this document are all forecasts based on the information available at the time of this documentation and hence contain risks and uncertainties inherent to such forecasts. Due to such risks and uncertainties, the actual results may differ from the forecasts, etc. herein.

The information concerning companies other than our company contained in this document is all extracted from publicly available sources; we have not verified the accuracy, adequacy, etc. of such information, and we do not guarantee the accuracy, adequacy, thereof, either.

Shinwa Co., Ltd. (Address: 30-7 Hiratacho Bushigawa, Kaizu-shi, Gifu Pref.)

Department:	Corporate Planning Dept.
Persons in charge:	Niwa; Aoki
TEL:	0584-66-4436
e-mail:	ir@shinwa-jp.com

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Shinwa Co. Ltd. published this content on 07 August 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 07 August 2020 06:03:18 UTC

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736 ^JPY	-0.27%		-0.54%	-0.67%

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