Licensed by TOKYO TOWER 216 Year Ended March 31, 216 ANNUAL REPORT
To Our Shareholders Chairman and CEO Akiji Makino Our corporate philosophy encourages every member in our group to Become a person needed by society, as those needed by society can prosper. In this spirit, we aim to maintain stable supply and to create new value as a gas and energy supplier. The Energy Business, which supports people s lives mainly through the supply of LPG, and the Industrial Gases & Machinery Business, which supports industry, form our core business, through which Iwatani puts its efforts into sustainable growth and the enhancement of corporate value. The year 215 was positioned as Year One of the Hydrogen Era. While industry, government, and academia actively work towards the realization of a hydrogen society, Iwatani further expanded its hydrogen business this past fiscal year by completing the installation of 2 hydrogen refueling stations. The situation surrounding gas and energy is changing greatly, including retail deregulation of electric power and gas in Japan. As we continue to take on new challenges for more growth, we ask for your continued support in the years to come. Gas & Energy Supplying Gas & Energy to meet the needs of society Contents To Our Shareholders... 1 Business Overview... 2 An Interview with the President... 3 Performance by Segment... 8 Financial Highlights... 9 Company Information... 1 Disclaimer Regarding Forward-looking Statements: This report contains forward-looking statements regarding the Company s plans, outlook, strategies and results for the future that are based on management s estimates, assumptions and projections at the time of publication. Certain risks and uncertainties could cause the Company s actual results to differ materially from any projections presented in this report. These risks and uncertainties include, but are not limited to, the domestic and international economic circumstances surrounding the Company s businesses, competitive activity, related laws and regulations and exchange rate fluctuations. 1
Business Overview Energy We are the sole, end-to-end supplier of LPG in Japan, handling the gas from import to retail sales throughout the nation, and we have established accompanying disaster prevention measures. We provide a stable supply of LPG by maintaining a disaster-resistant distribution system, such as with seismic reinforcement to our facilities and by diversifying our purchasing sources. Industrial Gases & Machinery We supply a variety of gases, including air-separation gases such as oxygen, nitrogen, and argon; hydrogen; helium; and gas for semiconductor materials. By using our technical capabilities cultivated over many years and our comprehensive capabilities in combining gas and machinery, we offer optimal solutions to customers. Technology for the Future As a unique trading company with technological capabilities Materials We are implementing initiatives in application development of advanced functional materials and in the resource development and import sales of mineral raw materials. In addition to mineral sand, metals, PET resins, and functional plastic films, we are concentrating efforts on PKS (Palm Kernel Shells) a product that is garnering attention as a biomass fuel as we expand our business globally. Agri-bio & Foods We are expanding our sales business in areas including frozen vegetables and frozen prepared foods, health supplement foods processed with frost shattering technology, hogs for breeding, hog farming facilities, gardening materials, and agricultural machinery and materials. In recent years, we have been enhancing food safety and security through initiatives that apply gas technology at plant factories. 2
An Interview with the President In fiscal 215, the year ended March 31, 216, the last year of the PLAN15 medium-term management plan, we pursued enhancement of capacity for sustained growth and strengthening of the financial standing. As a result of actively striving for change under the previous plan, I think we have achieved a foundation for growth, our next step. In fiscal 216, we have announced PLAN18, the sixth medium-term management plan. We will continue to improve corporate value in line with the basic policies to implement strategies for growth and expand our business foundation. I ask you for your continued support. President Masao Nomura Progress of the Medium-term Management Plans over Five Stages Interest-bearing debt ( billion) 198.8 185.6 179.3 Ordinary income ( billion) 12. 13.4 158.9 6.4 7. (FY) 2 21 22 23 24 25 26 27 28 29 21 211 VD22 PLAN5 PLAN8 PLAN12 3
Question 1 What were the results of the PLAN15 three-year medium-term management plan? Answer 1 During PLAN15, we worked towards the management goals of enhancing capacity for sustained growth and strengthening the financial standing. On the profit front, it was a difficult business environment in which Iwatani incurred time-lag losses of 4.6 billion during the final year of the plan due to a sharp decline in the LPG import price. However, we achieved our target for ROA, and ordinary income was generally in line with the target. We also had steady profitability improvement in each business. On the financial front, by working on efficient management of funds, we achieved our targets for reducing the level of interest-bearing debt and the ratio of interest-bearing debt to total assets. PLAN15 Overview 17.4 21.5 Although ordinary income was not achieved due to the effects of time-lag losses, profitability was steadily improved and financial standing was strengthened. Ordinary income Result (FY212) 17.4 billion Target 22. billion Result (FY215) 21.5 billion ROA (ordinary income to total assets) 4.5% 5.3% or higher 5.3% 151.3 136.5 Interest-bearing debt 151.3 billion 145. billion or less 136.5 billion 212 213 214 215 PLAN15 Ratio of interest-bearing debt to total assets 39.2% 35.% or less 33.7% 4
An Interview with the President Question 2 Could you tell us about the details of PLAN18, which is the new medium-term management plan? Answer 2 In PLAN18, we have set out to implement strategies for growth and expand our business foundation as basic policies. Under a series of five medium-term management plans implemented starting in fiscal 2, the Iwatani Group has engaged in structural improvement with gas and energy as a core business. During that time, we have achieved significant improvement in profitability and financial standing. Under the recently instituted PLAN18, we will reliably secure earnings and build an even stronger management foundation while investing actively in growth fields such as the LPG, hydrogen, and resources businesses as efforts toward greater growth. (An overview of PLAN18 appears on page 6.) Question 3 What strategies are you pursuing to achieve these goals? Answer 3 We are an end-to-end supplier of LPG, procuring and importing it from Middle Eastern countries, the U.S., and other gas-producing countries and delivering it to households. In our core businesses in particular, such as the LPG business and industrial gases business, we will leverage the advantage of operating on a nationwide scale, making distribution and energy security more efficient and highly developed. Also, along with the promotion of a hydrogen society, taken from a long-term perspective, including construction of hydrogen refueling stations and augmentation of the liquid hydrogen supply function, we intend to enhance the scale of our businesses through initiatives such as strengthening overseas businesses and undertaking the start-up of new businesses. 5
PLAN18 Medium-term Management Plan Challenges and Growth Taking on New Challenges for Further Growth Implement strategies for growth Basic Policies Expand our business foundation Basic Strategies Promotion of a hydrogen society We will build a supply chain centered primarily on liquid hydrogen in anticipation of the early realization of a society that uses hydrogen as an energy source. Strengthening of overseas businesses With the aim of increasing the overseas sales ratio, we have newly set up the Global Business Division to do business from a cross-organizational perspective that transcends boundaries between business segments. We will strive for business expansion, particularly in Southeast Asia, in view of the elimination of intra- ASEAN import duties. Energy distribution reform We will leverage the key advantage of operating an upstream to downstream nationwide integrated LPG business and endeavor to further expand and upgrade the business by implementing distribution reform and reinforcing security systems. We will undertake expansion of our business base in the total energy and living services business through measures to increase the number of consumer households. Start-up of new businesses In keeping with the Iwatani Group s corporate philosophy Become a person needed by society, as those needed by society can prosper, we will engage in new businesses that respond to customer needs in our B-to-C business activities. Compliance By striving to ensure compliance group-wide, we will fulfill our corporate social responsibility, build the confidence of customers, business partners and a wide variety of other stakeholders, and contribute to local communities and the global environment. Ordinary income 24. billion Management Targets (Fiscal 218) ROA (ordinary income to total assets) 5.5% or higher ROE (net income to net assets) 1.% or higher 6
An Interview with the President Question 4 Could you describe the future of the hydrogen business? Answer 4 Our forward-looking investments for advancing a hydrogen society are continuing. In terms of profit, the costs will be covered by hydrogen sales for use in industrial sectors such as semiconductors, and by expanding revenues from sales of facilities related to hydrogen refueling stations. Also, in line with the growing demand for liquid hydrogen, including hydrogen energy, we will pursue efforts to expand manufacturing capacity while lowering costs, and at the same time move forward on projects directed at realization of CO 2 -free hydrogen supply as we take a strong look at the future. Outlook for the Spread of Fuel Cell Vehicles (FCVs) and Hydrogen Refueling Stations FY216 Market release of FC buses and practical use of FC forklifts 82 16 4, No. of hydrogen refueling stations 32 2, No. of FCVs on the road 8, Around FY23 Start of full-scale hydrogen power generation plants 215 (FY) 22 225 23 From the Revised Version of the Strategic Roadmap for Hydrogen and Fuel Cells Question 5 What is your thinking on shareholder returns? Answer 5 We increased our dividends in fiscal 215 to eight yen, an increase from the seven yen per share announced at the start of the period. We will put our efforts into strengthening the profit foundation that will enable us to solidly maintain this pace. In the 54 years since our founding, we have never failed to pay a dividend. Our basic policy is to continuously pay stable dividends, and we work hard to provide greater shareholder returns. 7
Performance by Segment Percentage of Net Sales n Energy n Industrial Gases & Machinery n Materials n Agri-bio & Foods n Others 2.4% 4.6% 1.3% 26.7% 47.% Segment Performance Review Energy LPG for household, commercial and industrial use LPG-supply equipment and facilities LNG Petroleum products Household kitchen appliances Home energy components Daily necessities Portable cooking stoves Gas canisters Mineral water, etc. Net Sales Operating Income ( million) ( million) 4, 12, 3, 289,422 9, 9,49 2, 6, 1, 3, (FY) 14 15 (FY) 14 15 The business environment was made harsh by the yearlong downward trend of the LPG import price and higher than normal temperature. However, unit sales in the retail business expanded as a result of an increase in the number of LPG consumer households. The effects of the LPG import price fluctuation lessened; income expanded as a result of the increase in consumer households; and sales of industrial-use gas facilities were strong. All three factors contributed positively to income. As a result, operating income rose by 6.7 billion. Industrial Gases & Machinery Net Sales Operating Income Air-separation gases Hydrogen ( million) ( million) Helium Other specialty gases 2, 1, Gas-supply facilities Welding materials 164,459 Welding and cutting equipment Industrial machinery and facilities 15, 7,5 7,624 Industrial robots Pumps and compressors Hydrogen refueling station facilities 1, 5, Disaster prevention equipment High-pressure gas containers Semiconductor manufacturing equipment 5, 2,5 Electronic-component manufacturing equipment Factory automation systems Medicine and food packing machinery (FY) 14 15 (FY) 14 15 Environmental equipment, etc. In air-separation gases, sales of nitrogen for the electronic components industry and other industries were firm, and income grew as a result of lower production costs. In liquid hydrogen, the Company acquired new customers and also increased its sales volumes to existing customers in the electronic and chemical fields. In the machinery and facilities business, the Company had solid sales in international and domestic gas-supply facilities, robots, machine tools, and facilities associated with hydrogen refueling stations. As a result, operating income rose by 1.2 billion. Materials Stainless steel Non-ferrous metals Resin materials Resin molded goods and products Functional plastic films Display components Electronic materials Mineral sands Ceramics materials Biomass fuels, etc. Net Sales Operating Income ( million) ( million) 16, 4, 3,846 125,918 12, 3, 8, 2, 4, 1, Sales were strong in resin products such as films and molded goods and products, as well as biomass fuels, which we started importing during the year. Also, profitability improved in mining materials from Western Australia as a result of a fall in the Australian dollar. On the other hand, market conditions worsened in PET resin materials, and stainless steel, causing sales to fall. As a result, operating income rose by 1.1 billion. (FY) 14 15 (FY) 14 15 Agri-bio & Foods Frozen vegetables and fruits Health foods Livestock-related products Agri-bio related goods Food plant sanitation management, etc. Net Sales Operating Income ( million) ( million) 3, 28,567 15 1,246 2, 1 1, 5 In the foods business, the high price of fresh vegetables led to a greater demand for frozen vegetables as an alternative, while the sales of frozen side dishes increased due to their shorter cooking time. In the agriculture and livestock business, sales were firm in agricultural facilities and livestock facilities, while shipment of breeding stock also increased. As a result, operating income rose by.5 billion. (FY) 14 15 (FY) 14 15 8
Financial Highlights (Years ended March 31) 212 213 214 215 216 216 For the year million US$ thousand Net sales 661,185 657,6 73,923 691,92 616,21 $ 5,468,592 Gross profit 144,432 139,763 146,792 141,34 154,55 1,367,19 Operating income 19,171 16,79 18,518 11,174 2,496 181,895 Ordinary income 19,528 17,46 19,258 12,761 21,584 191,551 Income before income taxes and minority interests 19,535 15,465 18,32 12,468 2,781 184,424 Profit attributable to owners of parent 1,543 8,26 1,466 6,199 12,365 19,735 Comprehensive income 1,58 13,691 16,384 16,1 8,281 73,491 R&D expenses 572 683 1,368 1,25 1,173 1,41 Ratios % % Net income to net sales* 1 1.6 1.2 1.5.9 2. 2. ROE (net income to net assets) 15.7 1.4 11.6 6.1 11.1 11.1 ROA (ordinary income to total assets) 5.1 4.5 4.8 3.1 5.3 5.3 Equity ratio 18.4 21.5 23.2 26.7 28.4 28.4 Per share data Yen U.S. dollars Profit attributable to owners of parent 43.24 32.88 42.53 25.19 5.24.44 Shareholders equity 292.28 337.74 393.15 442.96 495.62 4.39 Cash dividend applicable to the period 7. 7. 7. 7. 8..7 At year-end million US$ thousand Total assets 386,127 386,32 416,219 48,824 44,479 3,589,625 Fixed assets 2,354 27,523 214,724 227,15 228,61 2,28,762 Interest-bearing debt 159,398 151,378 161,99 141,793 136,514 1,211,519 Net assets 79,551 9,93 15,58 117,942 124,583 1,15,635 * The U.S. dollar amounts have been translated at the prevailing exchange rate as of March 31, 216, which was 112.68 to US$1.. *1 The basis for calculation of Net income to net sales is Profit attributable to owners of parent. Net Sales Operating Income Profit Attributable to Owners of Parent ( million) 8, ( million) 25, ( million) 15, 6, 2, 12, 4, 15, 1, 9, 6, 2, 5, 3, 12 13 14 15 16 12 13 14 15 16 12 13 14 15 16 Total Assets ( million) 5, 4, 3, 2, 1, Net Assets ( million) 15, 12, 9, 6, 3, 12 13 14 15 16 12 13 14 15 16 9
Company Information (As of March 31, 216) Company Information Name Formal establishment February 2, 1945 Osaka Head Office 6-4, Hommachi 3-chome, Chuo-ku, Osaka 541-53, Japan Tel: 81-6-7637-3131 Headquarters Tokyo Head Office 21-8, Nishi-Shimbashi 3-chome, Minato-ku, Tokyo 15-8458, Japan Tel: 81-3-545-5711 Company directors and auditors Chairman and CEO* 1 Akiji Makino Vice Chairman* 1 Toshio Watanabe President* 1 Masao Nomura Executive Vice President* 1 Kazuhiko Minamimoto Executive Vice President* 1 Hisato Ueha Senior Executive Director* 1 Mitsuhiro Tanimoto Senior Executive Director* 1 Hirozumi Hirota Senior Executive Director* 1 Takashi Funaki Executive Director* 1 Masanori Watanabe Executive Director* 1 Hiroshi Majima Executive Director* 1 Naoki Iwatani Executive Director* 1 Akira Ohta Director* 1 Satoshi Watanabe Director* 1 Tomotaka Iwanaga Director* 1 Makoto Horiguchi Director* 2 Mitsuaki Naitou Director* 2 Shinji Murai Corporate Auditor Toyofumi Ohama Corporate Auditor Yoshiaki Fukuzawa Corporate Auditor* 3 Masahiro Horii Corporate Auditor* 3 Yoshinori Shinohara *1 Director and executive officer *2 Outside director *3 Outside auditor (As of June 28, 216) Paid-in capital 2,96 million yen Number of employees 8,918 (consolidated) Website http://www.iwatani.co.jp/eng/ Share Information Share listing Agent to manage shareholders registry Distribution of shares by type* 4 Major shareholders* 5 Tokyo, Nagoya Shares of common stock issued and outstanding Mitsubishi UFJ Trust and Banking Corporation Individuals and others 37.9% Financial institutions 25.8% Other institutions 27.8% Foreign institutions and others 7.4% Securities companies 1.1% Name 251,365,28 (5,41,41 shares of treasury stock included) Number of shares held (Thousand shares) Shareholding ratio (%) The Iwatani Naoji Foundation 2,663 8.39 Tetsu Iwatani Co. Ltd. 6,87 2.79 The Bank of Tokyo-Mitsubishi UFJ, Ltd. 6,68 2.71 The Master Trust Bank of Japan, Ltd. (Trust Account) 6,139 2.49 Resona Bank, Ltd. 5,888 2.39 Japan Trustee Services Bank, Ltd. (Trust Account) 4,945 2.1 Nippon Life Insurance Company 4,491 1.82 Iwatani Enyukai 4,472 1.82 Iwatanisangyou Senyukai 4,65 1.65 Sompo Japan Nipponkoa Insurance Inc. 3,97 1.59 *5 In addition to the above, the Company holds 5,41,41 shares of treasury stock. Shares of common stock issued and outstanding (Treasury stock included) 251,365,28 *4 Treasury stock is included in Individuals and others. Share Price (Yen) 1, Trading Volume (Thousand shares) 3, Change in share price 5 25, 2, 15, 1, 5, May Apr. Mar. Feb. Jan. Dec. Nov. Oct. Sept. Aug. Jul. Jun. May Apr. Mar. Feb. Jan. Dec. Nov. Oct. Sept. Aug. Jul. Jun. Jun. May Apr. Mar. Feb. Jan. Dec. Nov. Oct. Sept. Aug. Jul. Jun. May Apr. Mar. Feb. Jan. [213] [214] [215] [216] 1
Osaka Head Office 6-4, Hommachi 3-chome, Chuo-ku, Osaka 541-53, Japan Tel: 81-6-7637-3131 Fax: 81-6-7637-3535 Tokyo Head Office 21-8, Nishi-Shimbashi 3-chome, Minato-ku, Tokyo 15-8458, Japan Tel: 81-3-545-5711 Fax: 81-3-545-564 Corporate Website http://www.iwatani.co.jp/eng/ FSC LOGO Printed in Japan