▷ Full-year FY03/20 sales were JPY37.9bn (-4.2% YoY), operating profit was JPY6.6bn (-15.4% YoY), recurring profit was JPY6.8bn (-15.7% YoY), and net income attributable to owners of the parent was JPY4.4bn (-19.1% YoY). Industrial machinery and steelmaking-related sales of thermal spraying treatments increased steadily thanks to capturing demand for better durability and quality, but the business environment for mainstay semiconductor/FPD-related treatments was difficult, particularly in 1H, causing sales and profit to fall overall. Against company forecasts (sales: JPY37.3bn, operating profit: JPY6.3bn), results were marginally ahead. The annual dividend for FY03/20 is forecast to be JPY25.0 per share (a payout ratio of 34.5%). TOCALO has not disclosed
TOCALO / 3433
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Coverageguidance for FY03/21. This is on account of the impact of the novel coronavirus pandemic. When reasonable predictions can be made, TOCALO shall promptly disclose these.
▷ For Jan–Mar 2020 (Q4 FY03/20), sales were JPY9.4bn (+6.5% YoY), operating profit was JPY1.4bn (+27.5% YoY), recurring profit was JPY1.6bn (+33.3% YoY), and net income was JPY1.0bn (+17.1% YoY). Since Q1, sales had been trending lower YoY, but in Q4, sales shifted to growth. Operating profit had also been trending lower YoY since Q4 FY03/19, but this also shifted to growth in Q4. Contributing to this was a 22.7% YoY increase in industrial machinery-related sales, in addition to
semiconductor/FPD-related sales of thermal spraying treatments shifting to growth and rising 3.3% YoY. However, it should be noted that sales were low in Q4 FY03/19, and against Q3 FY03/20 results, sales were down 2.9% and operating profit was 26.0%
lower. The novel coronavirus had only a minor impact on Q4 earnings.
Thermal Spraying (Parent)
Thermal Spraying (Parent): In the Thermal Spraying (Parent) segment, full-year FY03/20 sales were JPY28.2bn (-7.2% YoY) and recurring profit was JPY5.3bn (-19.1% YoY). Industrial machinery and steelmaking-related sales were respectively JPY4.8bn (+15.1% YoY) and JPY3.9bn (+6.5% YoY), buoyed by demand for longer life power plant boilers and higher quality steel (including steel sheets) for automobiles, but semiconductor/FPD-related sales, which account for a large proportion of sales, were JPY14.1bn (-17.7% YoY). With reduced production volume, the company cut back on outsourcing and raised the ratio of in-house processing. However, recurring profit fell YoY mainly due to lower sales, and also to increased depreciation
accompanying greater capital expenditures in the recent years.
For Q4 alone, sales were JPY7.1bn (+8.6% YoY) and recurring profit was JPY1.4bn (+41.3% YoY). Sales and profit were higher in comparison to Q4 FY03/19 because Q4 FY03/19 marked the lowest point in the demand cycle. Semiconductor/FPD-related sales were JPY3.7bn (+3.3% YoY) on an increase in orders from major semiconductor manufacturers. Industrial machinery-related sales were JPY1.1bn (+22.7% YoY), with robust sales particularly in the energy sector (surface treatment to extend the life of power plant boilers). Steelmaking-related sales were JPY1.1bn (+15.6% YoY). Although outsourcing costs, personnel costs (related to retirement benefits), and depreciation all increased, higher semiconductor/FPD-related and industrial machinery-related sales had a greater impact (marginal profit ratio of over 60%).
Q4 orders were JPY7.8bn (+16.9% YoY), driven by semiconductor/FPD-related orders of JPY4.6bn (+36.1% YoY), a new quarterly record. Orders from semiconductor equipment makers both inside and outside Japan has increased. TOCALO points out that some orders it expected in Q1 FY03/21 may have arrived early. Industrial machinery-related orders were JPY1.2bn (-12.2% YoY).
Although some variation was seen between quarters, the level remained high. About half of industrial machinery-related orders were for the energy sector and about 30% were bearing-related (mainly surface treatment of high-speed railway bearings).
Steelmaking-related orders were JPY844mn (-1.2% YoY) and other orders were JPY1.1bn (+6.6% YoY).
Domestic Subsidiary (Japan Coating Center [JCC])
Full-year FY03/20 sales in the Domestic Subsidiary segment were JPY2.4bn (-5.2% YoY), and recurring profit was JPY491mn (-9.9% YoY). Performance was sluggish in PVD processing for cutting tools used to machine automotive parts due to reduced production at automotive parts manufacturers that supply parts to China.
For Q4 alone, sales were JPY578mn (-3.7% YoY) and recurring profit was JPY116mn (+30.3% YoY). Some 60–70% of JCC’s sales are to the automotive and auto parts industries. Although there was no serious impact on Q4 performance, the automotive industry reduced production due to the novel coronavirus, which may negatively impact sales in the short term.
Overseas Subsidiaries
FY03/20 sales in the Overseas Subsidiaries segment (December financial year-end) were JPY4.9bn (+10.4% YoY), while recurring profit was JPY1.1bn (-0.8% YoY). In China, orders grew in steel, industrial machinery, oil and gas, papermaking and other fields, but a YoY drop in orders in the semiconductor and FPD fields in Taiwan dampened full-year results. For Q4 alone, sales were
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CoverageJPY1.2bn (+5.8% YoY), and recurring profit was JPY92mn (-58.6% YoY). Since the start of FY03/21, sales in Taiwan targeting semiconductor equipment appear to have rebounded.
Other Surface Treatments
The Other Surface Treatments segment saw full-year FY03/20 sales of JPY2.4bn (+8.2%) and recurring profit of JPY266mn (+75.0% YoY). In addition to TD processing for agricultural machinery components getting into full-swing, the segment recorded growth in the PTA business that leverages laser processing technology. For Q4 alone, sales were JPY577mn (-4.2% YoY) and recurring profit was JPY63mn (+34.0% YoY).
Capital expenditures, depreciation, and R&D expenses
FY03/20 capital expenditures were JPY2.3bn (-61.2% YoY). TOCALO initially planned to allocate JPY3.6bn to capital expenditures, but postponed or scaled back some investment plans in light of the order environment in the semiconductor field. However, the company proceeded as planned with investment in new facilities to enhance production capacity and develop next-generation coating technology. Depreciation was JPY3.0bn (+12.5% YoY), with the increase largely the result of a high level of capital expenditures, about JPY6.0bn between FY03/17 and FY03/19. R&D expenses were JPY1.2bn (+15.6% YoY, 3.1% of sales).
Source: Shared Research based on company data
FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20
(JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons.
Capital expenditures 1,217 1,644 2,513 2,678 3,730 5,936 6,361 5,965 2,313
Depreciation 1,739 1,545 1,388 1,440 1,560 1,703 1,948 2,658 2,991
R&D expenses 634 630 653 746 862 834 905 1,003 1,159
R&D ratio 2.9% 3.0% 2.9% 2.9% 3.0% 2.9% 2.7% 2.5% 3.1%
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LAST UPDATE: 2021.05.10 Research Coverage Report by Shared Research Inc. | https://sharedresearch.jp