Air Water has established a medium-term management plan that runs through to the end of full year 2021, The Gas Review reports.
Announced back in May, the end of this management plan sets company sights on sales revenue of YEN one trillion, operating profit of YEN 60bn, an operating profit ratio of 6% and an overseas sales ratio of 10% (YEN 100bn). It will form the final stage of the YEN one trillion company vision given as a 10-year growth goal by the company in full year 2010.
President and Chief Operating Officer Kiyoshi Shirai said, “We will target our goal by continuing our all-weather management style to balance industrial business with lifestyle business, boldly undertaking M&A, and growing our current business endeavours.”
Last term, the company’s three-year growth rates from full year 2018 results were 34.8% for sales revenue, 40.6% for operating profit and 30.7% for term profit. Since full year 2019, Air Water has shifted to the International Financial Reporting Standards (IFRS) and results for full year 2018 were also based on IFRS.
Increases are predicted of around YEN 250bn in sales revenue and about YEN 17.3bn in operating profit. Around YEN 90bn of the increase in sales revenue is from business growth in previously completed M&A ventures and YEN 76bn is from growth in previous businesses. Add this to approximately YEN 60bn in new M&A and approximately YEN 30bn in power generation business and you get the target of YEN one trillion. The three-year total investment capital was around YEN 240bn. Of this, YEN 70bn is planned for M&A.
New M&A will be undertaken while group companies are intended to be restructured and integrated. The current 263 companies will be integrated into 150 companies in three years to create around YEN 500m of additional profit annually.
Around 25% of growth in sales revenue and operating profit are expected to be from industrial gases. In business results for full year 2018, sales revenue for industrial gases sought to rival sales revenue for medical products, but the path leading to sales of YEN one trillion will be after all industrial gases, which have been handed down from the founder.
Specifically, growth of YEN 60.5bn in sales revenue and YEN 4.2bn in operating profit are expected from industrial gases. At the centre will be strengthening of VSU networks. In addition to the VSU networks schedule for Yamagata Ekisan and Kameyama in Mie Prefecture, expansion of four VSU facilities is planned, making a total of 24 systems across Japan.
For overseas business, expected to reach YEN 100bn in three years, engineering for industrial gases will be the main area. This results from the cryogenic equipment and plant engineering manufacturer subsidiaries in North America, in addition to partnerships with independent local distributors, leading to a US version of the company’s VSU strategy. There are plans to establish at least one VSU facility in the US by full year 2021. In Asia, intentions are to establish a local subsidiary in Singapore and start with equipment engineering as a bridgehead to further developments.
Whereas previously local business companies tended towards industrial and medical gases, development strategies that pursue local characteristics will be executed. By full year 2021, the eight local business companies will target total sales revenues of YEN 217.7bn and operating profit of YEN 17.7bn.
Medical business is expected to reach growth of YEN 35.8bn (20.6% growth) in sales revenue and YEN 2.6bn (25.4% growth) in operating profit over three years. This will be the results of focusing on perioperative medicine where advance medical equipment is located, while working hard to build new business based on an R&D centre which opened in Kobe in May (2019).
For agricultural and food business, sales of YEN 33.4bn (an increase of 24.5%) and operating profit of YEN 2bn (an increase of 51.5%) are expected over three years as well. To target the ready-made meal market where expansion is expected, production in Hokkaido will be expanded to include Kyushu and processing plants will be built in the Kanto Area where the largest population is centred.
In addition, in the next three years projects to see electrical power will be started based on FIT one after another. These include a woody biomass-coal co-combustion project in Hyogo Prefecture in September 2020, and a woody biomass combustion project in Fukushima Prefecture in April 2021. With the operation of these three power plants, sales revenue of around YEN 30bn and operating profit of about YEN 5bn are expected.
The Gas Review, issue no. 470