business report - gunzenet sales 3,126 functional solutions business was adversely affected by the...

1

Business Report

GUNZE LIMITED(Company Code: 3002)

End of March 31, 2020

（FY2019）

Ⅰ. Corporate Outline＆ History

2Copyright © GUNZE LIMITED. All rights reserved

Founded ： August 10, 1896 （124 years ago）

Capital Stock ： 26.1 billion yen

Affiliates ： 62 Facilities (Domestic- 29, Overseas- 33)

Employees ： 6,185 （Consolidated），1,743 (Non-consolidated)

Net Sales ： 140.3 billion yen (Consolidated)

＜ March 31, 2020＞

Ⅰ-1.Corporate Profile


Founding Philosophy

Origin of “Gunze”

People-oriented Approach ＝ Respect people

Commitment to Quality ＝ Serve the people’s needs

with the finest products

Harmonious Coexistence ＝ Contribute to society

Why was “Gunze”

founded？

Tsurukichi Hatano

（Founder）

郡(GUN)－

是(ZE) － Means “policy” in Japanese

GUNZE Silk

Manufacturing

Co., Ltd.

To promote the silk industry and

contribute to the local community

Ⅰ-2. Founding Philosophy

Copyright © GUNZE LIMITED All rights reserved

Refers to Ikaruga-gun, Kyoto (“Gun” means “district” in Japanese)

4

Entry into

non-textile business

Expand into

consumer

products from raw

silk business

Real estate development

through effective

utilization of

factory sites

2014 Solar Power

1896 Founded （Silk Industry）

1954 Sewing Thread

1946 Inner Wear

1934 Stockings

1965 Lingerie

1977 Pajamas

1973 Baby Wear

Functional Solutions Apparel（Consumer Products） Lifestyle Creations

1984 Sports Clubs

1962 Real Estate

1973 Greenery Business

1962 Plastic Films

1969 Mechatronics

1983 Engineering Plastics

1985 Electronic Components

2010 Optical Films

1988 Medical Materials

Ⅰ-3. Corporate Development

Copyright © GUNZE LIMITED All rights reserved 5

2016 Jeans･Casual Dan

Trends in Net Sales and Operating Profit


Net Sales 営業利益率(%)Operating margin (%)

Ⅰ-4. Performance （Consolidated）

Operating

Profit

31 37 42

62 66 672.2

2.7

3.1

4.4 4.8 4.8

597 562502 508 532 563

676682

716 740 726 694

145146 152

161 152 149

0

200

400

600

800

1000

1200

1400

1600

2014年 2015年 2016年 2017年 2018年 2019年

34 34 3554 61 61

15 22 25

2625 27

1312 13

1412 12

0

20

40

60

80

100

120

140

160

180

200

1,412 1,383 1,366 1,405 1,407 1,403

FY2014 FY2015 FY2016 FY2017 FY2018 FY2019

Functional Solutions Apparel Lifestyle Creations

Unit： Hundred millions of yen

Ⅱ. Business Summary

Copyright © GUNZE LIMITED. All rights reserved 7

Operating

Profit27％

Ⅱ-1. Breakdown by Business Segment

8

Net Sales:

140.3 Billion Yen

Operating Profit:

6.7 Billion Yen

Net Sales40％

Net Sales49％

Operating

Profit61％

Net Sales11％

Operating

Profit12％



Net

Sales

営業利益率(%)Operating margin (%)

Ⅱ-2. Performance （Functional Solutions）

Operating

Profit

5.7 6.0 7.0

10.6

11.6 10.9

597562

502 508532

563

34 34 3554 61 61

0

100

200

300

400

500

600

700

2014 2015 2016 2017 2018 2019FY2014 FY2015 FY2016 FY2017 FY2018 FY2019


Ⅱ-3. Products in the Functional Solutions Business (1)

Copyright © GUNZE LIMITED All rights reserved10

Plastic Films Presently, the main products are films for food and beverage

packaging applications.

Engineering Plastics

Multilayer Sheets

Beverages

Toiletry goods

Presently, the main products are high-function materials for OA applications.

High-function Plastics Fluororesin Materials

Nylon Films

Refill Pouch

Barrier Nylon Films and

Others

OPP Films

Anti-Fogging Film for fresh

vegetables including bean

sprouts and mushrooms

Semiconductor

applications

Wall paper

Image Transfer Belt for ColorPhotocopiers.（Seamless Belt）

Shrink Films

Tubes for Fuser Rollers

Other Fluorine Products Filter materials for

Semiconductor applications

Ⅱ-4. Products in the Functional Solutions Business (2)


Electronic Components Presently, the main products are touch screens and related

components.

Medical Materials

ITO Films, Functional

Films, etc.

Presently, the main products are bioabsorbable materials for surgical instruments.

Projected Capacitive Touch Screen (PCAP)

For Laptops, PC Monitors, Tablets,

Smartphones

Resistive Touch Screen

Elastic Medical

Stocking Bioabsorbable Reinforcement Felt

Polyglycolic

Acid Suture

For industrial PCs and FA

devices

•Finished

•Semi-finished

Indium Tin Oxide film

Optical film

Optical Clear Adhesive

Anti-Fingerprint Hard Coat Low ＆Anti-Reflection, etc.

Automatic suture device with

suture reinforcement Bioabsorbable

Bone Fixation

Devices Bioabsorbable

Dural Substitute

Artificial

Dermis

11

Electronic Components（Taiwan）

Gunze Taiwan

Limited （2010）

Electronic Components

Gunze Electronics

U.S.A. Corp.

（Texas, 1988）

Medical Materials

Gunze Medical Devices

(Shenzhen) Limited（2011）

Engineering Plastics

Gunze Engineering Plastics

(Hong Kong) Limited （2005）

Plastics（Kansas）

Gunze Plastics &Engineering Corporation

Of America（1992）

Plastics（Shanghai）Shanghai Gunze New

Packaging Co., Ltd.

（1997）Shanghai Gunze New

Plastics Film Co., Ltd.

（2002）

Electronic Components（DongGuan)

）DongGuan Guan Zhi

Electronics Ltd.（2002）

Supplementary Information : Global Network（Functional Solutions）

Copyright © GUNZE LIMITED All rights reserved12

Plastics（Vietnam）

Gunze

Plastics&Engineering

of Vietnam Co.,Ltd.

（ 2018）

676 682716

740 726694

15 22 25 26 25 27

0

100

200

300

400

500

600

700

800

2014 2015 2016 2017 2018 2019

Ⅱ-5. Performance （Apparel）


Trends in Net Sales and Operating ProfitOperating margin (%)


Net

Sales

Operating

Profit

FY2014 FY2015 FY2016 FY2017 FY2018 FY2019

2.2

3.2 3.5

3.5 3.5

3.9

Ⅱ-6. Apparel Products


Innerwear Legwear

Jeans & Casual･DanNightwear, House casual wear Threads and Accessories

Shanghai

Beijing Aimer Gunze Apparel Ltd.Dalian Gunze Fashion Garments

Co., Ltd.

Threads and Accessories

15

◆ Supplementary Information: Global Network（Apparel）

Innerwear （Thailand）

Thai Gunze Co., Ltd.

Inner Wear （Vietnam）

Innerwear （Beijing） Innerwear （Dalian）

Gunze (Vietnam) Co., Ltd.

Gunze United Limited

Indonesia

P.T. Gunze Indonesia

Socks

P.T. Gunze Socks Indonesia



（Bangladesh）

Innerwear ／ Stockings

Gunze China Ltd.

Gunze (Shanghai) International Trading Co., Ltd.

Shanghai Gunze Fiber Co., Ltd.

Innerwear ／ Stockings（Shandong Province）

Cｈina

Vietnam

Thailand

Bangladesh

Shandong Gunze Apparel Ltd.

Shandong Gunze Apparel Processing Co., Ltd.

Jinan Gunze Apparel Co., Ltd.


（ Vietnam ）

Gunze Hanoi Co., Ltd.

Copyright © GUNZE LIMITED. All rights reserved

Changshu Gunze Accessories Co., Ltd.


Taicang Gunze New Material Co., LTD.

（ China ）

145 146152

161152 149

13 12 13 14 12 12

0

20

40

60

80

100

120

140

160

180

2014 2015 2016 2017 2018 2019

Ⅱ-7. Performance （Lifestyle Creations）



Net

Sales

営業利益率(%)Operating margin (%)

Operating

Profit


FY2014 FY2015 FY2016 FY2017 FY2018 FY2019

9.0

8.2

8.6 8.7

8.1

7.9

Ⅱ-8. Lifestyle Creation Business (1)


Sports Clubs

GUNZE SPORTS Suita-Kento shop

Operation of Commercial Facilities

Shopping complex

“TSUKASHiN”

in Amagasaki, Hyogo.

Fitness Gyms, 22 gyms (present), 50,000 members

Commercial Facility Development, Real Estate Business, Spa Business

Machine training

Ⅱ-9. Lifestyle Creation Business (2)


Engineering Business Energy and resource savings, Performance Management-

Diagnostics & Consultant

Landscaping and Greening Business

Sale of high-quality trees and flowers

Sales for flowers and

garden products

Solar Power Business

（2013－)

Domestic facilities at

3 locations

"Eco Zakura®" cherry-

trees with an

environmental

purification function

Phalaenopsis orchid

ESCO business

Energy-saving for buildings and factories

Solar Power Plant in Motomiya，Fukushima

Factory Energy

Support Service in

China （2012－）

18

Ⅲ. Recent Business Performance

Copyright © GUNZE LIMITED All rights reserved 19

Ⅲ-1. Consolidated Financial Summary

20

FY2019 FY2018

YoY Operating margin (%)

Increase/

Decrease (△)

Change

(%)FY2019 FY2018

Net Sales 140,311 140,706 △394 △0.3% －－

Operating

Profit6,746 6,690 56 0.8% 4.8% 4.8%

Ordinary

Profit6,868 7,152 △283 △4.0% 4.9% 5.1%

Net profit

attributable to

owners of the

parent

4,387 4,087 300 7.3% 3.1% 2.9%

（Millions of yen, %）

Last year: Non-operating profit (Exchange gain) 183

Consolidated Results

YoY Increase / Decrease (△) Topics

Net Sales △339 • Real EstateThe shopping center business suffered a negative impact from the consumption tax hike and the COVID-19

pandemic. However, its promotion of local community-based operations and revenues from new properties

in the rental property business contributed positively to the performance of the real estate category.

Operating Profit △53 • SportsClubThe sports club business was heavily impacted by the spread of COVID-19, although the decrease in

membership has finally come to an end.

Ⅲ-2. FY2019 Segment Summary

21


Net Sales △3,117The apparel business was negatively impacted by a downturn in consumer confidence after the consumption tax hike,

natural disasters including large typhoons, a particularly warm winter, and the spread of COVID-19. Even so, efforts

geared toward improving its business structure allowed this segment to post an increase in operating profit.

Operating

Profit236

• Innerwear

• Legwear

Innerwear continued to perform well, mainly for BODYWILD AIRZ and YG CUTOFF (men’s

innerwear) and KIREILABO (women’s innerwear). The reinforcement of product development

capabilities, including legwear, helped enhance profitability.

Lifestyle Creations

Apparel

Functional Solutions (Millions of yen)


Net Sales 3,126

Functional solutions business was adversely affected by the slowdown in the semiconductor market. However, sales

grew, partly due to the positive contribution of M&A.

• Plastic FilmsNylon film sales remained firm, but sales of OPP films and multilayer films were adversely

impacted by the market downturn.

• EngineeringPlasticsAlthough sales were sluggish for semiconductor and industrial equipment applications, products

for office equipment continued to perform stably.

Operating

Profit△39

• ElectronicComponents Sales in China remained steady, but film sales decreased.

• Medical MaterialsGUNZE turned Medical U&A, Inc. into its subsidiary, which helped boost this category’s sales revenue. However, medical materials business was adversely affected by the decline in sales of bioabsorbable reinforcement felt in the U.S. market and the increase in clinical trial costs.

Ⅲ-3. FY2019 Performance by Segment

22

Net Sales Operating Profit (margin, %)

FY2019 FY2018Increase/

Decrease (△) FY2019 FY2018 Increase/Decrease (△)

Functional

Solutions56,361 53,234

5.9%

3,1266,12010.9％

6,16011.6%

△0.6%△39

Apparel 69,491 72,609△4.3%

△3,1172,743

3.9%

2,5073.5%

9.4%236

Lifestyle

Creations14,945 15,285

△2.2%

△3391,187

7.9%

1,2418.1%

△4.4%△53

Total 140,311 140,706△0.3%

△3946,746

4.8%

6,6904.8%

0.8%56

(Millions of yen)

Ⅲ-4. Extraordinary Profit (Loss)

23

FY2019 FY2018Increase/

Decrease (△)

Gain on sale of fixed assets 1,058 690 367

Impairment loss (867) － △867

Factory relocation expenses (390) － △390

Other (770) (1,547) 778

Total extraordinary profit (loss) (969) (857) △112

（Millions of yen）


Ⅲ-5. Key financial and management indicators (consolidated)

Unit FY2019 FY2018Increase

Decrease (△)

ROA: Return on assets % 4.0 3.9 0.1

ROE: Return on equity % 4.0 3.7 0.3

Total assetsmillions

of yen 166,633 169,632 △2,998

Total equitymillions

of yen 107,566 109,506 △1,940

Equity ratio % 64.6 64.6 －

Interest-bearing debtmillions

of yen 25,030 26,242 △1,212

BPS: Book-value per share yen 6,061.10 6,059.06 2.04


Ⅲ-6. Cash Flows

25

FY2019 FY2018IncreDecrease

(△)

ase/

Operating

Activities13,688 11,491 2,196

Investing

Activities△8,262 △7,373 △888

Free

Cash Flow5,426 4,118 1,308

Financing

Activities△4,886 △5,483 597

Cash and Cash

Equivalent

(End of Period)9,267 8,102 1,165

Breakdown of Major Investing CF

Proceeds from sale of fixed assets 2,195

Payments for purchase of fixed assets △9,599

（Millions of Yen）Cash Flows

Breakdown of Major Financing CF

Proceeds from issuance of long-term debt 1,643

Repayment of long-term debt △2,454

Cash dividends paid △1,989

Payments for purchase of treasury stock △1,487

Breakdown of Major Operating CF

Income before income and other taxes 5,899

Depreciation and amortization 6,390

Decrease in notes and accounts receivable 3,385

Income tax paid △2,174


Ⅲ-7. Distribution of Earnings to Shareholders

26

1,272 1,273

1,685 1,837 1,825 1,831 1,843

2,297 2,297

2,727

6.1% 6.1%8.0% 8.8% 8.7% 8.7% 8.8%

10.9% 10.9%13.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

0

500

1,000

1,500

2,000

2,500

3,000

2009/3 2010/3 2011/3 2012/3 2013/3 2014/3 2015/3 2016/3 2017/3 2018/3

期末自己株式数自社株比率

400

150500

340

1,100

消却▼1,800

（Unit: yen）Dividend per Share, Dividend Payout Ratio

Treasury Stock

CancellationBalance at the

end of periodAcquisition

The GUNZE Group paid a dividend of ¥115 per share for fiscal 2019.

1,220

2019/3

※GUNZE carried out consolidation of its shares in which every ten shares of the Company’s common stock would be consolidated into

one share effective October 1, 2017. Accordingly, dividends before the end of March 2017 are converted by reflecting this share consolidation.

(Unit:1,000 shares)

Treasury stock ratio

260

6.3%

▼1,700

1,546

8.0%

2020/3

100.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 90.0

110.0 115.0

10.0

130.5%175.6%

81.3%

253.4%

0.0% 57.3% 44.7% 45.2%47.5%

48.8%46.9%

0.0%

50.0%

100.0%

150.0%

200.0%

250.0%

300.0%

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

2009/3 2010/3 2011/3 2012/3 2013/3 2014/3 2015/3 2016/3 2017/3 2018/3 2019/3 2020/3

普通配当記念配当配当性向Ordinary

Dividend

Commemorative

Dividend

Payout

Ratio

421


27

Ⅳ. Future Outlook


Ⅳｰ1. Future Outlook

28

Going forward, we will implement necessary measures to

respond to rapidly changing situations. By so doing, we

will enhance the binding force that unites all members,

as we endeavor to meet our goals.

In June of 2014, the GUNZE Group announced its medium-term

management plan, “CAN 20,” which targets the years leading up

to March 31, 2021. However, because of the heavy impact of the

novel coronavirus (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 “CAN 20” up to the fiscal year ending

March 31, 2022.


Ⅳ-2. Outline of Medium-term Management Plan “CAN 20”


Focus and Concentration

8 years （FY2014 - FY2021)1st Phase （FY2014 - FY2016）2nd Phase （FY2017 - FY2021）

By further reinforcing its strength, GUNZE will contribute to

society as a global company that provides customers with a

“feeling of comfort” that only GUNZE can offer.

Set health and medical-related fields, which contribute to the

improvement of quality of life, as core factors for growth;

establish a one-of-a-kind position in the industry in targeted fields

through “focus and concentration”

29

Key Concept

Period

2021

Management

Vision

2021 Business

Objectives

Ⅳ-3. Fundamental Strategy for the “CAN 20” 2nd Phase

30

ROE： 5.0% or over

Strongly promote 3 pivotal strategies

FY2021 management goals (consolidated)

Item UnitFY2016

Results

FY2021

Forecast

Increase/Decrease

FY2021 vs. FY2016

Net Sales Millions of Yen 136,579 150,000 +13,420 110％

Operating Profit Millions of Yen 4,206 8,000 +3,794 190％

Operating Margin % 3.1 5.3 +2.2％

Net Profit Millions of Yen 3,102 5,600 +2,498 180％

ROA % 2.5 4.7 +2.2％

ROE % 2.9 5.0 +2.1％

Business strategy

in each segment

Creation of new

business

Reinforcement of the

management foundation


Ⅳ-4. Outlook for FY2020

31

業績予想

Lifestyle Creations

・In plastic films, the GUNZE Group will aim to develop and introduce environmentally responsible products that can help

alleviate pollution from marine plastic and food loss. The GUNZE Group will also strive for a vertical start-up for the new

factory in Vietnam, which started operations in the fiscal year under review, in order to make a swift contribution to the

GUNZE Group’s management. In Japan, we will launch a project aimed at realizing a Circular Factory (resource-circulating

factory) in Moriyama.

・In engineering plastics, in addition to mainstay products for the office equipment market, we will aim for sales expansion of

products for industrial equipment applications.

･ In medical materials, we will further promote synergy with Medical U&A, Inc., which became a GUNZE subsidiary in the

previous fiscal year. Moreover, we will seek to expand sales in China and other overseas markets, while striving to acquire

approval for large-scale next-generation products.

Functional Solutions

Apparel

・While the apparel business has concerns about the slump of in-store sales due to the spread of COVID-19, the GUNZE

Group aims to further promote the appeal of our products on the EC channel.

・In innerwear, the GUNZE Group will release new materials and new products that meet consumer needs, which are

returning to natural materials and casual-oriented trends, under YG and BODYWILD brands.

・In legwear, the GUNZE Group will strive to enhance market responsiveness to accommodate changes in consumer needs.

By so doing, the GUNZE Group will proactively launch new SABRINA products targeting the younger generation, and

fully update the Tuché lineup to conform to the casual-oriented trend.

・The GUNZE Group will work to boost the profitability of its commercial facilities and promote property-specific

management that emphasizes investment efficiency.

・As for the sport club category, a prolonged negative impact from COVID-19 is expected. Even so, we will continue to

put the health and safety of club members and staff above all else.Copyright © GUNZE LIMITED. All rights reserved

Copyright © GUNZE LTD. All rights reserved 32

Forward-looking statements such as earnings forecasts and other

projections contained in this report are based on information available at

this time and assumptions that management believes to be reasonable, and

do not constitute guarantees of future performance. Actual results may

differ materially from those expectations due to various factors.


business report - gunzenet sales 3,126 functional solutions business was adversely affected by the...

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