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Message to Investors

Earnings status

During the fiscal year ended March 31, 2021, the HDS Group’s business environment remained harsh in the first half of the fiscal year as companies all over the world took a careful approach toward capital investment due to the spread of the novel coronavirus. However, entering the second half of the fiscal year, environments surrounding order bookings showed signs of recovery, especially in Asian markets including Japan, as the Chinese economy became one of the first to recover from the pandemic. Furthermore, toward the end of the fiscal year, the operating environment improved substantially as companies became more inclined to make capital investments.
As mentioned above, the environment surrounding order bookings was harsh in the first half of the fiscal year, but rapidly improved from the second half of the year due to increased investment in automation in the Asian market, especially in China, as well as the acceleration of large-scale investment by major semiconductor companies in response to the surge in data demand. In addition, progress in adjustment of customer inventory, which had been at excess levels until the previous year, also contributed to higher orders. As a result, consolidated orders for the full year rose 38.8% year on year to 41,675 million yen.

By application, sales of products for use in industrial robots rose, thanks to the recovery in capital investment in automation centered on China, as well as higher demand brought on by the adoption of industrial robots in the EV battery production process. Sales to semiconductor production equipment manufacturers rose year on year owing to robust capital investment appetite driven by the expansion of 5G communications and progress in IoT. Meanwhile, sales of products for use in flat panel display manufacturing equipment remained low, hurt by sluggish orders for capital equipment as in the previous year. Sales for machine tools and automotive applications also fell for the full year on sluggish orders in the first half of the fiscal year.

In terms of profitability, we focused on building a leaner organization capable of generating profits under challenging operating environments and preparing for the next expansion period, while prioritizing measures to prevent the spread of the novel coronavirus among customers, trading partners, employees, and their families. As a result, despite the decrease in net sales, operating income came to 865 million yen (compared to an operating loss of 195 million yen in the previous fiscal year). In addition, as a result of the increase in operating income, net income attributable to owners of parent reached 662 million yen (compared to a net loss attributable to owners of parent of 1,095 million yen in the previous fiscal year).

By product type, sales of speed reducers were 29,319 million yen (up 4.6% year on year) and sales of mechatronics products were 7,714 million yen (down 18.4% year on year), accounting for 79.2% and 20.8% of net sales, respectively.

Emphasis on enhancement of corporate value over the medium to long term

The figure below shows the trend of HDS’s net sales since its foundation and its relationship with application into new fields that lead to such results.

History of Sales(Non-consolidated basis) Million ¥ Demand Drivers Working Machines Robotics Semiconductor Equipment Flat Panel Display Manufacturing Equipment

Most of the HDS Group’s products are built into industrial products, such as machine tools and robots.

Therefore, our short-term sales are strongly influenced by the trend of capital investment in Japan and overseas. However, we have achieved growth over the medium to long term by shifting to application into new fields capable of spearheading growth in line with the progress of technology.

The Group’s performance inevitably will fluctuate in the short term depending on the capital investment trend. Nevertheless, by emphasizing enhancement of corporate value over the medium to long term, we are endeavoring to strengthen competitiveness as a highly skilled precision engineering specialist delivering Total Motion Control.

For this purpose, we are strengthening collaboration among HDS Group companies in Japan, Europe, the U.S., and China and implementing globalization strategies covering all aspects of sales, development, and production.

On the quality front, having set out a clear policy of giving highest priority to quality improvement, we are carrying out management initiatives emphasizing quality, while strengthening the quality management structure of the Group to enable stable provision of high-quality products to increasingly global markets. On the research and development front, through advanced application of our existing technologies, we are working to develop high added value products in a short time, and to expand our product variations to meet diverse customer needs. We also seek to make our existing products significantly more competitive, by taking on highly challenging development themes and further strengthening our core technologies. In the sales and marketing area, recognizing rapidly growing Asian markets as key targets for our products, we are carrying out an integrated marketing and sales strategy for Japan and Asia, enhancing our problem-solving ability and introducing new products, in order to raise our competitiveness in major markets. As for production, our aims are to increase the superiority of our skills, while making efforts to further improve quality and cost-competitiveness and shorten delivery times.

As we move forward, we greatly appreciate your continued support.

May 14, 2021
Mitsumasa Ito, Chairperson
Akira Nagai, President and CEO