■Summary

1. Business content

Kurabo (3106) is a major textile manufacturer founded in 1888. Since our establishment, we have continued to take on the challenge of creating new value while always looking ahead of the times. Currently, we are developing business areas in a wide range of fields, such as textiles, automobiles, housing, biomedical, food, and electronics, semiconductors, and environmental plants that support industry. Furthermore, we have a track record of actively working on social contribution activities since our establishment, and it is our policy to continue to respond to the SDGs (Sustainable Development Goals), which are common goals of the international community, pursue product and technology development on themes such as health, comfort, and environmental considerations, and contribute to the creation of a better future society.

In the medium-term management plan “Progress'24” (fiscal year ending 2023/3 to fiscal year ending 2025/3), which has reached its final year, we are working to expand high-profit businesses and strengthen basic businesses for sustainable growth. Although the textile business continues to struggle due to the effects of the external environment, etc., semiconductor manufacturing related fields, etc. with high profitability and where growth can be expected have grown, and business performance has risen to the bottom. Furthermore, the company went through a general shareholders' meeting held in 2024/6, and Mr. Shinji Nishigaki took office as president and the former president, Mr. Haruya Fujita, became the chairman with the right to represent. Under the new management system, we aim for sustainable growth and improvement of corporate value through the formulation and execution of the next medium-term management plan starting from the 2026/3 fiscal year.

2. Value creation process

The company's value creation process creates value by deploying accumulated management resources such as technology, know-how, and human resources to solve social issues and grow markets. Looking back on history so far, these are derived from the textile business, which is the ancestral business, such as the chemical products business, which developed resin processing technology into residential building materials and automobile components, and the electronics business (environmental mechatronics business), which has spread from automation of “color” control in dyeing processes to color management and inspection/measurement. Furthermore, the real estate business, which is a stable source of revenue, and an R&D system centered on technical research institutes also support value creation. Going forward, it depicts a value creation story that simultaneously realizes solutions to social issues and sustainable growth by concentrating management resources into fields with high profitability and where growth can be expected, such as the semiconductor manufacturing related market, automation/control device market, and medical market.

3. Financial Summary for the Fiscal Year Ending March 31, 2024

Consolidated financial results for the fiscal year ended 2024/3 showed a slight increase in sales of 151,314 million yen, down 1.4% from the previous fiscal year, and operating profit of 9,186 million yen, up 5.9% from the same period, while sales increased slightly, and hit record highs in profit at each stage. Sales declined slightly due to the exclusion of Kurashiki Machinery from consolidation and the effects of inventory adjustments for some customers in the textile business. However, excluding the textile business, in addition to the chemical products business and environmental mechatronics business, where semiconductor manufacturing related fields were doing well, the food/service business, and the real estate business also remained steady. In terms of profit, the decline in the textile business was covered by growth in the chemical products business and environmental mechatronics business, and an increase in operating profit exceeding plans was achieved. Also, the annual dividend was implemented at 100 yen per share, an increase of 30 yen from the previous fiscal year.

4. Basic Policies and Progress of the Mid-Term Management Plan “Progress'24”

The company aims to be a “strong enterprise group that generates innovation and high profits” based on the “Long-term Vision 2030” (fiscal year ending 2020/3 to the fiscal year ending 2031/3) that started in fiscal 2019, and is proceeding with “business portfolio transformation” by “concentrating management resources on focused businesses in growth markets and strengthening the profitability of basic businesses.” The medium-term management plan “Progress '24” is located in the second stage, and we are working to build a foundation for the next stage, with 1) expanding the business volume of growth and strengthening the profitability of basic businesses, 2) creating new businesses and early monetization through strengthening R&D activities, 3) contributing to achieving the SDGs, and 4) promoting the activities of diverse human resources. Although the textile business continues to struggle, steady results have begun to appear for future business expansion in terms of growth and focus businesses, starting with semiconductor manufacturing related fields, and the sales operating profit margin, which is important, is also moving at a level that exceeds plans.

5. Earnings forecast for the fiscal year ending March 31, 2025

Regarding consolidated financial results for the fiscal year ending 2025/3, which is the final year of the medium-term management plan “Progress'24,” the company expects sales to be 153 million yen, up 1.1% from the previous fiscal year, and operating profit to 9,300 million yen, up 1.2% from the same period. Sales and operating profit are expected to fall slightly below the target of the medium-term management plan due to the effects of Kurashiki Kikai's consolidation exclusion, but excluding that impact, it will generally land on the planned line. With the full-scale recovery of the semiconductor market as a tailwind, high-performance resin products (chemical products business) etc. will drive growth in business performance, and a recovery in the textile business is also expected. In terms of profit, it is expected that operating profit will increase due to growth in high-performance resin products and surplus in the textile business. The annual dividend is forecast to be 120 yen per share, an increase of 20 yen from the previous fiscal year.

6. Initiatives aimed at improving capital profitability

The company announced “efforts aimed at improving capital profitability” in 2024/5. Improving ROE has been set as an issue for realizing management that is conscious of capital costs and stock prices, and in addition to achieving ROE of 8% or more within the next medium-term management plan period (until the fiscal year ending 2028/3), we are aiming for 10% or more for the fiscal year ending 2031/3. Specifically, we will concentrate management resources on focused businesses that are highly profitable and can be expected to achieve “building a business portfolio that realizes sustainable growth,” and at the same time work on implementing disciplined fund allocation and reducing policy holdings.

■Key Points

・Expand business areas into a wide range of fields, such as textiles, automobiles, housing, biomedical, food, electronics, semiconductors that support industry, etc.

・In the future, management resources will be concentrated in fields that are highly profitable and can be expected to grow, such as semiconductor manufacturing related markets, automation/control equipment markets, and medical markets

・While sales declined slightly for the fiscal year ending 2024/3, they hit record highs in terms of profit at each stage

・In the fiscal year ending 2025/3, high-performance resin products (chemical products business) etc. will drive business growth, with full-scale recovery in the semiconductor market as a tailwind, and is generally expected to go as planned

・Concentrate management resources on focused businesses that are highly profitable and can be expected to grow, and aim for an ROE of 8% or more by the 2028/3 fiscal year and 10% or more by the fiscal year ending 2031/3

(Written by FISCO Visiting Analyst Ikuo Shibata)