South Korea

Sanei Co., Ltd. Research Memorandum (4): Full year ended March 2020 operating income up on successful client mix review | Reuters


*15:54JST Sanei Corporation Research Memorandum (4): Full year ended March 2020 operating income increased due to successful client mix review
■ Performance trends

1. Overview of annual results for the year ended March 31, 2020
Sanei Co., Ltd.8119The consolidated results for fiscal year 2003/20 were sales of JPY 41.2 billion (-3.0% YoY), operating profit JPY 1.3 billion (+74.9% YoY), and recurring profit JPY 1.3 billion (+74.9% YoY). (+62.2%) year-on-year), and the net profit attributable to shareholders of the parent company was 191 million yen (-2.0% year-on-year). Operating profit rose despite a slight decline in sales.

Sales fell slightly by 3.0% year-over-year. In the OEM business, sales of clothing and accessories business increased, but in the furniture and home furnishing business, sales of home furnishing products for Europe and the United States fell sharply, resulting in a decline in overall business sales. In addition, in the brand business, although the sales of Birkenstock and Kipling in the clothing and accessories business decreased, the increase in overall sales was mainly due to the increase in sales of the furniture and home furnishing business and the home appliance business. On the other hand, some businesses are growing rapidly. The “MINT” brand online furniture and interior store, as well as hair and beauty utensils and cooking utensils that carry branded products in the home appliance business are growing. The impact of COVID-19 has been felt since around February, but the full impact will start in the 2003/21 financial year.

Gross margin improved by 1.2 percentage points YoY due to review of customer mix. Therefore, in addition to an increase in gross profit, SG&A expenses also decrease, resulting in an increase in profit. In terms of business segments, the profit of the furniture and household products business increased significantly. The decrease in net profit attributable to shareholders of the parent company was mainly due to an extraordinary loss of 289 million yen. We also made an impairment loss on fixed assets of retail stores whose profitability is expected to deteriorate as we reviewed the possibility of future recoverability in light of the deterioration in the business environment due to the COVID-19 disaster. At FISCO, we value companies’ efforts to quickly consider future risks and steadfastly maintain a highly reliable balance sheet.

For the first quarter of the fiscal year ended March 31, 2021, profits fell sharply due to the impact of the new crown virus. Some products, such as furniture/interior online stores and hairdressing appliances, performed well due to home demand.
2. Overview of financial results for the first quarter of the fiscal year ended March 31, 2021
Consolidated results for the first quarter of fiscal year 2003/21 were sales of 6.6 billion yen (-33.1% year-on-year), operating loss of 479 million yen (profit of 83 million yen in the first quarter of fiscal year 2003/2019), recurring The loss was 440 million yen (profit 119 million yen), and the net profit was a loss attributable to shareholders of the parent company of 512 million yen (profit 70 million yen).

On the sales front, the OEM business was impacted by the drop in global demand due to the COVID-19 pandemic. In addition, in terms of brand business, due to the self-discipline requirements of physical stores, the closure of commercial facilities for store operations, and shortened business hours, sales declined. In terms of market segment, in the furniture and home furnishing business, the growth of the furniture and interior decoration online store “MINT” was driven by home demand, but the shipments of the Japanese and overseas OEM business slowed down due to the slowdown. Impact of the COVID-19 pandemic. Affected by this, overall sales fell by 27.8% year-on-year. In terms of clothing and accessories business, the sales of travel goods in the OEM business declined, and the brand business operating BIRKENSTOCK and other specialty stores was greatly affected. Affected by this, sales fell by 43.4% year-on-year. In the consumer electronics business, beauty and cooking utensils performed well, but the shipments of the OEM business declined, resulting in an overall decline of 36.1% year-on-year.

In terms of operating income, despite efforts to control SG&A expenses (-8.4% yoy), the decline in gross profit (-28.5% yoy) was more than offset by the decline in sales, resulting in a lower operating income loss. In the first quarter (April to June), the annual schedule is relatively seasonal, such as new life products, spring and summer products, etc.

The equity ratio is 52.9%.Staying financially sound in the face of headwinds
3. Financial status and management indicators
As of the end of the first quarter of fiscal 2003/21, total assets decreased by 1.6 billion yen to 20.6 billion yen from the end of the previous fiscal year. Current assets decreased by 1.8 billion yen to 14.7 billion yen. The main factor is that notes receivable and accounts receivable decreased by 1.37 billion yuan, and cash and deposits decreased by 1.072 billion yuan. Fixed assets were 5.929 billion yuan, an increase of 296 million yuan, mainly due to an increase of 246 million yuan in investment and other assets.

Total liabilities fell 1.1 billion yen to 9.6 billion yen. Among them, current liabilities decreased by 1.313 billion yuan, mainly due to the decrease of 1.236 billion yuan in notes payable and accounts payable. There was no significant change in fixed liabilities. The interest-bearing debt is 5.5 billion yen, and the interest-bearing debt ratio is controlled at 50.6%. Total net assets decreased by 397 million yen to 11.0 billion yen. This was mainly due to an increase in valuation differences of available-for-sale securities of RMB 195 million and a decrease in retained earnings of RMB 512 million.

Management metrics at the end of the first quarter of the fiscal year ended March 2021 showed a current ratio of 262.7% and an equity ratio of 52.9%, indicating high financial stability. Despite headwinds in the business environment due to the impact of the COVID-19 crisis, the company has built up past capital and remained financially sound.

(Written by Hideo Tsunoda, Visiting Analyst, FISCO)


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