Oki Electric Industry / 6703
COVERAGE INITIATED ON: 2017.04.21 LAST UPDATE: 2021.03.04
Shared Research Inc. has produced this report by request from the company discussed in the report. The aim is to provide an “owner’s manual” to investors. We at Shared Research Inc. make every effort to provide an accurate, objective, and neutral analysis. In order to highlight any biases, we clearly attribute our data and findings. We will always present opinions from company management as such. Our views are ours where stated. We do not try to convince or influence, only inform. We appreciate your suggestions and feedback. Write to us at [email protected] or find us on Bloomberg.
Research Report by Shared Research Inc. Oki Electric Industry / 6703 RCoverage LAST UPDATE: 2021.03.04 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp
INDEX
Executive Summary ------3 Key financial data------5 Recent updates ------6 Highlights ------6 Trends and outlook ------7 Quarterly trends and results ------7 Full-year company forecast ------12 Medium-term strategy (as announced in May 2017) ------13 Business, market and value chain ------15 Business overview ------15 Business segments (note: reporting segmentation scheme changed starting FY03/21) ------18 Strengths and weaknesses ------36 Historical results and financial statements ------37 Income statement ------37 Balance sheet ------38 Cash flow statement ------40 Historical results ------41 Other information ------49 News and topics ------49 Corporate governance, environmental, and CSR information (as of March 2018) ------49 Top Management ------51 Dividend policy ------51 Major shareholders ------52 Number of employees ------52 Profile ------53
02/58 Oki Electric Industry / 6703 RCoverage LAST UPDATE: 2021.03.04 Research Coverage Report by Shared Research Inc. | www.sharedresearch.jp
Executive Summary
Core business
◤ Since manufacturing the first domestic telephone in 1881, when it was founded, Oki Electric Industry Co., Ltd. (OKI) has focused on developing domestic telecommunication technology instead of relying on foreign products. OKI was one of four members of the Nippon Telegraph and Telephone (NTT) family (formerly a Japanese government-owned telecommunications monopoly, privatized in 1952). OKI’s sales within the NTT family have shrunk following the privatization of NTT, the opening of the domestic telecom market, and the shift of telecom networks to IP (internet protocol) technology, but the company has successfully built a customer base spanning national and local government bodies to general corporations by leveraging its audio technology in the telecom field.
◤ In the ICT segment, the company provides telecom systems and solutions to a range of industries and government agencies. The ICT segment is fueled by replacement demand from major companies. In the Mechatronics Systems segment, the company has a high domestic market share of cash-recycling ATMs (machines that use deposited cash for future withdrawals) for financial institutions and retailers. It is focusing on cash-handling machines and tapping into emerging markets overseas. In the Printers segment, key products are single and multifunction printers for the office printer market, but given the company’s low market share and high fixed costs, OKI is shifting its earnings structure to focus on specialty and professional printing markets. In the EMS segment, the company offers reliable, high-end electronics manufacturing services (EMS), while maintaining segment OPM of 5%. It expects continued EMS growth on expanded production bases and sales channels via acquisitions. While the ICT segment is the main earnings source, the company is stepping up efforts to expand the ATM business in emerging markets and pursue high-end domestic demand in the EMS segment.
◤ The company’s four segments are Information and Communication Technology (ICT), Mechatronics Systems, Printers, and Electronics Manufacturing Services (EMS). OKI works to further develop the ICT and EMS segments where the earnings base is stable, while simultaneously advancing structural reforms in the Mechatronics Systems and Printers segments.
Earnings trends
◤ For FY03/20, OKI reported sales of JPY457.2bn (+3.6% YoY), operating profit of JPY16.8bn (-4.0% YoY), recurring profit of JPY13.8bn (-10.8% YoY), and net income of JPY14.1bn (+67.6%). Lower sales in the Mechatronics Systems, Printers, and EMS segments were offset by sales growth in the ICT segment, resulting in higher sales overall. ICT sales rose 24.3% YoY, helped by growth in social infrastructure and telecom network businesses, along with the benefit of increased adoption of the percentage of completion method especially in government agency projects. In terms of profits, although ICT was the driving force, overall operating profit declined, impacted by lower sales in the Printers segment, reduced profit in the EMS segment, and yen appreciation against the euro. Net income increased 67.6% YoY as the company recorded an extraordinary gain on sales of fixed assets and investment securities, and impairment losses under extraordinary losses narrowed.
◤ OKI announced its FY03/21 earnings forecast at the same time as its Q1 FY03/21 results. The company forecast sales of JPY405.0bn (-11.4% YoY) and operating profit of JPY8.5bn (-49.5% YoY), and had no forecast for recurring profit and net income. When it announced Q2 results, the company maintained its sales and operating profit estimates and newly announced the forecast for recurring profit and net income, factoring in the impact of structural reform. It expects recurring profit of JPY8.0bn (-42.0% YoY) and net income of JPY1.0bn (-92.9% YoY). The company changed its reporting segments effective Q1 FY03/21. Segment forecasts are as follows: Solution Systems JPY195.0bn (-14.9% YoY) in sales and JPY15.0bn (-28.0% YoY) in operating profit, Components & Platforms JPY205.0bn (-5.2% YoY) in sales and JPY1.0bn (-81.8% YoY) in operating profit, and Others JPY5.0bn (-57.9% YoY) in sales and JPY0mn in operating profit (JPY600mn operating loss in FY03/20). The company estimates the effects of the pandemic at around JPY20.0bn for sales and JPY6.0bn for operating profit, mostly affecting overseas markets. The company maintained its earnings forecast at the time of Q3 results announcement.
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Medium-term strategy
◤ On October 29, 2020, the company announced a three-year plan covering FY03/21–FY03/23, Medium-Term Business Plan 2022. OKI marks its 150th anniversary in 2031, and targets sustainable growth through solving social problems. It has positioned the current three years as a time to put in place the foundations for growth as the first installment of these ambitions, and announced plans to execute large-scale structural reforms.
◤ OKI’s approach is three-pronged: restructuring its business portfolio; strengthening its “mono-zukuri” (manufacturing) foundations; and reforming costs in shared group functions. The three hardware-based businesses (Mechatronics Systems, Printers, and Electronics Manufacturing Services (EMS) are to be integrated into the new Components & Platforms segment to concentrate on the production of AI edge-related and other competitive products. The company will also review its domestic and overseas sales structures. In addition, the technologies, development structure, and production functions held separately by the three businesses are to be integrated and restructured as a manufacturing platform for electronic equipment. Alongside this restructuring, the company plans to integrate procurement departments and restructure the supply chain to optimize inter-group costs. In FY03/23, the last year of the plan, the company targets operating profit of JPY20.0bn (+19.0% versus FY03/20) and a shareholders’ equity ratio of 30%.
Strengths and weaknesses
Shared Research views the company’s strength as its diversified customer base in the ICT segment, its system construction tailored to customers’ workflows and designed to meet various standards, and its cash-recycling ATMs, which allow it to differentiate itself in the ATM markets of developing countries. As for its weaknesses, Shared Research thinks these are high fixed costs in the Printers segment, past inadequate management structures overseas, and a weak balance sheet.
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Key financial data
Income statement FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 FY03/21 (JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Est. Sales 423,480 455,824 483,112 540,153 490,314 451,627 438,026 441,452 457,223 405,000 YoY -2.1% 7.6% 6.0% 11.8% -9.2% -7.9% -3.0% 0.8% 3.6% -11.4% Gross profit 106,541 118,417 128,477 140,506 129,064 114,233 110,576 118,827 117,807 YoY -6.4% 11.1% 8.5% 9.4% -8.1% -11.5% -3.2% 7.5% -0.9% Gross profit margin 25.2% 26.0% 26.6% 26.0% 26.3% 25.3% 25.2% 26.9% 25.8% Operating profit 11,980 13,475 27,196 32,415 18,594 2,545 7,721 17,522 16,829 8,500 YoY 89.9% 12.5% 101.8% 19.2% -42.6% -86.3% 203.4% 126.9% -4.0% -49.5% Operating profit margin 2.8% 3.0% 5.6% 6.0% 3.8% 0.6% 1.8% 4.0% 3.7% 2.1% Recurring profit 9,075 20,304 36,655 37,928 11,366 -2,366 8,515 15,477 13,804 8,000 YoY 678.3% 123.7% 80.5% 3.5% -70.0% -120.8% -459.9% 81.8% -10.8% -42.0% Recurring profit margin 2.1% 4.5% 7.6% 7.0% 2.3% -0.5% 1.9% 3.5% 3.0% 2.0% Net income 1,555 13,599 27,359 33,091 6,609 4,691 5,891 8,405 14,086 1,000 YoY -104.9% 774.5% 101.2% 21.0% -80.0% -29.0% 25.6% 42.7% 67.6% -92.9% Net margin 0.4% 3.0% 5.7% 6.1% 1.3% 1.0% 1.3% 1.9% 3.1% 0.2% Per-share data (JPY) Shares issued (year-end; mn) 730.8 728.0 727.8 868.5 868.4 87.2 87.2 87.2 87.2 EPS 0.3 17.2 36.2 40.0 7.6 54.0 67.9 97.2 162.8 11.6 EPS (fully diluted) 97.0 162.5 Dividend per share - - 3.0 5.0 5.0 50.0 50.0 50.0 50.0 - Book value per share 13.4 34.4 79.3 137.7 122.9 1,115.7 1,154.0 1,155.3 1,227.4 Balance sheet (JPYmn) Cash and cash equivalents 79,513 36,406 50,901 53,632 47,829 54,164 48,698 29,730 49,227 Total current assets 273,888 246,994 278,522 293,629 277,630 231,506 230,420 223,206 236,726 Tangible fixed assets 52,592 57,829 56,193 57,176 56,691 44,783 52,048 49,393 51,428 Intangible fixed assets 7,026 7,655 9,600 10,240 9,637 10,891 9,952 10,457 11,288 Investments and other assets 34,557 36,843 68,196 78,311 67,816 73,544 79,356 82,446 73,027 Total assets 368,065 349,322 412,514 439,358 411,776 360,724 371,778 365,503 372,471 Accounts payable 66,307 63,416 73,312 79,053 65,477 58,685 67,124 67,465 61,714 Short-term debt 78,745 77,000 107,033 65,556 75,144 56,882 58,958 48,880 35,415 Total current liabilities 214,355 197,129 242,272 211,580 199,162 176,559 186,666 176,194 159,940 Long-term debt 63,604 48,958 19,438 48,740 55,118 37,264 31,906 41,599 42,310 Total fixed liabilities 112,457 95,567 78,322 106,362 105,228 86,949 82,967 89,108 106,090 Total liabilities 326,813 292,697 320,595 317,943 304,391 263,509 269,634 265,302 266,030 Total net assets 41,251 56,625 91,918 121,414 107,384 97,215 102,144 100,200 106,440 Total liabilities and net assets 368,065 349,322 412,514 439,358 411,776 360,724 371,778 365,503 372,471 Total interest-bearing debt 142,349 125,958 126,471 114,296 130,262 94,146 90,864 90,479 77,725 Cash flow statement (JPYmn) Cash flows from operating activities 22,791 -11,619 31,868 40,999 -3,573 41,967 15,578 6,364 32,547 Cash flows from investing activities -9,392 -9,214 -13,977 -18,583 -13,762 7,588 -10,485 -12,099 -2,972 Cash flows from financing activities -17,535 -21,092 -4,270 -20,724 11,138 -43,985 -11,512 -12,971 -9,224 Financial ratios ROA (RP-based) 2.5% 5.7% 9.6% 8.9% 2.7% -0.6% 2.3% 4.2% 3.7% ROE 3.9% 28.0% 37.8% 31.8% 5.8% 4.6% 6.0% 8.4% 13.7% Equity ratio 11.2% 16.1% 21.5% 27.2% 25.9% 26.9% 26.9% 27.3% 28.5% Source: Shared Research based on company data Figures may differ from company materials due to differences in rounding methods. Note: The company conducted a 1-for-10 reverse stock split in October 2016. Dividend forecast take into account the reverse stock split.
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Recent updates Highlights
On March 4, 2021, Shared Research updated the report following interviews with Oki Electric Industry Co., Ltd. (OKI).
On February 4, 2021, the company announced earnings results for Q3 FY03/21; see the results section for details.
On the same day, the company announced plans to build a new factory.
The company announced plans to build a new factory in Honjo, Saitama Prefecture, as part of its effort to strengthen "mono-zukuri" (manufacturing) foundations as set forth in its Medium-Term Business Plan 2022.
The company is positioning the new factory as a model smart factory for “Manufacturing Digital Transformation (DX),*” and aims to expand its efforts across the group to realize a "Virtual One Factory,**" a structure for manufacturing products at the most suitable factory within the group. For details, please refer to the company’s press release.
Overview of new factory Factory name: OKI Honjo Factory Phase 7 Building (tentative name) Total floor area: approximately 19,000sqm Investment: approximately JPY6bn Construction start: May 2021 Construction completion: March 2022
* Manufacturing Digital Transformation (DX) is a production system solution concept set forth by the company in its medium-term management plan. The company aims to transition its production facilities into smart factories by applying the following three reforms to its production system: On-site reforms to visualize the production floor; IT and operational reforms to provide advanced, two-way coordination between the production floor and management; and management reforms to support management decision-making regarding environmental changes, regulatory compliance, and low-volume value-added production. ** Virtual One Factory is a new production system outlined as a part of efforts to strengthen "mono-zukuri" (manufacturing) foundations in the company’s medium-term management plan. Unlike the conventional framework in which production departments and factories are tied to business and development departments, this production system matches the characteristics of products (prototypes, mass-produced products, small-lot products, large system products, etc.) with the production methods in which each factory excels, and enables manufacturing at the most suitable factory within the group.
On the same day, the company announced plans for structural reforms.
The company announced that it will be implementing structural reforms effective April 1, 2021 to steadily realize its Medium-Term Management Plan 2022 announced in October 2020.
The divisions affected are those under the Corporate Group, the Solution Systems Business Group, and the Components & Platforms Business Group. The company will eliminate, establish, or rename divisions within each business group in line with its Medium-term Management Plan 2022. For details, please refer to the company’s press release.
On the same day, the company announced plans to merge its two DMS business subsidiaries to form OKI Nextech Co., Ltd.
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The company announced that it will merge Oki Communication Systems Co., Ltd. (Tokorozawa, Saitama Prefecture; hereinafter “OCM”) and Nagano Oki Electric Co., Ltd. (Komoro, Nagano Prefecture; hereinafter “NOK”), both of which operate design and manufacturing services (DMS) businesses in the fields of infrastructure, industrial, and medical devices, to establish OKI Nextech Co., Ltd. on April 1, 2021.
In the merger, OCM will be the surviving company and NOK will be merged into OCM, and the name of the surviving company will be changed. The new company, OKI Nextech, will inherit the management resources, businesses, and service users of OCM and NOK, and provide one-stop design and manufacturing services utilizing technologies applicable to a wide range of devices from CPU boards to power supplies and communication devices. In addition, the new company plans to strengthen existing business domains and enter new fields by effectively using its management resources. For details, please refer to the company’s press release.
On December 23, 2020, the company announced an arbitration ruling concerning a subsidiary.
The company announced that its subsidiary Oki Banking Systems (Shenzhen) Co., Ltd. (“OBSZ”) has received a ruling on the arbitration concerning payment of trade receivables by its sales partner, Shenzhen Yihua Computer Industrial Co., Ltd. (“Yihua Industrial”).
OBSZ had filed for an arbitration concerning payment of the abovementioned trade receivables with Yihua Industrial as the respondent and continued mediation proceedings. (See the “Notice concerning arbitration proceedings by subsidiary” dated November 2, 2015 and the Business, market and value chain section in this report). On December 16, 2020, the South China International Economic and Trade Arbitration Commission, the arbitrator, sent its ruling that Yihua Industrial should pay the unpaid product payments and interest costs for late payment to OBSZ.
Details of mediation (1) Yihua Industrial shall pay OBSZ the unpaid product payments of CNY1,096,866,800 (about JPY17.4bn) and overdue interest charges. (2) OBSZ shall pay Yihua Industrial a deposit of CNY69,589,750 (about JPY1.1bn) for contracted, but undelivered products and overdue interest charges. Yihua Industrial shall pay OBSZ the difference between (1) and (2). (3) Yihua Industrial shall pay OBSZ’s legal fees. Note: The exchange rate used is JPY15.84/CNY (as of December 16, 2020).
OKI considers that this ruling is almost entirely in line with its own and OBSZ’s claims and that the legitimacy of its claim has been confirmed. The company and OBSZ will ask Yihua Industrial to promptly comply with this ruling. It does not expect this matter to have any immediate impact on its previously announced earnings forecast.
On December 22, 2020, the company announced that it will terminate sales and production of ATMs in China.
The company said that, as of December 2020, it will no longer sell or produce ATMs in China.
The move is part of the company’s efforts to restructure its business portfolio and strengthen its “mono-zukuri” (manufacturing) foundations as set forth in its Medium-Term Business Plan 2022. China is moving further toward a cashless economy, and by ejecting local ATM production and sales, the company aims to reconfigure its overall production functions. The production of ATM and other financial equipment at Oki Electric Industry (Shenzhen), which also produces printers, will be taken over by OKI’s Tomioka plant in Japan (Gunma Prefecture) and OKI VIETNAM COMPANY LIMITED in Hai Phong, Vietnam. Maintenance service for existing equipment in China will gradually be handed off to experienced and capable local maintenance partner companies, while OKI will continue to supply replacement parts and technical support.
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OKI has been producing and selling ATMs optimized for the Chinese market since it launched its ATM business in that country in 2001. However, in light of recent market shrinkage and a cashless global economy on the horizon, the company made the decision to shift the target of its components business to supplying modules to partner companies. The company says the move to terminate ATM production and sales in China will not have any significant impact on its consolidated earnings. We refer you to the company’s official press release for further details.
For previous releases and developments, please refer to the News and topics section.
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Trends and outlook Quarterly trends and results
Cumulative FY03/20 FY03/21 FY03/21 (JPYmn) Q1Q2Q3Q4Q1Q2Q3% of Est.FY Est. Sales 107,617 218,384 327,858 457,223 81,375 173,542 266,853 65.9% 405,000 YoY 21.0% 12.8% 9.5% 3.6% -24.4% -20.5% -18.6% -11.4% Gross profit 25,167 54,312 82,693 117,807 20,810 41,378 64,250 YoY 6.3% 7.4% 3.4% -0.9% -17.3% -23.8% -22.3% Gross profit margin 23.4% 24.9% 25.2% 25.8% 25.6% 23.8% 24.1% SG&A expenses 24,091 49,110 73,561 100,978 21,931 43,947 66,838 YoY -1.6% -1.3% -1.9% -0.3% -9.0% -10.5% -9.1% SG&A ratio 22.4% 22.5% 22.4% 22.1% 27.0% 25.3% 25.0% Operating profit 1,075 5,201 9,131 16,829 -1,121 -2,568 -2,588 - 8,500 YoY - 546.1% 83.1% -4.0% - - - -49.5% Operating profit margin 1.0% 2.4% 2.8% 3.7% - - - 2.1% Recurring profit 149 2,937 7,290 13,804 -2,148 -3,231 -3,433 - 8,000 YoY - - 160.2% -10.8% - - - -42.0% Recurring profit margin 0.1% 1.3% 2.2% 3.0% - - - 2.0% Net income -369 4,060 7,183 14,086 -3,326 -5,445 -8,465 - 1,000 YoY - - - 67.6% - - - -92.9% Net margin - 1.9% 2.2% 3.1% - - - 0.2% Quarterly FY03/20 FY03/21 (JPYmn) Q1Q2Q3Q4Q1Q2Q3 Sales 107,617 110,767 109,474 129,365 81,375 92,167 93,311 YoY 21.0% 5.9% 3.5% -9.0% -24.4% -16.8% -14.8% Gross profit 25,167 29,145 28,381 35,114 20,810 20,568 22,872 YoY 6.3% 8.4% -3.5% -9.6% -17.3% -29.4% -19.4% Gross profit margin 23.4% 26.3% 25.9% 27.1% 25.6% 22.3% 24.5% SG&A expenses 24,091 25,019 24,451 27,417 21,931 22,016 22,891 YoY -1.6% -1.0% -3.1% 4.2% -9.0% -12.0% -6.4% SG&A ratio 22.4% 22.6% 22.3% 21.2% 27.0% 23.9% 24.5% Operating profit 1,075 4,126 3,930 7,698 -1,121 -1,447 -20 YoY - 155.0% -6.0% -38.6% - - - Operating profit margin 1.0% 3.7% 3.6% 6.0% - - - Recurring profit 149 2,788 4,353 6,514 -2,148 -1,083 -202 YoY - 245.5% 19.2% -48.6% - - - Recurring profit margin 0.1% 2.5% 4.0% 5.0% - - - Net income -369 4,429 3,123 6,903 -3,326 -2,119 -3,020 YoY - - 205.9% -30.7% - - - Net margin - 4.0% 2.9% 5.3% - - -
Source: Shared Research based on company data Note: Quarterly data derived by subtracting cumulative results for previous quarter from relevant cumulative results (e.g. Q3 figures are 1H results subtracted from cumulative Q3 results).
Quarterly sales Quarterly operating profit
(JPYmn) Q1 Q2 Q3 Q4 (JPYmn) Q1 Q2 Q3 Q4 600,000 20,000 17,522 16,829
441,452 457,223 15,000 405,000 7,698 8,500 400,000 129,365 12,535 142,136 10,000
109,474 3,930 105,740 5,000 93,311 200,000 4,182 4,126 110,767 1,618 104,628 92,167 1,075 0 -813 -1,121 -1,447 88,948 107,617 81,375 -20 0 -5,000 FY03/19 FY03/20 FY03/21 FY03/19 FY03/20 FY03/21 Source: Shared Research based on company data
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Q3 FY03/21 results (out February 4, 2021)
Cumulative Q3 FY03/21 results (April‒December 2020)
▷ Sales: JPY266.9bn (-18.6% YoY) ▷ Operating loss: JPY2.6bn (JPY9.1bn operating profit in cumulative Q3 FY03/20) ▷ Recurring loss: JPY3.4bn (JPY7.3bn recurring profit in cumulative Q3 FY03/20) ▷ Net loss*: JPY8.5bn (JPY7.2bn net income in cumulative Q3 FY03/20)
*Net loss attributable to owners of the parent
▷ Background behind decrease in sales: The main contributing factor was an 18.3% YoY reduction in sales at the Solution Systems segment, owing to a fallback in demand for large telecom network projects and major replacement projects for government agencies the company had in FY03/20 as well as the impact of changes in revenue recognition methods (combined impact of JPY10–13bn according to the company). In addition, the sale of the Brazilian subsidiary (JPY5.3bn) and the impact of the COVID-19 pandemic (JPY23bn) contributed to a 16.1% YoY decline in sales at the Components & Platforms segment, and the combination of these one-time factors resulted in an 18.6% YoY decline in sales. ▷ Background behind decline in operating profit: The main reason for the slump in profit was the sharp sales decline at both mainstay segments. According to the company, the estimated negative impact of the COVID-19 outbreak was roughly JPY7bn for operating profit. ▷ The company changed its reportable segments from Q1 FY03/21. The three new segments are Solution Systems, Components & Platforms, and Others.
Quarterly performance
(JPYbn) Sales YoY (right axis) (JPYbn) Operating profit OPM (right axis) 30%
153 147 20% 16 16% 150 138 142 129 115 10% 12 12% 110 113 111 109 106 106 104 106 105 106 108 8.8% 7.6% 100 93 90 89 92 93 7.3% 6.0% 81 0% 8 8% 4.0% 3.2% 3.4% 3.7% 3.6% -10% 4 4% 1.5% 1.5% 50 0.7% 1.0% 1.2% 1.0% 0.0% -0.3% -0.0% -20% 0 0% -1.4% -1.2% -0.9% -1.6% 0 -30% -4 -4% Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 FY03/21 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 FY03/21 Cumulative FY03/20 FY03/21 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4 Est. Total sales 107,617 218,384 327,858 457,223 81,375 173,542 266,853 405,000 Operating profit 1,075 5,201 9,131 16,829 -1,121 -2,568 -2,588 8,500 Quarterly FY03/20 FY03/21 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4 Total sales 107,617 110,767 109,474 129,365 81,375 92,167 93,311 Operating profit 1,075 4,126 3,930 7,698 -1,121 -1,447 -20 Source: Shared Research based on company data
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Results by segment Solution Systems segment
Earnings performance Cumulative FY03/20 FY03/21 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4 Est. Sales 52,801 103,640 157,317 229,100 40,042 83,507 128,598 195,000 YoY - - - - -24.2% -19.4% -18.3% -14.9% % of total sales 49.1% 47.5% 48.0% 50.1% 49.2% 48.1% 48.2% 48.1% Operating profit 2,544 5,627 10,721 20,800 1,743 3,988 6,472 15,000 YoY - - - - -31.5% -29.1% -39.6% -27.9% Operating profit margin4.8%5.4%6.8%9.1%4.4%4.8%5.0%7.7% Quarterly FY03/20 FY03/21 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4 Sales 52,801 50,839 53,677 71,783 40,042 43,465 45,091 YoY - - - - -24.2% -14.5% -16.0% % of total sales 49.1% 23.3% 16.4% 15.7% 49.2% 25.0% 16.9% Operating profit 2,544 3,083 5,094 10,079 1,743 2,245 2,484 Operating profit margin 4.8% 6.1% 9.5% 14.0% 4.4% 5.2% 5.5% Source: Shared Research based on company data
▷ Cumulative Q3 FY03/21 sales (sales to external clients; same for figures below): JPY128.6bn (-18.3% YoY) ▷ Segment profit: JPY6.5bn (-39.6% YoY) ▷ Sales declined due in part to the absence of telecom network projects and large projects for government agencies seen in FY03/20, and FY03/21 being the first year under the expanded scope of application of the percentage of completion method. On a quarterly basis, however, sales and operating profit have been recovering. As was the case in Q2 (July–September 2020),
both sales and profit increased QoQ in Q3 (October–December 2020), by 3.7% and 10.7%, respectively. By the company’s calculations, the COVID-19 pandemic impacted the segment sales by roughly JPY3bn and operating profit by JPY1bn. According to the company, transportation-related business was somewhat weak but segment performance overall was slightly
ahead of plan, driven mainly by network-related business.
Components & Platforms segment
Performance Cumulative FY03/20 FY03/21 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4 Est. Sales 51,640 108,426 161,034 216,300 39,977 87,800 135,185 205,000 YoY - - - - -22.6% -19.0% -16.1% -5.2% % of total sales 48.0% 49.6% 49.1% 47.3% 49.1% 50.6% 50.7% 50.6% Operating profit 339 3,073 3,945 5,500 -1,703 -3,633 -4,176 1,000 YoY ------81.8% Operating profit margin 0.7% 2.8% 2.4% 2.5% - - - 0.5% Quarterly FY03/20 FY03/21 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4 Sales 51,640 56,786 52,608 55,266 39,977 47,823 47,385 YoY - - - - -22.6% -15.8% -9.9% % of total sales 48.0% 26.0% 16.0% 12.1% 49.1% 27.6% 17.8% Operating profit 339 2,734 872 1,555 -1,703 -1,930 -543 Operating profit margin 0.7% 4.8% 1.7% 2.8% - - - Source: Shared Research based on company data
▷ Cumulative Q3 FY03/21 sales: JPY135.2bn (-16.1% YoY) ▷ Segment loss: JPY4.2bn (JPY3.9bn profit in cumulative Q3 FY03/20)
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▷ Factors contributing to sales decline: Sales were sluggish in overseas markets, which were severely impacted by the spread of COVID-19. The company puts the impact of the pandemic at roughly JPY20bn for sales and JPY6bn for operating profit in this segment, and cites the pandemic as a reason why sales in Asian markets (including India and ASEAN countries), which are considered growth areas for automated equipment, were more stagnant than the company had anticipated. Further, although sales of consumables improved at the printer business in Europe, the impact on overall sales was fairly limited. The domestic market had been stable, but the prolonged impact of the COVID-19 pandemic has caused some EMS and automated equipment customers (in broadcasting- and transportation-related areas, for example) to revise or postpone their investment plans. ▷ Factors contributing to operating loss: Profitability improved in Q3 (October–December 2020), with the segment operating loss narrowing due to cost reductions from various structural reform measures, favorable foreign exchange rates, and a temporary increase in sales of consumables in Europe, which led the printer business to turn profitable in Q3. However, the segment still posted an operating loss in cumulative Q3 FY03/21.
Others
Performance Cumulative FY03/20 FY03/21 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4 Est. Sales 3,175 6,317 9,505 11,900 1,356 2,234 3,069 5,000 YoY - - - - -57.3% -64.6% -67.7% -58.0% % of total sales 3.0% 2.9% 2.9% 2.6% 1.7% 1.3% 1.2% 1.2% Operating profit -117 -143 -173 -600 46 -87 -291 0 YoY ------Operating profit margin - - - - 3.4% - - 0.0% Quarterly FY03/20 FY03/21 (JPYmn) Q1Q2Q3Q4Q1Q2Q3Q4 Sales 3,175 3,142 3,188 2,395 1,356 878 835 YoY - - - - -57.3% -72.1% -73.8% % of total sales 3.0% 1.4% 1.0% 0.5% 1.7% 0.5% 0.3% Operating profit -117 -26 -30 -427 46 -133 -204 Operating profit margin - - - - 3.4% - - Source: Shared Research based on company data
▷ Cumulative Q3 FY03/21 sales: JPY3.1bn (-67.7% YoY) ▷ Segment loss: JPY291mn (JPY173mn loss in cumulative Q3 FY03/20)
For previous quarterly earnings, see Historical performance section.
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Full-year company forecast
FY03/18 FY03/19 FY03/20 FY03/21 (JPYmn) 1H Act. 2H Act. FY Act. 1H Act. 2H Act. FY Act. 1H Act. 2H Act. FY Act. 1H Act. 2H Est. FY Est. Revenue 193,974 244,052 438,026 193,576 247,876 441,452 218,384 238,839 457,223 173,542 231,458 405,000 YoY -2.7% -3.3% -3.0% -0.2% 1.6% 0.8% 12.8% -3.6% 3.6% -20.5% -3.1% -11.4% Operating profit -4,125 11,846 7,721 805 16,717 17,522 5,201 11,628 16,829 -2,568 11,068 8,500 YoY - 271.1% 203.4% - 41.1% 126.9% 546.1% -30.4% -4.0% -149.4% -4.8% -49.5% OPM - 4.9% 1.8% 0.4% 6.7% 4.0% 2.4% 4.9% 3.7% -1.5% 4.8% 2.1% Recurring profit -3,344 11,859 8,515 -849 16,326 15,477 2,937 10,867 13,804 -3,231 11,231 8,000 YoY - 80.2% -459.9% - 37.7% 81.8% - -33.4% -10.8% -210.0% 3.3% -42.0% RPM - 4.9% 1.9% - 6.6% 3.5% 1.3% 4.5% 3.0% -1.9% 4.9% 2.0% Net income -4,581 10,472 5,891 -2,579 10,984 8,405 4,060 10,026 14,086 -5,445 6,445 1,000 YoY - -42.5% 25.6% - 4.9% 42.7% - -8.7% 67.6% -234.1% -35.7% -92.9% Net margin - 4.3% 1.3% - 4.4% 1.9% 1.9% 4.2% 3.1% -3.1% 2.8% 0.2% Source: Shared Research based on company data Figures may differ from company materials due to differences in rounding methods.
Full-year company forecast (announced along with Q1 results)
▷ At the time of the Q1 results announcement, the company only forecast two items for FY03/21: full-year consolidated sales of JPY405.0bn (-11.4% YoY) and operating profit of JPY8.5bn (-49.5% YoY). It later unveiled the forecast for recurring profit and
net income along with the Q2 results, while maintaining its sales and operating profit estimates. It expects recurring profit of JPY8.0bn (-42.0% YoY) and net income attributable to owners of the parent of JPY1.0bn (-92.9% YoY). OKI said that the release of figures for recurring profit and net income were delayed, because they reflect recent performance trends and the impact of
structural reform efforts following its earlier review. Its full-year FY03/21 forecast assumes a negative impact of around JPY500mn from forex and dividend payments on non-operating income/expenses and an extraordinary loss of around JPY4.0bn, including business structural reform expenses for the term.
▷ The company maintained its earnings forecast at the time of Q3 results announcement. In general, performance is tracking pretty much in line with company expectations. In the Solution Systems segment, performance is steady overall, and in some
(especially network-related) areas, recovery is stronger than the company had anticipated. In the Components & Platforms segment, the COVID-19 pandemic is a factor behind sluggish sales, but losses are narrowing nonetheless as the cost structure improves via structural reforms. Shared Research understands that in Q4, the impact of structural reform will hinge on the
degree of improvement in costs, especially for the automated equipment and printer businesses.
▷ Starting Q1 FY03/21, the company changed its reporting segmentation scheme, its old Information and Communication Technology (ICT) segment becoming the new Solution Systems segment, and its old Mechatronics Systems segment, Printer segment, and Electronics Manufacturing Services (EMS) segment being merged to form the new Components & Platforms segment. Together with the Other segment, the company now has a total of three reporting segments. Previously announced on February 7, 2020, this change was made to facilitate the company’s efforts to build up its Solution Systems business as its core business. The merger of OKI’s three manufacturing-related businesses to form the Components & Platforms segment is aimed at creating a business unit centered around manufacturing technology, within which the company can better focus its resources on selected fields and work to improve profitability. In FY03/21 and beyond the company plans to continue pursuing structural reforms including restructuring centered on the Components & Platforms segment (including a new production system), and an overhaul of companywide costs.
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Medium-term strategy (as announced in October 2020) Medium-Term Business Plan 2022 announced in FY03/21
On October 29, 2020, the company announced a three-year plan covering FY03/21–FY03/23, Medium-Term Business Plan 2022. OKI marks its 150th anniversary in 2031, and it is seeking to achieve sustainable growth through solving social problems by that date. To this end, it has positioned the current three years as a time to put in place the foundations for growth as the first installment of these ambitions, and announced plans to execute large-scale structural reforms. The key message of the medium-term business plan is “Delivering OK! to your life.”
In FY03/23, the last year of the plan, the company targets operating profit of JPY20.0bn (+19.0% versus FY03/20) and a shareholders’ equity ratio of 30%. To attain these targets, the company assumes sales of JPY465.0bn, net income of JPY12.0bn, and ROE of 10%.
Structural reforms for growth The approach in Medium-Term Business Plan 2022 is three-pronged: restructuring its business portfolio; strengthening its “mono-zukuri” (manufacturing) foundations; and reforming costs in shared group functions.
Restructure business portfolio ▷ The company believes it must strategically reallocate management resources to business areas where it can harness its strengths at a time when changes in its business environment are accelerating. The company therefore decided to restructure its business portfolio centered on the integration of the three former hardware-based segments (Mechatronics Systems, Printers, and EMS) announced in April 2020. ▷ The new Components & Platforms segment established by integration of these three former segments provides manufacturing services and equipment that solves social problems rather than selling individual products as in the past. The company will therefore integrate and strengthen design and development resources and change its sales and marketing methods as well, from the previous focus on its own sales networks to active business collaboration with customers and other companies to streamline operations. ▷ Of the three former hardware-related segments to be integrated, the Printers segment needed reform the most. The Printers business has an established global manufacturing and sales structure, yet has been struggling amid a shrinking office printer market and increased competition. First, the company integrated printer companies with its head office to centralize corporate functions. Second, it integrated design and development functions with design and development-related departments of the former EMS segment, and reallocated its engineers. The company integrated sales and marketing functions with the Marketing & Sales Group at its head office, transferred or redeployed salespeople in Japan, and is reviewing sales bases and personnel overseas. Regarding products, the company is narrowing its focus on specific-use models, as well as considering the supply of components to other companies and collaboration with global partners in the overseas business. ▷ The former Mechatronics Systems segment needed to develop new products to drive growth and diversify sales methods (such as making a profit from maintenance and selling modules), because the market for ATMs (its previous sales driver) and other automated equipment is maturing. The EMS segment, which has been recording stable earnings, also had issues such as the need to improve the weighting of its contract work portfolio and strengthen fulfillment of demand for upstream design.
The company’s policy for the Components & Platforms segment as a whole (with the exception of contract manufacturing work) is to focus on manufacturing and selling AI edge computer-related electronics products through joint development with clients.
Strengthen “mono-zukuri” foundations ▷ The company shifted focus from selling products it has developed and manufactured through its sales channel to providing a service of stable supply of products that customers need in a timely manner. Put another way, the company does not supply equipment in existing categories, but is changing its business model to providing a “mono-zukuri” (manufacturing) platform.
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▷ By integrating the intellectual property related to technology and development of the three former segments, the company will first aim to combine its mechanics- and electronics-related technologies. It will also review its overseas production bases and consolidate domestic production subsidiaries to progress centralization. Instead of assigning production items to specific factories, the company will establish “virtual one factory,” a structure for integrated management of production across the group that optimizes production items and factories. By transitioning in this way to “smart factories” that are centrally managed, the company aims to create a flexible production structure that can adapt to changing demand and technological advances over the long term. As well, the company plans to integrate purchasing departments and restructure the supply chain. This production system is also positioned as a model facility for Manufacturing Digital Transformation (DX).
Reform costs in shared group functions ▷ As part of business integration, the company will streamline costs by integrating shared functions within the group. ▷ First, the company aims to cut purchasing costs. To this end, it will strengthen supply chain management and integrate supply chains, leveraging the gains it makes to build a streamlined purchasing structure, including reorganization of supplier maps. Integrating the three former segments’ separate purchasing strategies will also strengthen development purchasing departments. The company estimates that this will produce a cost saving of around JPY10.0bn over the three-year medium-term plan period. ▷ Second, the company will reduce personnel and other expenses. It plans to streamline and optimize shared group functions in accordance with its portfolio restructuring. Specifically, it plans to outsource logistics, expand the scope of business of group shared companies, and stem expenses paid to outside the group. The company estimates a total expense reduction of around JPY4.0bn in three years.
Growth strategies by segment The company’s growth strategy aims to integrate “mono-zukuri” (manufacturing) with a difference and AI edge computer technology to help solve customers’ problems. It plans to leverage the structure it is building through business structural reforms for providing an all-round manufacturing-related service. AI edge is a technology that incorporates an artificial intelligence (AI) learning model to edge devices (devices used by end-users). AI functions are provided in the cloud, which is suited to the AI learning environment, but advances in IoT have also enabled solutions whereby devices to have their own AI functions to reduce the load on networks. The company is fulfilling customer demand for digital transformation (DX) by providing its own solutions service that combines “mono-zukuri” services with AI technology. The company sees as its points of difference its customer base (mainly of social infrastructure service providers), range of edge computing-related equipment and solutions based on these core products, and AI edge technology fostered in the process of device manufacturing.
Solutions Systems segment ▷ Sales: Target increase from JPY229.1bn in FY03/20 to JPY235.0bn in FY03/23 ▷ Operating profit: Target of JPY19.0bn ▷ OKI foresees a society of accelerating digital transformation in the “new normal” age after the COVID-19 pandemic is under control. It also believes that solutions harnessing technologies such as 5G and AI will increase, and edge computing (distributed computing to deal with increased volume of information) will become more important. The company seeks to strengthen its business for supporting customers’ digital transformation using AI edge technology.
Components & Platforms segment ▷ Sales: Target increase from JPY216.3bn in FY03/20 to JPY225.0bn in FY03/23 ▷ Operating profit: Target of JPY8.5bn ▷ The company will transition from a product-centered business (such as office printers and ATMs) to providing components (devices and modules) needed for systems and services by creating a “mono-zukuri” platform.
Investment in growth The company plans capex of JPY70.0–80.0bn (including M&A) in the three-year medium-term plan period. Spending will be on strengthening its manufacturing base, transitioning production facilities to smart factories, and promoting DX (such as ERP
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advancement and IT integration). The company plans R&D investment of JPY40.0bn in the same period, to be spent on DX solutions, component development, and its five priority technologies (sensing, networks, AI, robotics, and user experience).
Team OKI configuration
Solving social issues
OKI's customer base (social infrastructure Partners' customers providers)
Collaborations, co-creation
Koto-zukuri Partners (experience creation)
DMS OEM, other
Mono-zukuri (manufacturing)
Team OKI structure
Source: Shared Research based on company data
New business segments Three-way business line integration
Partial transfer ICT Solution Systems Marketing & Business New product planning, Sales Group collaboration partner development
Collaboration Mechatronics Systems Mechatronic Providing equipment to solve Systems Automation social issues, particularly systems Components labor shortages Printers ＆ Platforms Printers Providing manufacturing EMS EMS/DMS services from design to EMS manufacturing and evaluation Integration Integration and appropriate Components ＆ Platforms New business segments allocation of resources
Source: Shared Research based on company data Source: Shared Research based on company data
Medium-term Business Plan 2019 announced in FY03/18
OKI’s three-year Medium-term Business Plan 2019, which started in FY03/18, reflects on issues observed under the previous medium-term business plan, and sets improved earning capacity as its goal. As key performance indicators, OKI is targeting an operating profit margin of 6% and equity ratio of at least 30%. Performance targets for the final year of the plan (FY03/20) were sales of JPY500.0bn and operating profit of JPY30.0bn. The company is also looking to get the shareholders equity on its balance sheet up to JPY120.0bn and pay a stable dividend. The essential features of the plan as of the time of announcement were as follows.
▷ Key indicator is OPM: The company will be focusing on its operating profit margin as one of its key performance indicators because it is difficult to fund dividends and growth investments without stable earnings from operations. The central theme of the current business plan is to make OKI a company that can secure stable earnings and maintain an operating profit margin of 6%, by placing utmost focus on strengthening earning capacity and laying the foundation for sustained growth and evolution.
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▷ Earning stability: A company that can secure stable earnings, in OKI’s definition, is a company that can handle changes in the business environment. This requires not only a well-balanced portfolio of profitable businesses, but also the ability to create next growth-drivers, the strength to endure adverse environment, and a system of corporate governance that is capable of playing offense as well as defense. Whether or not the company achieves these goals during the medium-term plan will be key in the qualitative assessment of OKI’s progress.
▷ The plans for each segment are as follows: in ICT, to create a stable earnings base while growing new business; in Mechatronics Systems, to put the business back on the growth track; in Printers, to shift strategy with the aim of achieving stable profitability; in EMS, to grow sales and get closer to its ultimate goal of creating a JPY100bn business. Put another way, the company aims to establish a solid base for earnings with the ICT segment, work on turning around the Mechatronics Systems and Printers segments as soon as possible, and then add to this by building up new growth business in areas such as social infrastructure and ATMs for emerging markets.
When OKI reported its FY03/20 earnings, it also conducted a review of its Medium-term Business Plan 2019, according to which its FY03/20 operating margin came to 3.7%, falling short of the plan’s stated objective of 6%. Management attributes this to failure to get the Mechatronics Systems segment on track for growth as envisioned. In terms of equity ratio improvement, although it failed to reach its objective of 30%, the company says it did make progress on improving internal control and the financial position.
Given that OKI has been unable to announce earnings forecasts for FY03/21 while the COVID-19 pandemic rages on, it has also made no mention of any new medium-term business plan. However, the company sees the following two points as pillars of its next plan.
First of all, there is the reallocation of hardware-business resources. OKI has traditionally run three hardware businesses, namely Mechatronics Systems, Printers, and EMS, but under its next medium-term business plan, it aims to organize the resources of each line of business and reallocate them under the framework of “hardware business.” Issues management intends to address in terms of hardware business include more focus on R&D to enable timely product development, and attention to the area of upstream design in its contract production services. The second point is to enhance OKI’s ability to access markets and reform its cost structure.
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Business, market and value chain Business overview
Long-established company integral to the telecom industry in Japan
▷ Since OKI’s inception in 1881 when it produced the first made-in-Japan telephone, for over 130 years the company has been an integral part of Japan’s telecommunications industry, as it worked to foster domestically developed technologies without easily depending on imported products. The accumulation of technology and expertise in this field has led to a stable earnings platform in its ICT segment, although relying on domestic development is one reason the company was not able to keep up with rapid changes in the telecom industry.
▷ OKI is one of the four original members of the former NTT family*, but rather than being involved with mainframes like Fujitsu (TSE1: 6702) and NEC (TSE1: 6701), it established a position in the field of terminals for data transmission. However, with changes in the business environment, including the privatization of NTT, the opening of the domestic telecom market, and the shift of telecom networks to IP, sales within the family are shrinking. OKI has therefore expanded from ICT system terminal technologies to network construction and peripheral devices.
▷ OKI’s specialization is audio technology underpinned by over 130 years of expertise beginning with telephones as well as systems that leverage its core technologies such as multi-hop wireless network technology**.
*NTT family: The Japanese government established Nippon Telephone and Telegraph Public Corporation (currently NTT Group) in 1952 to promote the spread of telephones. The public corporation worked to develop the infrastructure needed for Japan’s landlines, and a group of manufacturers with exclusive rights to supply various equipment and terminals came to be known as the NTT family. In telecom equipment, members of the NTT family other than OKI were NEC, Hitachi (TSE1: 6501), and Fujitsu. In the telecom networks space, which was OKI’s mainstay, the application of IP (internet protocol) technology in routers and switches brought about a transition to switchboards made by overseas companies that met international standards. As a result, OKI’s sales to the telecom sector shrank to JPY68.5bn in FY03/16 compared to JPY160bn in FY03/01. Sales to NTT withered to less than one-third (around JPY20bn) of total sales.
**Multi-hop wireless network: This is a wireless network that not only enables direct communication between terminals, but also allows data to be relayed across multiple terminals, making the communication area expandable. With this sort of wireless network, users are not associated with a certain cell, but can access multiple base stations. Since various wireless devices make up the networks by autonomously determining different communication routes, multi-hop wireless networks are considered to be highly reliable and can be used in smart meter networks, various sensor networks, and emergency networks in times of disaster. OKI was the first company in Japan to develop a wireless telecom unit for use in the 920MHz band. This frequency band is considered suitable for constructing networks because its high diffractiveness makes it less susceptible to obstacles.
Developed new businesses in manufacturing-related areas while generating earnings from the ICT segment
▷ In addition to ICT, OKI runs business in Mechatronics Systems, Printers, and Electronics Manufacturing Services (EMS). The company is planning to adopt new business segmentation in FY03/21, but in the following we refer to FY03/20 earnings-based segmentation.
Information and Communication Technology (ICT) segment: Provides diverse telecom systems and solutions to a range of industries, with customers including major companies and government agencies. Stable earnings underpinned by replacement demand from blue-chip clients.
Mechatronics Systems segment: ATMs are the main product. OKI has 40% domestic share in a three-company oligopoly. Aims to develop new markets for and increase uptake of cash-recycling ATMs by tapping into ATM demand in emerging
markets.
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Printer segment: Challenges are low market share in office printer market but high fixed costs. Shifting to specialty and professional printing markets.
Electronics Manufacturing Services (EMS) segment: High-end contracted EMS is a high-quality, highly reliable one-stop service from design and development through production. The segment maintains OPM of around 5%. Winning new customers and new orders from existing customers; actively pursuing M&A.
New segment classifications In FY03/17 the former Info-Telecom Systems segment was split into the ICT segment and the Mechatronics Systems segment. Of the four subsegments (finance, telecom, social systems, and mechatronics systems) comprising the former Info-Telecom Systems segment, the mechatronics systems subsegment was made an independent segment, and the three remaining subsegments formed the new ICT segment. These three subsegments were also merged structurally from April 2016. The integration was necessary to move from the legacy industry-based approach to one where the company can offer all customers the technology and solutions developed in the finance, telecom, and social infrastructure divisions. For example, solutions for payment operations can be applied not just to financial institutions but in a variety of industries including distribution and retail.
Sales by segment
(JPYbn) 740 ICT Printers Information (old segment) Telecom (old segment) EMS Others Semiconductors 689 717 720 700 654 681 182 605 585 146 138 151 600 132 151 545 540 114 33 37 43 119 27 483 18 490 500 31 54 456 40 452 457 57 29 443 433 423 18 438 441 40 18 5 163 50 138 185 186 14 19 37 42 18 7 105 160 23 16 18 33 129 43 15 60 400 103 31 31 48 65 86 160 125 125 139 111 112 92 300 125 107 109 103
200 352 347 360 373 353 359 353 330 338 302 304 305 267 261 267 293 278 266 267 300 100
0 FY03/01 FY03/02 FY03/03 FY03/04 FY03/05 FY03/06 FY03/07 FY03/08 FY03/09 FY03/10 FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 Operating profit by segment
(JPYbn) ICT Printers Information (old segment) Telecom (old segment) EMS Others Semiconductors Adjustments Operating profit 40
30 2.3 12.0 32.4 28.3 27.2 29.9 3.4 27.2 21.6 20 3.0 18.6 17.5 16.8 3.8 13.5 24.0 12.023.8 23.4 25.9 10 19.8 10.6 18.7 17.6 20.5 15.8 15.0 6.5 14.7 6.3 7.7 14.8 7.2 10.9 0.7 5.4 7.1 8.4 3.1 1.4 2.6 2.5 0 1.5 -1.5 -1.7 -0.6 -8.2 -5.2 -5.8 -5.7 -6.9 -6.5 -7.7 -7.6 -8.9 -11.5 -9.6 -10.9 -10.9 -10.3 -9.4 -6.6-8.6 -6.5 -1.0 -6.7 -6.4 -10 -7.8 -6.1 -11.9 -10.3 -20 -9.7 -27.2 -30 FY03/01 FY03/02 FY03/03 FY03/04 FY03/05 FY03/06 FY03/07 FY03/08 FY03/09 FY03/10 FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 Sales by region (for reference)
(JPYbn) 740.3 717.0 719.8 688.5 680.5 Japan North America Europe China Latin America Others 669.8 654.2 99.0 87.4 604.6 73.5 97.2 88.7 585.5 66.9 99.6 600 85.7 75.7 102.3 544.5 540.2 94.1 43.7 98.8 75.2 67.8 81.3 14.3 490.3 56.6 483.1 59.3 53.8 52.7 455.8 11.6 34.8 15.0 451.6 69.4 55.1 62.1 442.9 432.7 438.0 54.9 56.6 423.5 16.4 8.3 70.5 25.5 18.5 85.3 50.6 16.2 40.2 42.5 44.1 50.7 20.7 23.3 400 38.5 49.3 53.5 56.7 29.4 16.8 77.4 61.3 46.6 53.1 45.2 43.6 46.4 19.4 22.0 22.3 20.0 22.9 20.8 17.1 17.5 17.4 555.5 505.9 464.4 485.5 458.8 477.4 200 441.0 427.6 443.0 364.1 337.1 341.7 302.5 308.0 310.6 329.3 326.0 320.3 320.6
0 FY03/00 FY03/02 FY03/04 FY03/06 FY03/08 FY03/10 FY03/12 FY03/14 FY03/16 FY03/18 Source: Shared Research based on company data
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FY03/20 sales breakdown by segment (JPYbn)
Sales Others 5.4 1% EMS 59.8 13%
Printers 92.3 20% ICT 229.1 50%
Mechatronics Systems 70.7 16%
Source: Shared Research based on company data
Capex Depreciation R&D expenses
Source: Shared Research based on company data
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Business segments (note: reporting segmentation scheme changed starting FY03/21)
Information and Communication Technology (ICT) segment
Segment performance FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 (JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Sales 260,708 267,179 293,034 303,600 352,505 191,174 177,391 172,716 184,286 229,065 YoY -2.5% 2.5% 9.7% 3.6% 16.1% - -7.2% -2.6% 6.7% 24.3% % of total 60.3% 63.1% 64.3% 62.8% 65.3% 39.0% 39.3% 39.4% 41.7% 50.1% Operating profit 14,733 18,709 23,815 23,416 25,920 11,627 14,385 13,513 14,668 20,835 YoY -1.7% 27.0% 27.3% -1.7% 10.7% - 23.7% -6.1% 8.5% 42.0% % of total 233.6% 156.2% 176.7% 86.1% 80.0% 62.5% 565.2% 175.0% 83.7% 123.8% OPM 5.7%7.0%8.1%7.7%7.4%6.1%8.1%7.8%8.0%9.1% Source: Shared Research based on company data Note: In FY03/17, Mechatronics Systems, which was previously a part of the former Info-Telecom Systems segment, was split off as an independent segment. Note: Sales declined in FY03/16 because telecom carriers’ investments in existing network equipment finished in Q1. Segment overview
▷ The ICT segment is the company’s core business, with a customer base built up since the time of the company’s establishment. With its base of sensing, network, and data processing technologies cultivated since automatic switchboards were first made in Japan, OKI offers a range of solutions supporting social infrastructure, along with related products and services. It provides
customized telecom equipment (terminals) and networking for each customer.
▷ Segment businesses involve social infrastructure systems; financial, transportation, and logistics systems; defense-related systems; and IoT-related systems. The company also provides maintenance and peripheral services related to these various systems. OKI has not released a breakdown by business area, but says that no particular business area stands out from the others. However, since most of these systems have a relatively long life by their very nature, Shared Research postulates that
the maintenance and services businesses generate a relatively large proportion of earnings.
▷ As the segment covers a wide range of services and solutions, we have provided concrete examples for various industries hereunder. OKI’s businesses can be roughly categorized as those associated with public sector demand (transportation-related, national and local government-related, and defense-related solutions) and private sector demand (financial, transport, and retail-related solutions).
(1) Transportation-related solutions (including intelligent transport systems such as air traffic control systems, ETC, and VICS, and railside systems)
Air traffic control desk (communication control unit) Electronic toll collection (ETC) system
Communication control units are indispensable for realizing voice ETC systems allow vehicles on highways and toll roads to pass through communication between air traffic controllers and between controllers toll gates without stopping. An ETC system integrates a wireless and pilots. Air traffic control desks developed by OKI are installed at antenna, vehicle detection sensor, toll bar, roadside display, and lane major airports around Japan and all four Area Control Centers of the monitoring camera. There are systems for making toll booths Ministry of Land, Infrastructure, and Transport. unmanned and for monitoring and controlling multiple toll booths at the same time. Source: Company website
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(2) Solutions for national and local governments (statistics and weather forecast systems, fire department command and municipal disaster prevention radio systems)
Automated gate system River monitoring system
This unmanned, compact and ergonomically designed By using ultrasound sensors that can operate on PV power together with the immigration control system confirms traveler identity using power-saving multi-hop wireless technology, water-level gauges can be fingerprints (personal identification information) when travelers installed without the need for power source installation or wiring work, enter or leave Japan. They have been installed at immigration enabling the real-time tracking of river water levels. A monitoring center controls (entry and departure) of the Narita International wirelessly collects data from water-level gauges and other sensors installed at Airport (Terminals 1 and 2), Tokyo International (Haneda) various points along rivers, and the data can be used to provide information to Airport, Chubu Centrair International Airport, and Kansai neighboring residents, guide evacuations, and support other disaster International Airport (North and South). prevention measures. Source: Company website
(3) Defense-related solutions (including submarine sonar systems, outdoor telecom systems, and sonobuoys) While OKI has not provided information on practical applications in the area of defense, the core maritime and acoustics technologies the company has cultivated over many years in the telecom and defense businesses are being applied not just in defense, but also in other business areas. A range of sensors (including ultrasound, acoustic, acoustic positioning, and fiber-optic sensors) based on those maritime and acoustic technologies are being used in marine vessel IoT, coastal monitoring, maritime resource development, maritime civil engineering and construction, and disaster prevention. In recent years, there has been growing need for measures to detect the incursion of suspicious objects or people both on and under the water in order to prevent poaching in coastal fisheries and provide stronger anti-terrorism measures for critical coastal facilities (including facilities for electricity generation, airports, harbors, and oil/LNG depots). OKI is conducting trials in cooperation with companies and national and local governments to realize monitoring services using its underwater acoustics technologies and sensors.
Coastal monitoring (maritime self-defense, security/crime prevention) There is growing need for measures to detect the incursion of suspicious objects or people both on and under the water in order to prevent poaching in coastal fisheries and provide stronger anti-terrorism measures for critical coastal facilities (including facilities for electricity generation, airports, harbors, and oil/LNG depots). OKI’s underwater acoustic sensors use passive sonar to pick up sounds emitted by possible offenders, allowing 24-hour monitoring of marine vessels and divers for possible poaching by detecting engine and screw sounds and divers’ breathing. OKI is conducting trials in cooperation with companies and national and local governments to realize monitoring services using its underwater acoustics technologies and sensors. Source: Company website
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(4) Financial-related solutions (sales office, administration, and call center systems, fintech solutions)
Call center system Share of domestic call center market
Contact center system: Since the CTstage series was launched in 1996, OKI has Some of the companies adopting call center systems are steadily incorporated user requests to arrive at its latest CTstage 6Mi model and kabu.com Securities, STNet, JB Service, Asahi Kasei Pharma, the budget-priced edition CTstage 6Mi Lite, along with a cloud version. The FM, and Chiba Bank. design of these products condenses the company’s expertise in Japanese contact centers. CTstage contains required functionality in an all-in-one format, so there is smooth linkage between functions, and additions can be made even after installation. It can also be run on single or multiple server configurations, offering users a high degree of freedom. Users can also adjust configuration to suit user and site counts. Source: Company website Source: Company website (Excerpted from IDC Japan’s August 2018 Domestic Unified Communications and Collaboration Market Share)
(5) Transport and retail (rail ticket machines, airline staff operation systems, automated baggage check machines)
VisIoT store business improvement support solution Service supporting efficient, improved environments in logistics business
Using OKI’s in-store image IoT system AISION, which contains image An onboard terminal (or smartphone) collects data on a vehicle’s sensing technology, together with proprietary AI and analytics location and movement, which are transmitted in packets to OKI’s technologies contained in OKI’s managed cloud service EXaaS, users Cloud Center, where the system displays current position and travel can coordinate information on how many customers are waiting at history on a digital map in an online service in order to improve the registers with POS data to determine how many registers should be efficiency of logistics operations. With the aim of improving the open at a particular time to avoid waste. In addition, by estimating the environment for delivery operations, a system function can output number of registers needed based on past performance, users can various forms including daily reports and display digital maps showing optimize the scheduling of staff shifts, forecast the number of where sudden braking and other signs of close calls occurred. customers who will approach registers based on characteristics and shopping times, and successively calculate appropriate times for the opening and closing of registers. This data can then be sent to a manager’s smartphone. Source: Company website
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Segment characteristics and profitability
▷ Segment characteristics: In the ICT segment, there is a largely fixed clientele, and OKI constructs systems suited to the business flows of its customers and in compliance with various standards. Much of the demand in this segment is replacement demand and we understand the company faces little danger of losing customers to competitors. This is because: OKI’s track record serves as a strength in the voice and telecommunications systems market where each system has particular reliability standards that are cumbersome; by building systems that are used in customers’ business operations, OKI can accumulate business flow data, which it can leverage to differentiate itself from peers; and the market is mature so few companies are trying to enter. For example, in large collaborative projects with ICT majors such as the construction of air traffic control systems, OKI is chosen for its strengths in audio technology and for its products, which can boost operational efficiency and respond to detailed customer needs. OKI also uses its sensing technologies and short-range wireless networks to develop new products and services.
▷ Seasonality: Due to the structure of the ICT segment, earnings tend to be concentrated in Q4—the fiscal year-end for government agencies and many companies in Japan. In Q4, sales are typically double those of other quarters. Profits also rise in Q4 in tandem with the sales increase while the other quarters are burdened by fixed costs. COS is booked as inventories on the balance sheet in Q1–Q3, but are eliminated from assets in Q4 when sales are recorded; in the subsequent Q1, accounts receivable are collected.
▷ Lead time: In the ICT segment, projects are typically completed in a year to a year and a half. OKI says it can fairly accurately forecast the timing for booking sales on systems replacement. This is because it can approximate the customer’s replacement
need at the time it receives an initial order, and makes plans to conduct bidding or work to secure orders accordingly.
▷ Profitability: Business scale and operating profit are both fairly stable. Shared Research believes this is because: most client companies are repeat customers, ensuring a steady customer base; business is mainly replacement demand in mature markets; sales enjoy industry diversification, and replacement demand periods are staggered; and there is little danger of losing customers because most projects are for systems where multiple companies are responsible for their respective specialty areas,
not generic systems. Competitors include members of the old NTT family—Fujitsu, NEC, and Hitachi.
Market trends and focus areas Existing markets: Domestic market is stable (mainly due to replacement demand) but mature, so sales growth is an issue. Maintain existing markets as cash cows
▷ Stable growth: Segment sales show slight fluctuations but appear largely stable once the impact of changes in segmentation has been excluded. There is also little deviation from the company’s initial forecast for the fiscal year. The main reasons for this are that the business mainly targets a mature domestic market, primarily involving replacement demand, and the renewal cycle (number of years) can be forecast fairly accurately because of the fixed customer base.
▷ Cash cows: Roughly half of sales are generated by public sector demand and sales to public institutions including public transportation, and most private sector business is with financial institutions and major transport companies. The company’s products are mainly terminals used by client companies when interacting with their customers, so as long as these interactions continue, so should demand. The scale of investment also seems unlikely to shrink significantly in the private sector, except in cases where large technological changes occur, making OKI’s systems obsolete (i.e. shift to unmanned operations, establishment of a completely ticketless society, and centralization of membership and point management on personal devices
such as smartphones). In the current market, demand for its systems remains stable, serving as an important earnings base for the company. In businesses where it has a competitive advantage, OKI intends to actively invest in growth areas and be on the lookout for good acquisition candidates.
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Growth market: Growth in social infrastructure, IoT, and co-creation businesses
▷ OKI sees social infrastructure as a growth area. This is because roads and transport account for a large proportion of public sector demand, and the company can differentiate itself through the effective use of its sensing technologies (both fiber optic and acoustic) and network technologies such as multi-hop and DSRC (dedicated short-range communications, designed for automotive use).
▷ Social infrastructure demand: Currently in Japan, the deterioration of social infrastructure built soon after World War II has become an issue, and replacement demand is beginning to increase not just in the field of civil engineering, but also in the field of information and communication technology (ICT). OKI believes such demand represents a business opportunity and is prepared to actively capture ICT-related demand in association with increasing sophistication and use of IT in social infrastructure.
▷ Deterioration of social infrastructure: The Ministry of Land, Infrastructure, Transport and Tourism says the ratio of bridges, tunnels, rivers, sewerage works, ports, and other facilities in Japan for which at least 50 years have elapsed since construction is rapidly increasing. As of March 2018, about 25% of bridges (of a total of around 730,000 bridges with a length of two meters
or more, excluding 230,000 with unknown construction dates), about 20% of tunnels (of a total of around 11,000 tunnels, excluding about 400 with unknown construction dates), and about 32% of river management facilities (of a total of about 10,000 facilities managed on the national level, excluding about 1,000 with unknown construction dates), were over 50 years
old. These ratios are expected to rise to about 63%, 42%, and 62% respectively by March 2033. As the ratio of deteriorated facilities is only going to grow in the next 20 years or so, OKI aims to expand business by proposing solutions for the social infrastructure field that involve IoT technologies.
▷ In addition to the aging transportation infrastructure, another new area of great interest to OKI is the V2X (Vehicle-to-Everything) market. Here, OKI is looking to roll out, for example, an infrastructure-coordinated Intelligent Transport
System (ITS) service that will connect the V2X networks that are needed to fully actualize Advanced Driver Assistance Systems and modernize existing transportation infrastructure systems. Both being areas where OKI can leverage its strengths, the company has already participated in related government-driven projects.
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Image of V2X advocated by OKI
Source: Shared Research based on company data
▷ Solutions that incorporate IoT technologies: In June 2016 the company launched a support service for making inspection reports of social infrastructure, a cloud service that helps streamline monitoring at tunnel inspection sites. In January 2017 the
company launched a similar service for bridges. These services help increase workflow efficiency, provide a solution to the inadequate number of experienced inspectors, and help reduce costs. In October 2016 OKI started selling bundled products incorporating IoT technology using multi-hop wireless networks, one of its strengths, with a variety of sensors including
seismic, temperature, and CO2 sensors. Installing these products on aged infrastructure can prevent accidents and help identify correlations. The company sees aged infrastructure solutions as a growth area, and is proactively developing related products and services.
▷ Systematic social infrastructure initiatives: The company is working to provide solutions for next-generation social infrastructure in three layers. At the bottom is the device layer, where OKI leverages its expertise in sensing technology for acoustic analysis,
image recognition, and radio wave analysis. The middle layer is a shared platform, which collects accurate information from the device layer and delivers this data to a service solution layer, the top layer. In the middle layer, the company offers an efficient network environment that integrates its strengths in both specialized wireless technologies and general-purpose telecom technologies. Data received from devices are sent over the 920 MHz band by multi-hop wireless or connected by DSRC (Dedicated Short-Range Communications; an open-source protocol for wireless communication similar to Wi-Fi) technology the company developed in the former Info-Telecom Systems segment. These data are then streamlined and passed on to the general network using video compression or broadband data transmission technology. In the top layer, software measures the efficiency of business processes.
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Solutions of next-generation social infrastructure
Source: Shared Research based on company materials
▷ Infrastructure-coordinated ITS service: A good example is the company’s infrastructure-coordinated ITS service that will link V2X communications to existing transportation infrastructure. V2X technology is at the heart of Advanced Driver Assistance Systems and OKI is working together with government agencies and various road-related contractors to create a system on the transportation infrastructure side capable of handling it. OKI already has ITS-related core systems up and running and is planning to roll out an infrastructure-coordinated ITS service that will provide the support infrastructure and can process all the big data needed to support Advanced Driver Assistance Systems. Transportation infrastructure-related systems and products, one of OKI’s strengths, have generated a combined total of more than JP100bn in sales for the company over the years. OKI is
also well known for its skill in utilizing probe data (traffic flow data generated by automobiles). It has been involved in related projects led by Japan's Ministry of Land, Infrastructure and Transport, and is considered one of the leaders in probe data analysis, according to the company. The usefulness of probe data goes well beyond ADRS-related applications; it is also used to
predict traffic jams and for early detection of reckless driving, vehicles travelling against traffic, car fires, and accidents. With the help of Dedicated Short-Range Communication technology (DSRC; wireless system that allows two-way, short-range communication between onboard devices and roadside devices [several meters to about 30 meters]), OKI is also planning a
range of other traffic solutions services, including a payment service.
▷ Social infrastructure solutions business overseas: This is a business OKI wants to enter in the future. However, the company does not think it is possible to turn a profit within two or three years of entering an overseas market. Even in Japan it is difficult to succeed without robust technology and strong products.
Mechatronics Systems segment
Segment performance FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 (JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Sales - - - - - 113,667 100,923 93,542 82,731 70,728 YoY ------11.2%-7.3%-11.6%-14.5% % of total - - - - - 23.2% 22.3% 21.4% 18.7% 15.5% Operating profit - - - - - 6,017 -11,818 -5,093 82 -296 YoY ------% of total -----32.4%--0.5%-1.8% OPM - - - - - 5.3% -11.7% -5.4% 0.1% -0.4% Source: Shared Research based on company data Note: In FY03/17, Mechatronics Systems, which was previously a part of the former Info-Telecom Systems segment, was split off as an independent segment.
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Sales by region
(JPYbn) Japan Overseas Domestic ratio (right axis) 140 75% 80% 120.7 70% 120 65% 65% 61% 105.7 100.9 60% 100 52% 93.5 85.5 59% 82.7 76.9 45% 80 68.0 70.7 62.4 49% 40% 60 29%
40 20% 59.3 61.1 61.7 47.5 49.5 20 40.6 41.6 39.8 42.2 34.4 0 0% FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 Source: Shared Research based on company data Segment overview
▷ ATMs are main product: Starting in FY03/17, the Mechatronics Systems segment was spun off from the old Info-Telecom Systems segment. The Mechatronics Systems sales team is in charge of overseas sales operations, but the ICT sales team runs domestic sales (costs allocated between segments). ATMs (including related services) account for the majority of segment sales, the rest being mostly cash-handling machines, change machines, and other terminals. Overseas sales (mostly of ATMs) account for around 20% of segment sales in FY03/19.
▷ Cash-recycling ATMs: The company developed AT-100, the world’s first cash-recycling ATM (reuses deposited cash for withdrawals) in 1982. Prior to this product, when a machine ran out of cash, operations had to be paused until the machine
was reloaded. The development of this machine substantially reduced operating costs for financial institutions. In Japan, cash-recycling ATMs are now widely used, but their spread has lagged overseas, particularly due to cultural differences in emerging economies (including the penetration of credit cards, counterfeiting problems, and security concerns), as well as
high initial costs. One of the company’s strengths is its cash-recycling technology accumulated over many years. In 2003, targeting the Chinese market, OKI launched machines that were tailored to handle CNY banknotes (different-sized bills that are difficult to reuse due to soft paper) and deal with counterfeits and dust, starting mass production and delivery in 2005. In 2009,
targeting the global market, the company was successful in developing ATMs that could deal with the various sizes, designs, and security information of the currencies of various countries around the world. In 2011 OKI expanded the number of bill varieties that could be handled by the same machine from 32 to 128, and launched sales of models with coin dispensing and
contactless (IC) functions. The company’s ATMs continue to evolve.
ATMs vs cash-recycling ATMs
Source: Shared Research based on company data
The growth strategy for ATMs includes maintaining existing markets, growing the number of ATMs in operation in emerging markets, expanding sales of cash-handling machines, and maximizing volume effects.
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Segment characteristics and profitability
▷ Impact of demand trends: The main customers for ATMs are financial institutions and retail companies such as convenience stores both inside and outside Japan. In the domestic market, financial institution demand for ATMs and maintenance services is generally steady. Segment earnings are impacted by temporary spikes in demand for cash-handling machines (such as in FY03/16 and FY03/17) and fluctuations in demand from the retail industry. Overseas, segment growth continued until FY03/15, driven by robust China operations, but segment operating profit has dropped since FY03/16, when sales declined as the company stopped sales to a major partner in China and cashless payments became more common in the Chinese market. As a result, sales to China in FY03/19 dropped to about half of their peak. In addition, as OKI is manufacturing and selling ATMs through a subsidiary it acquired in Brazil, the business environment and economic conditions in Brazil must also be considered.
▷ Difference between domestic and overseas business models: Domestic and overseas markets have differing business models. As production systems are concentrated in China, the benefits of mass production easily appear. In the domestic market, OKI profits from services such as maintenance and monitoring rather than product sales. The domestic market (excluding temporary demand) is steady, but overseas, profits are directly linked to sales and production volumes. For example, because China operations had seen continuous growth, the company had been expanding while holding some inventory, but sales volume dropped when the company stopped selling to a major partner (in FY03/16; details follow), and in FY03/17 it cut production.
Sales breakdown (JPYbn) and domestic ATM market share FY03/16 FY03/16 OKI's share of ATMs in Japan
Other overseas 7 Cash-handling machines 6% 25 Brazil 20 22% 18% OKI 40% ATM-related services 10 9% ATM China Japan Others 79 17 70 60% 69% 15% 61%
Source: Shared Research based on company data
Market trends and focus areas Domestic market: Enhanced sales activities in the retail field and expansion of solutions business
▷ Competition: Competitors in the ATM and CD (cash dispenser) business include Hitachi-Omron Terminal Solutions (ownership: 55% Hitachi, 45% Omron (TSE1: 6645) and Fujitsu Frontech (TSE2: 6945). The domestic market is essentially an oligopoly of three companies, with OKI holding a roughly 40% share. For the domestic retail industry (such as supermarkets and convenience stores), the company is the market leader with a share of around 70%.
▷ Position: In the domestic ATM market, the number of machines installed at financial institutions (banks including Japan Post Bank) is trending sideways, so demand is mostly replacement demand. At the four major convenience stores chains (Seven-Eleven, FamilyMart, Lawson, and Ministop), there was a net increase of just 40 stores. This number was down YoY as all four chains put more energy into relocating unprofitable stores than into expanding.
▷ Business strategy: With a market share of roughly 70%, OKI is in an advantageous position for selling to the retail industry, but is not optimistic regarding the overall domestic market. The company sees declining sales to financial institutions as a risk, and aims to maintain sales by increasing sales to the retail industry. Retailers are looking for ATMs with other functions in addition to financial transactions, so OKI plans to increase the value-added aspects of its products.
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▷ New business strategy in response to changes in environment: OKI will not only be providing ATMs, but will be actively pushing its one-stop "Full Outsourcing Service" (FOS) that handles everything for the ATM buyer from initial installation, to daily operation and security. Encouraged by the strong demand from users for its new FOS service, OKI is looking to differentiate itself and plans to develop this market in conjunction with partner companies in security business.
▷ OKI is also looking to introduce a new type of coin changing machine (cash-handling machine) to retailers, strengthen its alliances and other connections with POS system vendors, and work to boost sales by creating solutions for efficient cash register operations.
Number of ATMs installed in domestic market (left: by industry, middle: three retailers, right: installed machine and store count for Seven-Eleven and Lawson) (for reference)
（'000 unit） Seven Bank ATM units / Seven Eleven store count Financial institutions (excl. Japan Post Bank) （'000 unit） Seven Bank LAWSON AEON Bank Japan Post Bank 45 120 41 LAWSON ATM units / LAWSON and Natural LAWSON Convenience stores 39 40 37 120% store count 35 6 100 6 35 31 6 5 100% 28 30 3 80 26 11 11 23 2 11 25 21 2 10 80% 20 2 10 60 2 9 20 16 1 9 15 7 14 6 15 6 60% 40 11 4 4 4 23 8 21 22 10 3 18 20 6 15 17 40% 20 3 13 14 15 10 11 12 5 2 8 4 5 0 0 20% 1984 1988 1992 1996 2000 2004 2008 2012 FY00 FY05 FY10 FY15 FY00 FY05 FY10 FY15 Source: Shared Research based on each company’s data
Overseas markets: Escaping dependence on certain regions and strengthening sales in emerging markets OKI operates globally, but the hardware for banknote sorting and conveying is the same no matter the region. Banknote sorting modules are produced in Japan, while assembly and other work is concentrated in the Shenzhen China plant. With the company’s business model, it can reap mass production benefits regardless of the delivery location. In Brazil, OKI acquired a company that had its own factory, so CD machines are produced locally.
Overseas expansion: ATMs
Source: Shared Research based on company data
Market share OKI's share of ATMs for logistics industry and OKI's share of cash recycling ATMs in China OKI's share of ATMs and CDs in China convenience stores
OKI 15% Others 30%
Others OKI 50% 50%
OKI 70% Others 85%
Source: Shared Research based on company data
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▷ Competition: Competitors include Diebold (US, NYSE: DBD), NCR (US, NYSE: NCR), and Wincor Nixdorf AG (Germany, FWB: WIN) overseas. Overseas, three companies (Diebold, NCR, and Wincor Nixdorf) together hold a global market share of around 60%. Still, circumstances vary in emerging markets where the machines are not yet widespread. In Brazil, Diebold (market leader) has around 50%, OKI is the second-largest with around 25%, and a local company ranks third. In China, OKI has a market share of around 50% for ATMs (roughly 15% when including CDs). In India, where ATMs have low penetration rates, Hitachi Omron is the market leader.
▷ Sales ratios by region: Overseas, the company is concentrating management resources on developing emerging markets with prospects for future growth. China accounts for the bulk of the company’s overseas sales. Emerging markets such as Brazil, Russia, India, and Indonesia accounted for the rest. The company said it mainly sells ATMs and maintenance services, but it plans also to focus on growing sales of cash-handling machines.
▷ China market status: When OKI developed AT21S, an ATM for the Chinese market in 2003, NCR, IBM, and Diebold held the majority of the CD (cash dispenser) machine market. OKI worked to secure orders for its cash-recycling ATM to gain a foothold and in April 2005 made its first mass-produced delivery. Thereafter, it steadily grew its share to 36,000 in FY03/15. However, in June 2015 the company halted sales to its major distributor in China, Shenzhen Yihua Computer Industrial, due to delayed product payments (CNY1.1bn) and was forced to revise its sales strategy. (Roughly half of the company’s sales had been through Shenzhen Yihua Computer Industrial, with the remainder being direct sales. In November 2015, OKI applied for
mediation by the South China International Economic and Trade Arbitration Commission, and in FY03/17 booked JPY10.9bn in provision for doubtful accounts.) In light of this issue, in October 2015, OKI entered a new strategic alliance regarding the Chinese ATM business with Digital China Group (Shenzhen A: 000555). Thereafter, competition intensified as Chinese
companies (including GRG Banking Equipment Co., Ltd. [Shenzhen A: 002152] and Cashway Fintech Co., Ltd. [Shanghai A: 603106]) began catching up as a result of the Chinese government’s promotion of Chinese-made products. This and progress on the shift to cashless payments blunted growth.
▷ Markets other than China: OKI started supplying ATMs to a major Russian private bank (Alfa Bank) in 2012, Indonesia’s largest private bank (PT Bank Central Asia Tbk) in 2013, India’s largest bank, State Bank of India (partnering with a local company for
maintenance services), and major banks in Malaysia in 2014. In FY03/19, about 75% of ATMs OKI sold overseas went to markets other than China.
▷ Brazil subsidiary: The company’s full-scale entry into the Brazilian market took place with the establishment of a new company called OKI Brasil S.A., spun off from the automated machinery and maintenance service businesses of Itaútec, a company under the umbrella of the major Brazilian conglomerate ITAÚ Group (banking, chemicals, electronics, etc.) This resulted from a strategic partnership agreement with the conglomerate entered in May 2013. Unlike for other regions, OKI entered Brazil through an acquisition, as setting up a new entity was assessed to be difficult. In the Brazil market, CD machines are more widespread than ATMs, and the top company Diebold (around 50%) and the number three player, a local company, do not have their own cash-recycling ATM technology, so OKI saw an opportunity to capture market share, which is why it decided to enter the market. However, due to the slowdown in the Brazilian economy, banks’ ATM investment has cooled off and profits turned sluggish. In FY03/15, the year OKI entered the market, the operating loss was over JPY3bn. There was a further widening of the operating loss to around JPY4bn in FY03/16, so the company wrote down its production equipment. There was an operating loss of around JPY1.5–2.0bn in FY03/17, but the Brazil subsidiary came close to moving into the black in FY03/19 after OKI won orders in FY03/17 from the largest state-owned bank, Banco do Brasil, and started to ship a recycling cash-handling machine, TCR, to the second largest state-owned bank (Caixa Econômica Federal) and a major private bank (Banco Bradesco SA). Both improvement in the top line and restructuring focused on cost reductions contributed. In June
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2019, OKI announced that it will sell the financial, retail, and IT services businesses of OKI Brasil to the Brazilian subsidiary of competitor NCR Corporation.
Turning around operating losses at Brazilian subsidiary
(JPYmn)
0
-5 FY2015 FY2016 FY2017 FY2018 FY2019
Source: Shared Research based on company data and IBGE
▷ Revision of business strategy: OKI is revising its business strategy for overseas markets to move away from its dependence on China, to focus more on emerging markets, and to supply modules to partner companies. The aforementioned sale of some of
its Brazil businesses is also part of this new strategy. OKI aims to develop emerging markets such as India, which have ample room for growth, by injecting strategic models suited to market circumstances in those countries.
Printers
Segment performance FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 (JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Sales 125,012 107,425 111,379 124,831 129,271 124,647 112,389 108,905 102,554 92,285 YoY -10.9% -14.1% 3.7% 12.1% 3.6% -3.6% -9.8% -3.1% -5.8% -10.0% % of total 28.9% 25.4% 24.4% 25.8% 23.9% 25.4% 24.9% 24.9% 23.2% 20.2% Operating profit 165 -4,343 -8,837 5,125 6,720 1,426 1,033 2,729 5,740 2,774 YoY -97.3% - - - 31.1% -78.8% -27.6% 164.2% 110.3% -51.7% % of total 2.6% - - 18.8% 20.7% 7.7% 40.6% 35.3% 32.8% 16.5% OPM 0.1%-4.0%-7.9%4.1%5.2%1.1%0.9%2.5%5.6%3.0% Source: Shared Research based on company data Segment overview About 70% of sales are to corporate customers. Low 2% market share. EUR/USD rate impacts profits since most of sales are to Europe
▷ Wide format printers: In October 2015, the company acquired Seiko Infotech (SII, currently OKI Data Infotech) to enhance business involving wide format printers used primarily in the sign market, design business targeting the advertising and distribution industries, and medical business targeting on-site use at hospitals.
▷ Lineup: OKI makes a broad range of printers, including LED color multifunction printers (MFPs) for office documents, LED color printers for medical imaging and electronic medical records, LED monochrome printers, special A3 LED printers for packaging and point-of-purchase displays in manufacturing and retail, wide format color inkjet printers for signboards and wallpaper, and A0–A1 LED MFPs for engineering diagrams and other uses.
▷ Office printer demand is shrinking and the competitive environment intensifying, so the company is tapping into specialty and professional printing markets and concentrating development resources on high value-added MFPs in existing markets.
▷ OKI is trying to construct a business model where it can profit from high-end (although small-scale) printer demand, rather than the general office printer market, which is large. However, the high-end market still accounts for only around 20% of
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overall sales, which is insufficient to maintain sales channels and factory utilization rates, so the company is accelerating the shift to professional and specialty printing.
Segment characteristics and profitability
▷ LED printers: OKI’s products use LEDs as a light source, rather than lasers (the industry standard). The company developed the world’s first LED printer in 1981. LED printers are superior to laser printers for a number of reasons.
▷ Superiority of LEDs: LED printers require a simpler structure enabling more compact devices and easier maintenance (laser printers require mirrors and focal length correcting lenses); allow for faster print speeds; and enable high definition rendering (laser printers may produce blurry images due to varying focal distances). OKI aims to use its LED technology to stand out from the competition. The company shifted from single function printers (SFPs) to the growth area of multifunction printers (MFPs), but has been unable to capture a significant share of the MFP market, leaving it with the burden of supporting production systems and sales and service networks.
▷ Structural reform: In FY03/14, OKI achieved double-digit growth in sales and moved to an operating profit position (+JPY14.0bn YoY including JPY2.7bn in forex effects), as it implemented a number of initiatives to cut fixed costs (headcount
reductions primarily at distributors and plants); improved design efficiency and lowered parts procurement costs; and strengthened management systems. Still, in FY03/16, operating profit fell by JPY5.3bn YoY to JPY1.4bn. The company’s new strategic products fared well, but sales of existing products, which accounted for a large share of sales, fell, and there was
intense price competition even at low price points, leading to a tough market environment overall. This was compounded by the weakening of the euro against the US dollar.
▷ Restructuring under Medium-term Business Plan 2019: The company's first step under the current medium-term plan has been to extensively restructure its printer business with the aim of boosting profitability (earning capacity). More specifically, the company is looking to restructure its manufacturing operations and its overseas distributors, including reducing indirect labor
in the US, reorganizing distributors in Europe, and reducing indirect labor at Chinese distributors in Asia. It will also work to restructure head office operations, moving quickly to beef up product development while increasing operational efficiency (reduce work volume by 20%). The company’s thinking is to offset the drop in sales and profits of office printers by reducing
fixed costs and other expenses and, after creating a leaner and more efficient organization, OKI aims to get back on the growth track by expanding sales of specialty printers for industrial use.
Sales by region (JPYbn)
Europe Americas Japan Asia, other (JPYmn) 129.3 140 124.8 124.6 120 112.4 108.9 102.6 100 92.3
80
60
40
20
0 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20
Source: Shared Research based on company data
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Market trends and focus areas
▷ Office printer market: Segment results have been low for the past ten years. This is because of several reasons: the company’s market share for printers is low at around 2%, fixed costs are high, and OKI was late to enter the MFP market.
▷ Competitors: For printers in general, competitors include HP (NYSE: HPQ), Canon (TSE1: 7751), Seiko Epson (TSE1: 6724), and Brother (TSE1: 6448), while for MFPs, Ricoh (TSE1: 7752) and Xerox (NYSE: XRX) also compete. Competitors in wide format inkjet printers include Roland DG (TSE1: 6789), Mimaki (TSE1: 6638), and HP.
▷ Revision of basic stance: OKI is revising its basic stance and moving from chasing sales to generating profits. It does not intend to have the same strategies, product lineup, and office locations as major competitors but instead aims to steadily grow profits from both hardware and supplies by keeping investments and fixed costs appropriate for its size.
▷ Moving from office printing to industrial printing: OKI sees high-profitability and industry-specific specialty printing, and professional printing as target markets. These target markets require that OKI adopt a niche market strategy, which means smaller lot production of a wide variety of printers designed for specialty use. For example, the company targets specialized industries with large print runs, including design printing, retail, and medical facilities, where the strength of its LED heads can come to the fore. For professional printing, it targets design and signage (including billboards) markets. The main products of
OKI Data Infotech include wide format multifunction printers for computer-aided design and wide format inkjet printers for printing signs. These strategic products designed for professional printing are expected to play a major role in the company’s growth. Printing volumes in the wide format printing market are in an uptrend and environmentally friendly inks are showing
particularly rapid growth, so the company plans to strengthen its lineup of relevant products and distinguish itself versus its competitors.
Printer market
(Unit: sheets) Professional printing High speed, Approx. 10,000 market industry-use models Approx. 8,000 Office solution Color labels
Earnings model Earnings market Special color toners Approx. 5,000 Approx. 4,500 MFP Office printing market Approx. 2,500
Low end models Direction of business domain Designing and Logistics, retail, Offices Medical Others printing services institutions
Source: Shared Research based on company materials
Source: Shared Research based on company materials
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Vendor share Shipment volume-based Shipment value-based (USDmn)
1. HP Inc. 34.8% 25.0%
2. Canon + Océ 22.1% 12.1%
3. Epson 13.6% 7.6%
4. Mimaki 3.0% 5.7%
5. Roland 2.7% 5.1%
Others 23.8% 44.6%
Total 100.0% 100.0%
Source: Shared Research based on company data, IDC press release, and Infotrends
EMS (Electronics Manufacturing Services)
Segment performance FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 (JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Sales 31,035 31,264 32,665 37,111 40,308 42,654 43,165 55,488 66,246 59,788 YoY 36.8% 0.7% 4.5% 13.6% 8.6% 5.8% 1.2% 28.5% 19.4% -9.7% % of total 7.2% 7.4% 7.2% 7.7% 7.5% 8.7% 9.6% 12.7% 15.0% 13.1% Operating profit 1,340 1,467 1,569 1,656 2,027 2,284 2,058 3,305 3,727 2,074 YoY - 9.5% 7.0% 5.5% 22.4% 12.7% -9.9% 60.6% 12.8% -44.4% % of total 21.2% 12.2% 11.6% 6.1% 6.3% 12.3% 80.9% 42.8% 21.3% 12.3% OPM 4.3%4.7%4.8%4.5%5.0%5.4%4.8%6.0%5.6%3.5% Source: Shared Research based on company data Segment overview
▷ Background: The EMS segment was launched in 2002 at the company’s Honjo (Saitama) plant. As the mother plant for telephone switchboard and transmission equipment, the Honjo plant was expanded repeatedly, but then faced a significant fall in output due to changed procurement policies at NTT. In the midst of this, OKI launched the EMS segment, developing
capacity in printed circuit board (PCB) production and mountings, and winning the trust of customers. The company aims to expand operations by steadily capturing domestic demand.
▷ Business expansion through M&A: OKI has been working to grow production capacity and strengthen its customer base through a series of M&A. It took over the PCB business and Tsuruoka plant of Tanaka Kikinzoku Kogyo (October 2012; unlisted, currently OKI Circuit Technology head plant); the PCB business and Ome plant of Yokogawa Electric (April 2015; TSE1: 6841,
currently OKI Printed Circuit’s Ome plant); and the PCB business of Nippon Avionics (TSE2: 6946; July 2016, business transfer completed at end March 2018; obtained line certification from Japan Aerospace Exploration Agency (JAXA), a customer of PCBs for the aerospace and defense industries). In FY03/19, OKI made OKI Electric Cable (delisted on March 28, 2018) a wholly owned subsidiary. Customers operate in telecom, industrial, measuring, and medical equipment markets.
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Service flows and sales breakdown Serviceサービスフロー flows Sales売上構成 breakdown
医療 Medical 情報通信 One-stop設計⼀貫受託 DMS One-stop⽣産⼀貫受託 EMS IC T
フ 基板実装装置組⽴ ァ 品質保証検査 回路設計ー 機構設計ＡＷ設計 基板製造部材調達 試作 Measurement ム 計測 ウ ・ ・ ェ 検査 検査 Industrial
Firmware 産業 and testing and and testing and and testing and ア Prototyping manufacturing Artworkdesign Circuitry design Circuitry Procurement of Board mounting Quality assurance Mechanical design parts and materialsand parts Printed board circuit assembly Equipment Source: Shared Research based on company data
Segment characteristics and profitability
▷ High-end EMS: The company incorporates DMS (design manufacturing services) into traditional contracted EMS, so it offers a one-stop service from design and development through production. It acts as a factory for customers that do not own their own plants, providing them high-end EMS services. Advantages for OKI’s customers: speed up product development and improve cash flows by concentrating development resources on core businesses such as product planning and marketing;
create high value-added products with a fusion of OKI’s proprietary technologies and production expertise with customers’ own technologies and ideas; turning factory expenses such as fixed assets and capex into variable costs, to blunt the impact of the risk of sales fluctuations.
According to the company, Tanaka Kikinzoku Kogyo sold its PCB business in light of the changing industry environment, namely shrinking domestic PCB market, and the need for business restructuring. Further, it rated OKI’s EMS business highly for its future growth potential. Yokogawa Electric said that PCB production and mountings required ongoing capital expenditures. Also, it was positive toward OKI’s EMS business potential and technological capabilities that ensure high reliability as well as its track record in multi-product manufacturing.
Japan Avionics had numerous products including ultra-multilayer printed circuit boards for industrial use and high-reliability PCBs for the aerospace and defense industries, which demand top-notch environmental resistance performance. It judged that OKI was the ideal company for the business transfer in light of its track record in relevant areas, sufficient business scale, and PCB manufacturing history in terms of technology and quality control capabilities. Japan Avionics said it was working to ensure the transfer of technology and expertise proceeded smoothly.
▷ Sales and profit trending upward: The business is continuing to grow. Operating profit has been up YoY in each year but FY03/17. Segment earnings have been on a steady uptrend: operating profit grew for six years in a row since FY03/11 and the OPM has been above 5% since FY03/15. Since FY03/15, sales growth has accelerated, aided by customers acquired in M&A.
▷ Maintaining/increasing profitability: OKI’s EMS segment has maintained an OPM of around 5%, a relatively high margin which is difficult for a mass production EMS business to achieve. Leveraging the company’s expertise in high-mix, low-volume production developed at the Honjo plant, it uses enhanced testing processes to ensure high reliability and quality. The company has managed to maintain a relatively high OPM because it can handle flexible schedules and reduced production costs. In order to avoid being overly influenced by particular industries and customers, OKI has diversified its customer mix. Its target is sustainable growth. However, the company does not intend to change its high-end EMS business structure, so will not mass produce consumer goods.
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EMS segment sites Contract manufacturing overview
Source: Shared Research based on company data
▷ Targeting continuous growth: The company is targeting continuous growth through steady efforts in further tapping into high-mix, low-volume production demand, adding upstream processes such as design/planning to build a one-stop contract manufacturing business (including proposing plans), and stepping in when customers close factories (including through M&A). The company has recently begun marketing proposals from the planning stage. Although sales are still non-material, the
company may be able to set margins higher than normal.
▷ For business with existing customers, OKI intends to secure continued orders for existing projects by improving customer satisfaction. At the same time, it will seek business growth through new projects with existing customers by investing in facilities (to address demand for ultra-high precision PCBs and to raise production capacity) in order to expand the range of contracted production or by transferring entire production lines to the company.
EMS sales by type (left), market (middle) and client industry (right)
(JPYbn) (JPYbn) (JPYbn) (JPYbn) FY03/17 FY03/20 FY03/17 FY03/20 Existing contracts Existing customers, existing contracts 70 New markets New Infrastructure Infrastructure 60 60 new customers M&A 3.0 5.0 5 Others 50 6 Others ICT 43 3.2 ICT 6.0 PCB PCB 8.0 12.0 15 17.0 40 13.0 Medical 5.0 30 43.2 60.0 Medical Measurement 8.0 12.0 Measurement 20 Designing and Designing and Industrial 15.0 34 Industrial manufacturing 12.0 10 manufacturing 14.0 30.2 43.0 0 (JPYbn) FY03/17 FY03/20 Source: Shared Research based on company data
Other businesses
Segment performance FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 (JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Sales 15,928 17,611 18,744 17,569 18,067 18,471 17,756 7,374 5,632 5,355 YoY 17.8% 10.6% 6.4% -6.3% 2.8% 2.2% -3.9% -58.5% -23.6% -4.9% % of total 3.7% 4.2% 4.1% 3.6% 3.3% 3.8% 3.9% 1.7% 1.3% 1.2% Operating profit 1,544 2,535 3,014 2,844 3,467 4,185 3,431 988 855 389 YoY - 64.2% 18.9% -5.6% 21.9% 20.7% -18.0% -71.2% -13.5% -54.5% % of total 24.5% 21.2% 22.4% 10.5% 10.7% 22.5% 134.8% 12.8% 4.9% 2.3% OPM 9.7% 14.4% 16.1% 16.2% 19.2% 22.7% 19.3% 13.4% 15.2% 7.3% Source: Shared Research based on company data
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▷ Mainly independent businesses run by subsidiaries. Products include electronic parts, power supplies, and compact precision motors. Services include reliability testing and environmental-conservation related services.
▷ Because internal sales are large, OPM appears high, but there is a mix of high-margin businesses and low-margin businesses.
Main consolidated subsidiaries ICT OKI Crosstech Mechatronics Systems OKI Electric Industry (Shenzhen) OKI Software Japan Business Operations Printers OKI Data EMS OKI Electric Cable OKI Data Americas Nagano OKI OKI Data Manufacturing (Thailand) OKI Printed Circuits OKI Europe Others OKI Proserve OKI Electric Industry (Shenzhen)
OKI Trading (Beijing) Source: Shared Research based on company data
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Strengths and weaknesses
Strengths
ICT segment generates operating profit of around JPY10bn due to a diversified customer base The ICT segment generates steady earnings, with an OPM of around 6%. This is underpinned by a diverse customer base of major companies and government agencies. The segment generates operating profit of over JPY10bn, which is an important source of funds for future growth. Excluding the temporary demand for digitalizing fire departments’ wireless communication systems, the company has reduced its dependence on specific industries, and replacement demand is likely to continue.
Builds systems tailored to customers’ workflows and meeting various standards The ICT segment is supported by OKI’s systems that are built to suit customers’ workflows and meet various standards. OKI has developed repeat customers over many years by working with them to build suitable systems, and it has gained the experience to make workflows more efficient and deal with regulations and standards for various workplaces. As a result, the company has developed expertise in specialized areas, enabling it to participate in major projects involving numerous companies, such as air traffic control system projects. In call center systems, the company holds a domestic market share of around 30%. As a result of this expertise, the ICT segment accounts for over 40% of consolidated operating profit (FY03/19) and maintains OPM of 6–8%.
Cash-recycling ATMs, a tool for differentiation in emerging markets OKI’s long-term growth driver is cash-recycling ATMs. OKI was the first company in the world to develop and commercialize the product in 1982. Asian companies are working to develop similar products, but OKI and two other Japanese companies are still in a leading position due to their cash-handling machines that offer both speed and reliability in an area with no room for errors. OKI aims to develop emerging markets where ATM penetration is low, leveraging its conveyer technology (can handle various types of bills) and reliable authentication technology (based on various security information).
Weaknesses
Heavy fixed costs in Printers segment Overseas markets account for around 75% of sales in the Printers segment (roughly 40% Europe, 20% US). Roughly 70% of segment sales are to corporate customers, but OKI only has about 2% share of this market. Competition is fierce in the office printer market and fixed costs are high (for sales, maintenance, and development teams). The company is focusing on profits rather than chasing sales and is trying to shift its focus to professional printing, including design, advertising, distribution, and medical markets, but this will require it to review its sales channels. Further, the company’s factories in Thailand and Shenzhen China are suited to the current production levels, so a sudden adjustment in production would be difficult.
Inadequate management structures overseas Problems remain in management structures overseas––including improper accounting at a Spanish subsidiary and substantial uncollected accounts receivable in China. In addition, the number of affiliates has increased both inside and outside Japan as the OKI worked to expand operations, causing the parent’s guarantee on group companies’ loans and other debts to increase 50% YoY in FY03/19. OKI is considering countermeasures to strengthen the management structure of group companies.
Weak balance sheet Restructuring over the years (associated extraordinary losses of around JPY120bn since FY03/00 including JPY22.4bn in losses due to revising retirement benefit schemes) led the shareholders’ equity ratio to fall to as low as 10% in FY03/11. Subsequently, earnings recovery, yen depreciation, and the lowering of restructuring expenses saw the equity ratio improve to 28.5% in FY03/20, but the company still had more than JPY90.0bn in interest-bearing debt. It expects further capital demands to expand businesses and reorganize the Printers segment.
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Historical results and financial statements Income statement
Income statement FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 (JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Sales 432,651 423,480 455,824 483,112 540,153 490,314 451,627 438,026 441,452 457,223 YoY -2.3% -2.1% 7.6% 6.0% 11.8% -9.2% -7.9% -3.0% 0.8% 3.6% Cost of sales 318,793 316,939 337,406 354,635 399,647 361,250 337,393 327,450 322,624 339,415 Gross profit 113,858 106,541 118,417 128,477 140,506 129,064 114,233 110,576 118,827 117,807 YoY -6.1% -6.4% 11.1% 8.5% 9.4% -8.1% -11.5% -3.2% 7.5% -0.9% Gross profit margin 26.3% 25.2% 26.0% 26.6% 26.0% 26.3% 25.3% 25.2% 26.9% 25.8% SG&A expenses 107,549 94,560 104,942 101,281 108,090 110,469 111,688 102,854 101,305 100,978 SG&A ratio 24.9% 22.3% 23.0% 21.0% 20.0% 22.5% 24.7% 23.5% 22.9% 22.1% Operating profit 6,308 11,980 13,475 27,196 32,415 18,594 2,545 7,721 17,522 16,829 YoY -3.1% 89.9% 12.5% 101.8% 19.2% -42.6% -86.3% 203.4% 126.9% -4.0% Operating profit margin 1.5%2.8%3.0%5.6%6.0%3.8%0.6%1.8%4.0%3.7% Non-operating income (expenses) 1,108 1,046 9,442 12,176 8,092 1,180 1,181 3,564 2,419 3,109 Non-operating expenses 5,287 4,112 3,003 2,522 2,357 8,364 6,558 2,770 4,464 6,135 Recurring profit 1,166 9,075 20,304 36,655 37,928 11,366 -2,366 8,515 15,477 13,804 YoY -11.7% 678.3% 123.7% 80.5% 3.5% -70.0% -120.8% -459.9% 81.8% -10.8% Recurring profit margin 0.3%2.1%4.5%7.6%7.0%2.3%-0.5%1.9%3.5%3.0% Extraordinary gains 10,888 4,346 3,461 1,102 225 2,134 21,602 2,512 2,396 10,510 Extraordinary losses 42,176 7,828 5,131 5,995 621 1,811 5,563 2,900 6,8554,663 Income taxes 1,619 3,411 4,762 4,214 5,365 6,412 9,235 2,344 2,585 5,529 Implied tax rate -5.4% 61.0% 25.6% 13.3% 14.3% 54.9% 67.5% 28.8% 23.5% 28.1% Net income attrib. to non-controlling interests 68 627 273 187 -924 -1,332 -254 -108 27 35 Net income -31,809 1,555 13,599 27,359 33,091 6,609 4,691 5,891 8,405 14,086 YoY 729.2% -104.9% 774.5% 101.2% 21.0% -80.0% -29.0% 25.6% 42.7% 67.6% Net margin -7.4%0.4%3.0%5.7%6.1%1.3%1.0%1.3%1.9%3.1% Source: Shared Research based on company data Figures may differ from company materials due to differences in rounding methods.
▷ Large drops in sales in FY03/16 and FY03/17: In FY03/16, in Mechatronics Systems, OKI faced difficulty collecting accounts receivable from a Chinese partner distributing ATMs, and in FY03/17, it booked JPY10.9bn in provision for doubtful accounts,
causing the segment to fall into the red.
▷ Operating profit up since FY03/18: Operating profit increased on the success of restructuring in the various segments. Particularly helpful were the move to end dependence on China and expand operations in emerging markets, along with restructuring of Mechatronics Systems to optimize business scale. In FY03/19 this thrust gathered more steam, helping the Brazilian subsidiary get out of the red. In FY03/20, OKI had planned on companywide business reform, but it ended up with a minor decline in profit due to the COVID-19 pandemic.
Factors in variations in operating profit
(JPYbn) Changes in volume and product mix Price declines Procurement cost reductions and value engineering Forex Fixed costs Others Semiconductors Corrections in Printers business Operating profit 30.0
20.0 20.0
8.0 10.0 1.0 2.7 3.5 3.5 5.0 3.5 4.0 1.0 3.0 3.5 3.5 10.0 5.5 3.0 4.5 2.5 6.5 2.0 1.5 1.5 2.5 2.5 2.5 2.0 0.0 -2.0 -2.5 -3.0 -1.0 -2.5 -2.5 -5.0 -2.5 -3.5 -3.0 -7.5 -12.5 -3.5 -0.4 -4.0 -10.0 -2.0 -2.5 -25.0 -3.0
-20.0 -4.0
-30.0 -10.0 FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 Source: Shared Research based on company data
▷ Forex impact: Mechatronics Systems and Printers are particularly susceptible to forex fluctuations. The impact of foreign exchange rates on operating profit is as follows: a JPY1 appreciation against the EUR decreases operating profit by around JPY300mn, and against the USD increases operating profit by around JPY300mn. If the euro and the dollar move in tandem, the impact is essentially canceled out.
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Balance sheet
Balance sheet FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 (JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. ASSETS Cash and deposits 45,959 45,193 29,904 46,901 53,632 47,829 54,164 48,698 29,730 49,227 Notes and accounts receivable 113,729 112,137 123,886 133,383 137,895 135,910 101,572 97,936 106,672 111,314 Operational investment securities Inventories 64,943 68,226 74,961 85,284 86,054 79,468 62,581 60,204 64,607 52,211 Others 43,437 53,661 19,209 15,135 14,341 15,987 15,112 18,037 22,454 24,356 Allowance for doubtful accounts -1,150 -12,325 -7,600 -8,684 -7,940 -8,314 -7,377 -132 -257 -382 Total current assets 273,064 273,888 246,994 278,522 293,629 277,630 231,506 224,743 223,206 236,726 Total tangible fixed assets 53,134 52,592 57,829 56,193 57,176 56,691 44,783 52,048 49,393 51,428 Total intangible fixed assets 7,791 7,026 7,655 9,600 10,240 9,637 10,891 9,952 10,457 11,288 Investment securities 28,845 26,418 28,570 32,634 38,432 32,604 49,576 48,760 43,621 34,694 Long-term loans Others 11,848 9,314 9,209 36,390 40,699 36,030 35,939 50,930 58,201 56,322 Allowance for doubtful accounts -2,492 -1,175 -936 -828 -820 -818 -11,971 -19,924 -19,376 -17,989 Investments and other assets 38,201 34,557 36,843 68,196 78,311 67,816 73,544 79,766 82,446 73,027 Total fixed assets 99,127 94,176 102,328 133,991 145,728 134,145 129,218 141,768 142,296 135,744 Total assets 372,192 368,065 349,322 412,514 439,358 411,776 360,724 366,512 365,503 372,471 LIA BILITIES Notes and accounts payable 53,923 66,307 63,416 73,312 79,053 65,477 58,685 67,124 67,465 61,714 Short-term debt 118,063 76,635 75,192 104,478 63,329 72,692 56,882 58,958 48,880 35,415 Income taxes payable Others 51,123 71,413 58,521 64,482 69,198 60,993 60,992 60,579 59,849 62,811 Total current liabilities 223,109 214,355 197,129 242,272 211,580 199,162 176,559 186,661 176,194 159,940 Long-term debt 37,828 63,604 48,958 19,438 48,740 55,118 37,264 31,906 41,599 57,727 Deferred tax assets 0 0 1,942 18,307 19,340 13,742 14,683 11,782 9,945 9,784 Others 51,351 48,853 44,667 40,577 38,282 36,368 35,002 34,017 37,564 38,579 Total fixed liabilities 89,179 112,457 95,567 78,322 106,362 105,228 86,949 77,705 89,108 106,090 Total liabilities 312,288 326,813 292,697 320,595 317,943 304,391 263,509 264,367 265,302 266,030 NET ASSETS Capital stock 44,000 44,000 44,000 44,000 44,000 44,000 44,000 44,000 44,000 44,000 Capital surplus 113,124 21,554 21,554 21,554 21,554 21,673 19,799 19,795 19,057 19,047 Retained earnings -90,536 -20,968 -7,788 18,382 41,989 44,255 44,434 45,983 51,785 60,847 Treasury stock -23 -38 -399 -432 -453 -468 -477 -563 -997 -971 Shareholders' equity 66,565 44,548 57,367 83,504 107,090 109,460 107,756 109,215 113,845 122,923 Valuation difference on marketable securities -1,988 -1,815 2,192 4,333 8,291 4,642 5,337 6,578 2,816 -218 Foreign currency translation adjustments -4,238 -632 -2,829 -10,358 -10,433 -12,835 -11,702 -12,203 -10,884 -9,029 Others -7,132 -3,343 -1,215 5,310 12,616 -2,648 -10,783 -8,944 -13,771 -16,547 Non-controlling interests 470 46 473 3,104 1,708 572 242 1,873 126 64 Total net assets 59,903 41,251 56,625 91,918 121,414 107,384 97,215 102,144 100,200 106,440 Total liabilities and net assets 372,192 368,065 349,322 412,514 439,358 411,776 360,724 366,512 365,503 372,471 Working capital 124,749 114,056 135,431 145,355 144,896 149,901 105,468 91,016 103,814 101,811 Total interest-bearing debt 155,891 140,239 124,150 123,916 112,069 127,810 94,146 90,864 90,479 93,142 Net debt 109,932 95,046 94,246 77,015 58,437 79,981 39,982 42,166 60,749 43,915 Source: Shared Research based on company data Figures may differ from company materials due to differences in rounding methods.
▷ Asset size: Sales expanded from FY03/13 to FY03/15 on contributions from Mechatronics Systems. Excluding FY03/14–FY03/16, when that impact was felt, total assets have been stable in the JPY350–400bn range.
▷ Working capital: OKI has focused on improving its balance sheet since FY03/10, and has worked to recover accounts receivable and reduce inventories. The cash conversion cycle (CCC; number of days between procurement and receipt of cash from sales) has improved as a result. In FY03/16, there was an impact from the uncollected accounts receivable in China, after which in FY03/17, OKI undertook a structural review of its inventory position. As an example, the company has reduced small-scale storage locations used to hold inventories, and expanded its factory truck yards to increase direct deliveries from the factory. It has also arranged kitting locations for externally procured products. In the Printers segment, shipment of products from factories in Thailand and China ship to their destinations (Europe, US) causes around one month of seaborne inventory, so OKI is working to reduce inventories through improvement in supply chain management. In FY03/19, the company allocated cash on hand to cover the need for more working capital that arose from sales growth.
▷ Allowance for doubtful accounts: In FY03/17, OKI provisioned for an allowance for doubtful accounts to cover the uncollected accounts receivable at Yihua Computer Industrial; since that time the level of allowance for doubtful accounts has remained unchanged.
▷ Interest-bearing debt: OKI has been shrinking its debt for the past 10 years. Until about FY03/13, it maintained net debt of about JPY100.0bn, but from FY03/16 onward, OKI raised the pace of restructuring efforts and changed its focus from
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expanding operations to profitability. In FY03/19, making OKI Electric Cable a wholly owned subsidiary was a factor for debt increase, but in FY03/20 as well OKI continued to focus on cultivating the market for the ICT segment, while also searching for a direction for Mechatronics Systems and Printers in light of paperless and cashless trends.
Net debt
(JPYbn) (JPYbn) Short-term debt and CPs Long-term debt Net debt (a; right axis) Cash and cash equivalents Net debt Non-operating financial expenses (b) 200 172 b / a (average of beginning and end of year) 300 152 5 150 136 121 119 122 108 106 78 90 93 100 87 82 0 83 64 64 71 63 200 30 23 42 58 50 74 66 54 56 55 57 59 -5 45 51 49 35 0 36 30 100 51 54 48 54 49 49 75 80 50 81 -10
100 -15 0
Source: Shared Research based on company data
Cash conversion cycle
Accounts receivable days Days in inventory Accounts payable days Working capital efficiency 360 320 280 71 240 68 63 84 200 82 74 77 82 78 77 70 76 69 160 77 119 113 108 109 113 120 102 100 106 81 79 80 80 40 98 101 100 94 97 92 102 96 83 85 87 0 -40 -61 -62 -69 -70 -70 -70 -73 -67 -80 -120 FY03/10 FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20
Source: Shared Research based on company data
Shareholders’ equity
(JPYbn) Capital stock Capital surplus Retained earnings Treasury stock Foreign currency translation adjustments Remeasurements of defined benefit plans Other valuation and translation adjustments Shareholders' equity Equity ratio (right axis) 200 35% 160 30% 120 25% 80 40 20%
0 15% -40 Issued preferred stock and raised JPY30bn in Dec. 10% -80 2010. All the preferred shares were converted to common stock in FY03/15, increasing the number of 5% -120 shares issued by 140,737,358. -160 0% FY03/10 FY03/12 FY03/14 FY03/16 FY03/18 FY03/20
Source: Shared Research based on company data
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Cash flow statement
Cash flow statement FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 (JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cash flows from operating activities (1) 1,588 22,791 -11,619 31,868 40,999 -3,573 41,967 15,578 6,364 32,547 Pretax profit -30,122 5,593 18,634 31,762 37,532 11,689 13,673 8,128 11,018 19,651 Depreciation 14,095 12,680 13,021 14,249 14,464 14,382 13,991 12,978 12,367 12,574 Change in accounts receivable -12,563 7,418 3,487 5,009 8,693 -8,743 30,440 5,576 -6,823 -6,629 Change in inventories -3,478 -3,079 -1,307 -371 3,905 3,539 15,515 3,296 -4,529 11,098 Change in accounts payable 4,046 11,018 -17,963 -3,075 -8,906 -4,784 -1,040 7,593 -418 -2,999 Cash flows from investing activities (2) -4,423 -9,392 -9,214 -13,977 -18,583 -13,762 7,588 -10,485 -12,099 -2,972 Purchase of tangible fixed assets -6,535 -8,757 -11,881 -7,771 -10,598 -11,598 -8,773 -6,801 -9,486 -11,840 Purchase of intangible fixed assets -2,237 -2,282 -2,977 -3,664 -3,931 -2,630 -5,194 -2,638 -3,908 -4,441 Purchase, sale, and redemption of investment securities 797 2,552 4,809 446 319 2,680 3,081 229 1,726 8,941 Change in loans (short- and long-term; net) Free cash flow (1+2) -2,835 13,399 -20,833 17,891 22,416 -17,335 49,555 5,093 -5,735 29,575 Cash flows from financing activities 11,204 -17,535 -21,093 -4,270 -20,724 11,138 -43,985 -11,512 -12,971 -9,224 Change in short-term borrowings 8,795 -20,405 571 -2,056 -12,442 6,622 -13,360 -598 -6,896 -8,734 Change in long-term borrowings -27,782 4,696 -18,542 -772 -1,177 9,288 -22,418 -3,894 2,899 8,364 Acquisition of treasury stock Dividends paid 0 0 -1,321 -1,032 -4,917 -4,314 -4,317 -4,322 -2,601 -4,307 Source: Shared Research based on company data Figures may differ from company materials due to differences in rounding methods.
▷ Expansion of Mechatronics Systems: In FY03/13 free cash flows declined, but this was due to a decrease in operating cash flows brought on by efforts to expand the Mechatronics Systems business around that time. In FY03/15, the Brazilian subsidiary was newly consolidated.
▷ Impact of ATM business in China: In FY03/16, Oki’s ATM business in China became unsettled when the company faced difficulty collecting accounts receivable from a major Chinese distributor Yihua Computer Industrial. In the ICT segment, there
was a drop off in demand for existing carrier networks and for fire department wireless digitalization, and operating cash flows fell as performance stagnated. Operating cash flows recovered in FY03/17 as the company provisioned for doubtful accounts associated with the ATM business in China in FY03/16.
▷ Structural reform largely completed for now: Since FY03/18, the ICT business has been solid, particularly in Japan, and the structural reform of Mechatronics Systems and Printers has proceeded, so operating cash flows have been robust. In FY03/19, OKI made OKI Electric Cable a wholly owned subsidiary, increasing the cash flows used in investing activities, but such use of cash shrank substantially in FY03/20.
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Historical results
1H FY03/21 results (out October 29, 2020)
1H FY03/21 results (April‒September 2020)
▷ Sales: JPY173.5bn (-20.5% YoY) ▷ Operating loss: JPY2.6bn (JPY5.2bn operating profit in 1H FY03/20) ▷ Recurring loss: JPY3.2bn (JPY2.9bn recurring profit in 1H FY03/20) ▷ Net loss*: JPY5.4bn (JPY4.1bn net loss in 1H FY03/20)
*Net loss attributable to owners of the parent
▷ Background behind decrease in sales: Both the Solution Systems and Components & Platforms segments posted lower sales. In the Solution Systems segment, 1H sales (to external customers) declined by JPY20.1bn YoY due to lower demand from customers affected by the COVID-19 pandemic and the absence of large telecom network projects and major replacement projects for government agencies that boosted sales in 1H FY03/20. In the Components & Platforms segment, sales were also down by JPY20.6bn mainly due to the sale of the Brazilian subsidiary and weak sales in overseas markets, especially printers in Europe, impacted by the COVID-19 pandemic. ▷ Background behind decline in operating profit: The main reason for the slump in profit is the sharp 20.5% YoY sales decline. Gross profit fell 23.5% YoY and the GPM was down 4.0pp YoY to 22.3%. SG&A expenses were reduced by 10.5% YoY to JPY43.9bn, but because of lower sales, the SG&A expense ratio rose 2.8pp YoY to 23.9%. As a result, the company posted an
operating loss. The company’s estimate of the negative impact of the COVID-19 outbreak is roughly JPY16.5bn for sales and JPY5.0bn for operating profit. ▷ The company changed its reportable segments from Q1 FY03/21. The three new segments are Solution Systems, Components & Platforms, and Others.
Results by segment Solution Systems segment
▷ 1H FY03/21 sales (sales to external clients; also applies to figures below): JPY83.5bn (-19.4% YoY) ▷ Segment profit: JPY4.0bn (-29.1% YoY) ▷ In 1H FY03/21, the segment recorded a double-digit sales decline due in part to the absence of telecom network projects and large projects for government agencies that expanded in 1H FY03/20 and FY03/21 being the first year under the expanded scope of application of the percentage of completion method. However, the pace of sales decline narrowed by 9.7pp to 14.5% in Q2 from 24.2% in Q1. The company commented that although transportation-related business was weak due to impact of the COVID-19 pandemic, telecommunications-related business was stronger than expected, thanks in part to the start of 5G services in Japan, and network construction-related inquiries have been brisk. The company estimates that the impact of the pandemic in 1H was JPY2.5bn on sales and JPY700mn on operating profit.
Components & Platforms segment
▷ 1H FY03/21 sales: JPY87.8bn (-19.0% YoY) ▷ Segment loss: JPY3.6bn (JPY3.1bn profit in 1H FY03/20) ▷ Factors contributing to sales decline: Although the domestic market was relatively stable, equipment sales (such as printers and automated equipment) slumped as overseas markets remained affected by the spread of COVID-19. As a result, 1H sales were
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down 19.0% YoY to JPY87.8bn. The COVID-19 pandemic continues to impact on the overseas business. By region, Europe (the company’s main printer market) is seeing a second wave of infections and there is no major change to the COVID-19 situation in India, which has large demand for automated equipment such as ATMs. ▷ Factors contributing to profit decline: Sales of printers and profitable printer consumables remain subdued in Europe, which is the company’s main printer market, and there are no signs of improvement in sales for automated equipment in Asia. With structural reforms mainly of the three hardware-based businesses still in progress, the sales mix has yet to improve and cost reduction measures yet to take effect, so operating losses continued through Q2.
Others
▷ 1H FY03/21 sales: JPY2.2bn (-64.6% YoY) ▷ Segment loss: JPY133mn (JPY26mn loss in 1H FY03/20)
Q1 FY03/21 results (out July 30, 2020)
Q1 FY03/21 results (April‒June 2020)
▷ Sales: JPY81.4bn (-24.4% YoY)
▷ Operating loss: JPY1.1bn (versus JPY1.1bn profit in Q1 FY03/20)
▷ Recurring loss: JPY2.1bn (versus JPY149mn profit in Q1 FY03/20)
▷ Net loss*: JPY3.3bn (versus JPY369mn net loss in Q1 FY03/20)
*Net loss attributable to owners of the parent
▷ The decline in Q1 consolidated sales was driven in large part by a sharp drop in sales at the company’s mainstay Solution Systems segment from elevated levels in Q1 FY03/20, when sales were bolstered by the completion of a number of large-scale projects, including large telecom network projects and equipment replacement projects for government agencies. The decline
was further aggravated by the sale of the company group’s Brazilian subsidiary and weak sales overseas amid the COVID-19 pandemic, with the company putting the estimated impact on sales from the pandemic at JPY11bn, JPY3bn of this in Japan and JPY8bn overseas.
▷ The swing to an operating loss in Q1 FY03/21 from a profit in Q1 FY03/20 was driven by the double-digit decline in sales coupled with JPY5.5bn in additional costs resulting from changes in its equipment lineup, with these added costs being offset in part by reductions in costs elsewhere, including some JPY3.0bn worth of cuts in fixed costs and JPY500mn in savings from reductions in procurement costs and value engineering. The company put the estimated impact on operating profit from the pandemic at roughly JPY2bn, JPY800mn of this in Japan and JPY1.2bn overseas.
▷ The OKI group changed its reporting segment scheme starting in Q1 FY03/21, with its old Information and Communication Technology (ICT) segment becoming the new Solution Systems segment, and its old Mechatronics Systems segment, Printer segment, and Electronics Manufacturing Services (EMS) segment being merged to form the new Components & Platforms segment. Together with the Other segment, the company now has a total of three reporting segments.
Results by segment Solution Systems segment
▷ Q1 segment sales (to external clients; same below) of JPY40.0bn were down 24.2% YoY and segment operating profit of JPY1.7bn was down 31.5% YoY.
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▷ The JPY12.8bn YoY decline in segment sales reflected a number of factors, chief among which were the expanded application of percent-of-completion accounting, which reduced sales by roughly JPY10.0bn YoY, and the dropout of revenues from the completion of several large projects that were booked to sales in Q1 FY03/20 (including telecom network projects and large projects for government agencies). Compared with FY03/20, the company said the orders and sales this year come from a large number of small and medium-sized projects (mainly social infrastructure, network, and IT platform projects for private sector companies and public sector entities) rather than a handful of large projects as was the case last year. The company said that all the large projects in FY03/20 actually make the year an outlier, and that the solid trend in operating environment in recent years is evident if FY03/20 is excluded from the picture. With regard to the profitability of projects currently underway, the company reports that it is not seeing any money-losing projects nor is it seeing any projects where it looks like there will be cost overruns. With regard to the impact of the pandemic, the company put the hit to Q1 sales at roughly JPY2bn and the hit to operating profit around JPY500mn, with most of this resulting from delays in the delivery of transportation-related systems that had been expected to be finalized in Q1 but were pushed out into Q2 and subsequent quarters. Components & Platforms segment
▷ Q1 segment sales of JPY40.0bn were down 22.6% YoY; Q1 segment operating profit of JPY1.7bn compares with a profit of JPY339mn in Q1 FY03/20.
▷ The JPY11.7bn YoY decline in segment sales was due in large part to the JPY9bn hit to segment sales attributed to the novel coronavirus pandemic. Overseas sales suffered the most, the hit from the pandemic estimated at some JPY8bn as bidding on contracts in much of Asia was put on hold and demand for printer-related consumables fell in Europe, one of OKI’s biggest
markets. By business line, overseas sales at the segment’s electronics manufacturing services business were basically flat YoY but were down at both its printer business and mechatronics systems business (ATMs and other automated equipment). Domestic sales took a much lighter blow, the pandemic reducing Q1 sales by about JPY1bn, with much of this resulting from
delays in the delivery of some automated equipment orders, which were pushed out into Q2 and subsequent quarters.
▷ The swing from the Q1 FY03/20 operating profit of JPY339mn to a JPY1.7bn operating loss represents a YoY decline of just over JPY2.0bn. This punishing hit to the segment earnings was attributable in part to the less-profitable sales mix resulting from the decline in sales of high-margin printer consumables in Europe. The company put the hit to segment sales from the pandemic at JPY1.5bn, JPY300mn of this in Japan and JPY1.2bn overseas.
Others
▷ Q1 segment sales of JPY1.4bn were down 57.3% YoY; the segment operating profit of JPY46mn compares with a Q1 FY03/20 loss of JPY117mn.
▷ The sharp drop in sales and the swing to an operating profit reflects in part the sale of its subsidiary in Brazil, previously included under the old Mechatronics Systems segment.
Full-year FY03/20 results (out May 13, 2020)
Full-year FY03/20 results (April 2019‒March 2020)
▷ Sales: JPY457.2bn (+3.6% YoY)
▷ Operating profit: JPY16.8bn (-4.0% YoY)
▷ Recurring profit: JPY13.8bn (-10.8% YoY)
▷ Net income*: JPY14.1bn (+67.6% YoY)
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*Net income attributable to owners of the parent
▷ Background behind increase in sales: The Information and Communication Technology (ICT) business, the largest segment, drove overall growth with a 24.3% increase in sales. Sales fell in the Mechatronics Systems, Printers, and Electronics Manufacturing Services (EMS) segments. The ICT segment benefited from the expansion of projects related to social infrastructure and telecom networks, as well as from the increased adoption of the percentage of completion method especially in government agency projects. The switch to the percentage of completion method boosted sales by around JPY6.0bn and operating profit by around JPY2.0bn.
▷ Background behind decline in operating profit: Although the ICT segment saw a significant increase in sales and profit, in Mechatronics Systems, profit declined, reflecting reduced operation at the Shenzhen China plant due to the impact of the novel coronavirus outbreak. Operating profit was also affected by lower sales in the Printers segment and the impact of yen appreciation against the euro.
Results by segment ICT segment
▷ FY03/20 sales (sales to external clients; also applies to figures below): JPY229.1bn (+24.3% YoY)
▷ Operating profit: JPY20.8bn (+42.0% YoY)
▷ Factors contributing to sales growth: Road traffic/disaster prevention wireless radio and other social infrastructure-related projects and telecom carrier network buildout projects helped boost sales. Additionally, wider adoption of the percentage of completion method also boosted sales, especially for government agency business.
▷ Factors contributing to profit growth: Profit growth was underpinned by steady sales growth. The operating margin improved 1.1pp thanks to an increase in contracts in fields where the company has an established track record, such as social infrastructure, as well as a decline in unprofitable projects.
Mechatronics Systems segment
▷ FY03/20 sales: JPY70.7bn (-14.5% YoY)
▷ Operating loss: JPY296mn (versus operating profit of JPY82 in FY03/19)
▷ Factors contributing to sales decline: The YoY sales decline reflects the winding down of contributions from a large domestic cash-handling machine project and reduced operation at the Shenzhen China plant due to the spread of the novel coronavirus pandemic. According to management, aside from the absence of large orders for cash-handling machines in FY03/20, other business had about the same volume of activity as the previous year.
▷ Factors contributing to profit decline: Despite the positive impact of restructuring at overseas subsidiaries carried out in FY03/19, profit decreased as a result of reduced operation at the Shenzhen China plant as described above.
▷ The COVID-19 pandemic hurt segment sales by around JPY4.0bn and its operating profit by around JPY1.2mn, mostly due to downtime at the Shenzhen plant in China.
Printers segment
▷ FY03/20 sales: JPY92.3bn (-10.0% YoY)
▷ Operating profit: JPY2.8bn (-51.7% YoY)
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▷ Factors contributing to sales decline: Lower sales of office printers in Europe, as well as the yen’s appreciation against the euro, which exacerbated the drop in revenue.
▷ Factors contributing to profit decline: Lower sales and the yen’s appreciation against the euro, which caused a slide in profit throughout the year. The operating margin shrank 2.6pp YoY to 3.0%.
EMS segment
▷ FY03/20 sales: JPY59.8bn (-9.7% YoY)
▷ Operating profit: JPY2.1bn (-44.4% YoY)
▷ Factors contributing to sales decline: Sluggish factory automation and semiconductor-related sales due to lower demand from corporate customers, as well as delays in procurement of some materials.
▷ Factors contributing to profit decline: Lower sales volume as a result of sales decline, with the operating margin shrinking 2.1pp YoY to 3.5%.
Other segment
▷ FY03/20 sales: JPY5.4bn (-4.9% YoY)
▷ Operating profit: JPY389mn (-54.5% YoY)
Q3 FY03/20 results (out February 7, 2020)
Cumulative Q3 FY03/20 results (April 2019‒December 2019)
▷ Sales: JPY327.9bn (+9.5% YoY)
▷ Operating profit: JPY9.1bn (+83.1% YoY)
▷ Recurring profit: JPY7.3bn (+160.2% YoY)
▷ Net income*: JPY7.2bn (net loss of JPY1.6bn in Q3 FY03/19)
*Net income attributable to owners of the parent
▷ Background behind increase in sales: The Information and Communication Technology (ICT) segment drove overall sales and operating profit performance. Meanwhile, sales decreased in the Mechatronics Systems, Electronics Manufacturing Services (EMS), and Printers segments. The ICT segment’s strong performance was driven by network buildout for telecom carriers, road traffic/disaster prevention wireless radio systems and other social infrastructure-related projects for government agencies, and increased adoption of the percentage of completion method in projects. These factors contributed JPY 21.9bn of the JPY28.5bn expansion in cumulative Q3 sales and JPY3.4bn of the JPY4.1bn increase in operating profit.
▷ Background behind increase in operating profit: The biggest contributing factor was the strong sales and profit growth in the ICT segment. ICT sales were boosted by the above change in the standard for posting sales as well as actual sales growth. Despite a decline in Mechatronics Systems segment sales, segment profit turned to the black thanks to restructuring efforts centering around foreign subsidiaries.
Results by segment ICT segment
▷ Cumulative Q3 FY03/20 sales (sales to external clients; also applies to figures below): JPY157.3bn (+44.2% YoY)
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▷ Operating profit: JPY11.1bn (+235.9% YoY)
▷ Factors contributing to sales growth: Road traffic/disaster prevention wireless radio and other social infrastructure-related projects and telecom carrier network buildout projects helped boost sales. Additionally, continued wider adoption of the percentage of completion method in Q3 also resulted in higher sales. The change in method accounted for JPY21.9bn of the increase in cumulative Q3 sales and JPY3.4bn of the growth in operating profit. Other factors contributed about JPY26.3bn to sales growth, the biggest contribution coming from growth in orders for social infrastructure–related projects, including public transportation and disaster prevention related projects.
▷ Factors contributing to profit growth: The substantial improvement in profit was fueled by the above noted change in the method for posting sales as well as actual growth in sales. Cumulative operating profit in the ICT segment was up JPY7.8bn YoY, with the change in method accounting for JPY3.4bn and increased orders about JPY4.4bn. Considering that order growth accounted for more than half the overall increase in operating profit, Shared Research understands that most of the additional orders were from existing projects and thus did not add much to fixed costs. Accordingly, profits grew sharply.
Mechatronics Systems segment
▷ Cumulative Q3 FY03/20 sales: JPY53.6bn (-10.2% YoY)
▷ Operating profit: JPY340mn (loss of JPY1.3bn in Q3 FY03/19)
▷ Factors contributing to sales decline: The YoY sales decline reflects the winding down of contributions from a large domestic cash-handling machine project in FY03/19. However, sales to overseas markets were strong on a volume-basis.
▷ Factors contributing to improvement in profit: The return to the black in cumulative Q3 reflects the positive impact of restructuring efforts at foreign subsidiaries in FY03/19. This restructuring focused on structural reforms including the
concentration in core businesses and the optimization of human resources, especially in Brazil. The resulting expenses were recorded as an extraordinary loss of JPY3.5bn at the end of the previous fiscal year.
Printers segment
▷ Cumulative FY03/20 sales: JPY69.5bn (-9.3% YoY)
▷ Operating profit: JPY2.2bn (-52.5% YoY)
▷ Factors contributing to sales decline: Q3 sales reflected the fall in domestic sales following the surge in sales ahead of the consumption tax hike. The decline in sales was particularly noticeable for cartridges and other products with strong profit margins. Overseas, sales were weak due to sluggish sales activities and the emergence of new competitors in the mainstay European office printer market. The yen’s appreciation against the euro also negatively affected sales.
▷ Factors contributing to profit decline: Lower sales and the yen’s appreciation against the euro weighed heavily on cumulative Q3 profit. Looking at the three months of Q3 alone, operating profit was JPY77mn, nearly a breakeven level figure.
EMS segment
▷ Cumulative Q3 FY03/20 sales: JPY46.2bn (-6.1% YoY)
▷ Operating profit: JPY1.1bn (-60.4% YoY)
▷ Factors contributing to sales decline included sluggish factory automation and semiconductor related sales as well as delays in procurement of some materials owing to water damage caused by typhoons.
▷ Factors contributing to profit decline: Lower sales reduced capacity utilization and raised the burden of fixed costs.
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Other segment
▷ Cumulative Q3 FY03/20 sales: JPY4.2bn (-9.2% YoY)
▷ Operating profit: JPY364mn (-52.4% YoY). The large profit drop in Q3 was due to the decline in sales to external customers.
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Other information
News and topics November 2020 On November 10, 2020, the company announced its entry into the Japanese market for machine-learning development support services using FPGAs through an alliance with France’s Mipsology SAS.
The company announced that OKI IDS Co., Ltd. (OIDS), an OKI group company, has teamed with Mipsology SAS (head office: Palaiseau, France), which provides the Zebra neural network machine learning accelerating software for use with field-programmable gate arrays (FPGAs, a type of programmable logic device). The partners today announced the signing of a technical partnership agreement on October 20, 2020, with the stated goal of entering the Japanese high-speed machine learning (ML)-based image processing market.
OIDS offers intellectual property for FPGAs as well as design and development services related to high-speed image transmission and communication processing, primarily in Japan, while Mipsology provides acceleration platforms for ML processing, mainly in Europe and the US. With the signing of the agreement, the companies will launch design and development services to support acceleration of ML processing using FPGA technology in Japanese markets that require high-speed image processing, including autonomous driving, remotely controlled robots, telemedicine, and video monitoring.
While ML developments to date have centered on CPUs/GPUs, ML applications that require real-time capabilities are driving demand for faster processing. FPGAs are devices capable of performing complex arithmetic processing in parallel for high-speed processing of large volumes of data. Running ML programs on FPGAs can increase processing speeds by 6x or more (compared to current OIDS’s ML programs).
The agreement will enable both companies to offer services that accelerate ML processing by running ML programs on FPGAs. OIDS will install and optimize client ML programs on FPGAs using Mipsology’s Zebra platform to meet customer performance requirements with short lead times. Through this partnership, the company will seek to meet demand for faster ML programs, a market expected to see future growth in Japan, by providing edge AI devices (AI designed to run locally, at actual sites).
October 2020 On October 29, 2020, the company announced revisions to its consolidated FY03/21 earnings forecast.
Revised consolidated FY03/21 earnings forecast Sales: JPY405.0bn (unchanged from previous forecast) Operating profit: JPY8.5bn (unchanged) Recurring profit: JPY8.0bn (previously undetermined) Net income*: JPY1.0bn (previously undetermined) EPS: JPY11.55 (previously undetermined) *Net income attributable to owners of the parent
Reasons for revision The company had previously left some items in its FY03/21 earnings forecast undetermined as it was reviewing structural reform measures to deal with the rapidly evolving changes to the business environment brought about by the spread of COVID-19. The announcement unveiled the previously undetermined recurring profit and net income estimates in light of recent performance trends and the impact of structural reform efforts in the wake of the review. The company left its sales and operating profit estimates unchanged.
On the same day, the company announced its three-year plan covering FY03/21–FY03/23, Medium-Term Business Plan 2022.
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On the same day, the company announced the absorption-type merger of a consolidated subsidiary.
OKI announced that it had decided to execute an absorption-type merger with its consolidated subsidiary Oki Data Corporation. The merger is one of the structural reform measures based on Medium-Term Business Plan 2022 announced the same day.
On October 28, 2020, the company announced the merger of two design manufacturing services (DMS) companies.
The company announced that it will integrate Oki Communication Systems Co., Ltd. (“OCM”) and Nagano Oki Electric Co., Ltd. (“NOK”), which are engaged in the DMS business, and will establish a new company on April 1, 2021. In this merger, OCM will be the surviving company and NOK will be absorbed.
Both companies are operating DMS business in the fields of infrastructure, industry, and medical devices. Through the merger, OKI plans to strengthen its business foundation and expand its business scale through integrating sales and technological resources, improving efficiency of investment in robots and AI for more advanced production, and optimizing its manufacturing capabilities by leveraging the strengths of its production bases. As such, the company aims to enhance its technical capabilities through effectively utilizing its design resources, shorten the period for design and development, and strengthen its DMS business which benefits from consistent contract work from the upstream design stage through to equipment manufacturing.
On October 19, 2020, Oki Electric Industry Co., Ltd. (OKI) announced that it will strengthen its competitiveness by merging two operating companies responsible for printed circuit boards.
The company indicated that it will merge two operating companies responsible for printed circuit boards (PCBs), OKI Circuit Technology Co., Ltd. (OTC; located in Tsuruoka, Yamagata Prefecture) and OKI Printed Circuits Co., Ltd. (OPC; located in Joetsu, Niigata Prefecture), and establish a new company on April 1, 2021.
Through this merger, OTC, as the surviving company, will absorb OPC. By integrating these two companies, which are both operating businesses that produce multi-layered, high-quality PCBs, the company aims to integrate and optimize their sales, technology, and manufacturing resources and thereby strengthen the foundations for, and the size of, its own business. OTC has high technical capabilities that enable it to fulfill special requirements associated with devices such as advanced heat-dissipating circuit boards with heat resistant reinforcement that protect against damage from heat-generating components and highly bendable flex rigid circuit boards. It is characterized by its small-volume production of many product types used in fields such as aerospace and in communication base station, the high quality of these products, and its ability to deliver these products quickly. Meanwhile, OPC manufactures PCBs used in devices such as semiconductor inspection equipment and high-speed data transmission devices using sophisticated multi-layer lamination and fine drilling technologies, as well as various simulation technologies.
August 2020 On August 18, 2020, the company announced the details of incentive stock options (stock acquisition rights).
The company announced that on the same day, it decided on the details of the issuance of stock acquisition rights to be allotted as incentive stock options as announced on July 30, 2020.
▷ Title: FY2020 Oki Electric Industry Co., Ltd. Stock Acquisition Rights
▷ Position and number of target allottees and number of stock acquisition rights to be allotted: Four executive officers also serving as directors (208 units) and 13 executive officers not serving as directors (397 units), for a total of 17 people (605 units)
▷ Amount to be paid in: JPY52,600 per stock acquisition right (the amount to be paid in shall be offset by the monetary remuneration claims of the same amount held by the allottees against the company)
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July 2020 On July 30, 2020, the company announced its full-year FY03/21 consolidated earnings forecast.
On the same day, the company announced the grant of stock options (stock acquisition rights).
Pursuant to Paragraphs 1 and 2, Article 238, and Paragraph 1, Article 240 of the Companies Act, the company resolved at a Board of Directors meeting held on July 30 that it had finalized a memorandum on stock options (stock acquisition rights) awarded as compensation to its directors (excluding outside directors) and executive officers who are not directors, and that it would invite subscriptions to the stock acquisition rights. The purpose of the stock options is to improve medium- to long-term earnings performance and further enhance subscribers’ motivation to contribute toward increasing corporate value and raising morale.
The stock acquisition rights will be called FY2020 Oki Electric Industry Co., Ltd. Stock Acquisition Rights. The company plans to allocate 605 rights to acquire 100 common stock. Further details such as the amount to be paid in will be determined on the scheduled allocation date of August 18, 2020 (see company press release for details).
Corporate governance, environmental, and CSR information
Organizational form Organization Company with Audit & Supervisory Board and capit al st ruct ure Cont rolling shareholders None Directors Number of directors (per Articles of Incorporation) 15 Directors' term of office (per Articles of Incorporation) 1year Number of directors 9 Outside directors 4 Independent outside officers 4 Auditors Existence of Audit and Supervisory Board Y Number of Audit & Supervisory Board members (per Articles of Incorporation) 5 Number of Audit & Supervisory Board members 4 Outside members of Audit & Supervisory Board 2 Independent outside officers 2 Other Foreign shareholding ratio (as of end-March 2019) 18.27% Personnel A ffairs and Voluntary establishment of committee(s) corresponding to Nomination Y Committee or Remuneration Committee Compensation Advisory Committee Independent officers in the committee / total committee members 5 / 5 Disclosure of individual direct or's compensat ion None Independent officers 6 Implementation of measures regarding director incentives Performance-linked remuneration and stock option Eligible for st ock opt ion Directors, others Part icipat es in ICJ's elect ronic vot ing syst em for Other Participation to electronic voting platform inst it ut ional invest ors Preparation of convening notices in English Y Online disclosure Corporate takeover defenses None Environment al conservat ion act ivit ies Under OKI Group Environment Vision 2030/2050, the company puts int o pract ice environment al management following OKI Group Environmental Policy CSR Each of Oki's business divisions w ork on act ivit ies based on educat ion of employees on Oki group's Chart er of Corporate Conduct and Code of Conduct Activity status The company issues reports annually, available in print and online Source: Shared Research based on company data (as of March 2019)
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ROE and ROA/ROIC
ROA (RP-based) ROIC 60% 12% 37.8% 31.8% 40% 28.0% 10% 9.6% 9.5%
13.7% 20% 8.4% 3.9% 5.8% 4.6% 6.0% 8% 8.7%8.9% 6.5% 0% 6.0% -9.4% 6% 5.4% 4.7% -20% 3.9% 4% 5.7% 2.9% -40% 4.2% 3.7% 1.6% 1.8% 2% 2.5% 2.7% -60% 0.9% 2.3% 0.3% 0.3% -80% 0% -80.7% -0.6% -100% -2% FY03/10 FY03/15 FY03/20 FY03/10 FY03/15 FY03/20
ROIC 20% ROIC (before tax) OPM Sales / Invested capital (right axis) 3 2.6 2.5 2.5 2.4 2.3 2.4 2.3 2.2 15% 2.1 2.1 14.7% 14.0% 2
9.4% 10% 8.6% 7.6% 8.1% 6.5% 1 5% 4.2% 3.1% 5.6% 6.0% 3.8% 1.2% 4.0% 3.7% 2.8% 3.0% 1.8% 0% 1.5% 0.6% 0 FY03/11 FY03/14 FY03/17 (JPYbn) (JPYbn) Net assets Interest-bearing debt Operating profit (right axis) 250 40 32.4 35 200 27.2 30 107.6 122.1 119.0 93.1 25 150 81.9 90.5 18.6 87.0 20 120.5 152.1 136.5 100 13.5 12.0 17.5 16.8 15
121.4 100.2 10 6.3 107.4 106.4 50 91.9 97.2 102.1 7.7 56.6 5 38.9 41.3 0 2.5 0 FY03/11 FY03/14 FY03/17 Source: Shared Research based on company data
ROE
ROE Net margin Total asset turnover (right axis) Financial leverage (equity multiplier; right axis) 60% 9.5 9.3 10 37.8% 40% 28.0% 31.8% 9 7.4 13.7% 8 20% 5.8% 6.0% 8.4% 0.4% 4.6% 7 0% 6.1% 3.9% 5.7%5.3 6 -7.4% 3.0% 1.3% 1.0% 1.3% 1.9% 3.1% -20% 5 4.1 3.8 3.8 3.7 3.7 3.6 -40% 4 3 -60% -80.7% 2 -80% 1 -100% 0 FY03/11 FY03/14 FY03/17 FY03/20
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FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 (JPYmn) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. ROE -80.7% 3.9% 28.0% 37.8% 31.8% 5.8% 4.6% 6.0% 8.4% 13.7% Net margin -7.4%0.4%3.0%5.7%6.1%1.3%1.0%1.3%1.9%3.1% Total asset turnover 1.16 1.15 1.27 1.27 1.27 1.15 1.17 1.20 1.20 1.24 Financial leverage (equity multiplier) 9.47 9.28 7.38 5.26 4.09 3.76 3.793.723.683.58 ROA (RP-based) 0.3% 2.5% 5.7% 9.6% 8.9% 2.7% -0.6% 2.3% 4.2% 3.7% ROIC 1.8% 3.9% 4.7% 8.7% 9.5% 5.4% 0.9% 2.9% 6.5% 6.0% NOPAT 3,741 7,105 8,353 16,859 20,863 12,446 1,760 5,338 12,157 11,676 Net assets + Interest-bearing debt 205,491 184,319 177,439 194,036 219,953 229,226 206,847 184,142 187,369 195,131 ROIC (before tax) 3.1% 6.5% 7.6% 14.0% 14.7% 8.1% 1.2% 4.2% 9.4% 8.6% OPM 1.5%2.8%3.0%5.6%6.0%3.8%0.6%1.8%4.0%3.7% Sales / Invested capital 2.11 2.30 2.57 2.49 2.46 2.14 2.18 2.38 2.36 2.34 Source: Shared Research based on company data Figures may differ from company materials due to differences in rounding methods.
Top Management
Director and chairman of the board: Hideichi Kawasaki (Born: January 10, 1947, shares held as of March 31, 2018: 16,000) Joined OKI in April 1970; April 2001, appointed executive officer; April 2004, senior vice president; April 2005, general manager, marketing promotion division; June 2005, director; April 2008, general manager, financial business division; April 2009, senior executive vice president and member of the board; June 2009, president, representative director; April 2016, chairman of the board, representative director; June 2018, chairman of the board, director.
President: Shinya Kamagami (Born: February 9, 1959, shares held as of March 31, 2018: 6,700) In April 1981, joined company; April 2011, appointed executive officer, general manager, systems hardware business division; April 2012, senior vice president; April 2014, chief technology officer; April 2015, general manager, corporate planning division, chief compliance officer; April 2016, president, representative director.
In his career of over 30 years, Mr. Kamagami has been involved in areas from technical development through marketing and business management in the Mechatronics Systems segment, with a focus on ATMs and on-the-ground operations. He uses feedback from the factory floor and promotes growth in response to changes in the business environment. He says he is working to build a business platform that enables sustainable growth.
Dividend policy
OKI says its top management priority is to increase shareholder returns while strengthening its balance sheet and retaining earnings to improve corporate value. The company says retained earnings will be directed toward R&D and capital expenditure vital for growth and used to strengthen the business structure and management platform. The company dividend policy prioritizes returning profits to shareholders in a stable, continuous manner, with the dividend amount depending on profits.
Shareholder return FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 (JPY) Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. Cons. EPS -44.0 0.3 17.2 36.2 40.0 7.6 54.0 67.9 161.8 162.8 Dividend per share - - - 3.0 5.0 5.0 50.0 50.0 50.0 50.0 Payout ratio - - - 8.0% 13.0% 65.7% 92.6% 73.7% 30.9% 30.7% DOE - - - 5.3% 4.8% 3.8% 4.3% 4.4% 4.3% 4.2% Source: Shared Research based on company data
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Major shareholders
Shares held Shareholding Top shareholders ('000) ratio
The Master Trust Bank of Japan, Ltd. (Trust account) 7,460 8.62% Japan Trustee Services Bank, Ltd. (Trust account) 5,984 6.92% Japan Trustee Services Bank, Ltd. (Trust account 9) 2,070 2.39% Oki Elect ric Group Employees' Shareholding A ssociat ion 1,959 2.26% Japan Trustee Services Bank, Ltd. (Trust account 5) 1,658 1.92% JP MORGAN CHASE BANK 385151 1,610 1.86% Mizuho Bank, Ltd. 1,419 1.64% Hulic Co., Ltd. 1,407 1.63% Meiji Y asuda Life Insurance Company 1,400 1.62% Trust & Custody Services Bank, Ltd. (Securities investment trust accoun 1,333 1.54% SUM 26,304 30.40% Source: Shared Research based on company data (as of end-March 2020)
Number of employees
(number of employees) FY03/11 FY03/12 FY03/13 FY03/14 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 Consolidated 16,697 16,736 17,459 21,090 20,653 20,190 19,464 18,978 17,930 17,751 ICT 6,8387,0237,0797,033 Mechatronics Systems 4,7674,1063,1803,277 Printers 4,8754,4684,2223,931 EMS 1,3091,3261,9712,112 Other 1,2191,5951,023917 Company-wide 456460455481 Info-Telecom (old segment)8,8898,4648,68812,72912,40512,013 Printers 6,0856,5225,5645,0594,9634,917 EMS 4314191,1041,2441,2841,306 Semiconductors Other 1,0171,0131,7511,7051,6321,581 Parent 3,103 3,373 3,678 3,788 3,881 3,914 4,063 4,024 4,077 4,203 Average age 41.2 41.8 42.1 42.5 43.0 43.3 43.5 43.6 43.9 44.1 Average years of service 19.1 19.3 19.5 19.8 20.5 19.7 19.0 21.0 20.2 20.0 Average annual salary (JPYmn) 6.00 6.63 7.04 7.09 7.33 7.52 7.20 7.00 7.04 7.16 Subsidiaries 13,594 13,363 13,781 17,302 16,772 16,276 15,401 14,954 13,853 13,548
Source: Shared Research based on company data
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Profile
Company Head office
Toranomon First Garden Oki Electric Industry Co., Ltd. 1-7-12 Toranomon, Minato-ku, Tokyo
Phone Listed on +81-3-3501-3111 Tokyo Stock Exchange 1st Sections Established Exchange listing November 1, 1949 November 22, 1951 (predecessor founded 1881) Auditor Fiscal year-end PricewaterhouseCoopers Aarata LLC March HP IR Web http://www.oki.com/en/ http://www.oki.com/en/ir/ IR e-mail IR Contact General Affairs 03-3501-3764 (individual investors) [email protected] Corporate Planning, IR Office 03-3501-3836 (institutional investors, analysts)
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