Since formulating the "KITZ Global Vision 2020" in May 2010, we have been striving to implement policies for growth so that we can achieve its numerical targets with expecting economic recovery after Lehman shock.

In overseas market, the effects of slowing Chinese economic growth have caused stagnation not only in China but also in other emerging countries. Because of the sharp drop in the crude oil price, capital investments by energy-related companies have significantly decreased.

In domestic market, we can expect some demand of building facilities for Olympic / Paralympic games Tokyo in 2020, but with the effect of global stagnation, financial outlook of companies is uncertain and we cannot expect aggressive capital investments.

Based on the above situation, we judged that it is difficult to optimistically anticipate rapid increase of sales in next few years. Having reviewed the results of the second phase of the Medium-Term Management Plan (2013-2015) and considering the changing market environment, we formulated the following third phase of the Medium-Term Management Plan to fiscal 2018 and revised the targets of Long-Term Management Plan.

Third Phase of Medium-term Management Plan (FY2016—FY2018)

As of May, 2016

Basic Policy

  1. Concentrate management resources in the focused market fields (Building facility, Petrochemistry, General Chemistry, and Clean Energy) where we can make use of our advantages. Introduce new products and concentrate capital / R&D investment in those fields. Strengthen strategic implementation structure by following PDCA cycle of prioritized measures.
  2. Improve cost by global procurement, self-manufacture, and increasing productivity. Aggressively make capital investments which generate profit. Reorganize the business and eliminate waste. Aim for thorough implementation of the profit/cash flow-oriented policy and 8% or more of ROE.
  3. Aim for achieving 10 billion yen or more of the operating profit in the fiscal 2018 and the record-high profit in the fiscal 2020.
  4. To enhance return of profits to shareholders, we have set a target dividend payout ratio of about 25% of the consolidated Net Income attributable to owners of parent and will take a proactive stance for the acquisition of treasury stock.

Segmented Net Sales and Profit Plan (Consolidated)

(Millions of yen)
  FY16 FY17 FY18
Original
Plan
Result Original
Plan
Revised Plan
(as of Oct. 2017)
Original
Plan
Net Sales Valve Manufacturing Business 92,000 91,766 95,000 97,800 100,000
Brass Bar Manufacturing Business 16,400 19,333 16,500 22,500 16,500
Other 3,100 3,002 3,500 2,700 3,500
Total 111,500 114,101 115,000 123,000 120,000
Operating Income Valve Manufacturing Business 11,000 11,444 11,900 12,700 13,150
Brass Bar Manufacturing Business 250 831 350 650 100
Other 100 59 150 0 150
Eliminations or Corporate Expenses (3,350) (3,405) (3,400) (3,350) (3,400)
Total 8,000 8,929 9,000 10,000 10,000
Ordinary Income 7,700 8,799 8,700 9,700 9,700
Net Income attributable to owners of parent 5,000 5,400 5,700 6,300 6,300
Operating Income Ratio 7.2% 7.8% 7.8% 8.1% 8.3%
Overseas Sales Ratio 31.8% 29.7% 32.7% 29.1% 34.2%
ROE 6.6% 7.3% 7.2% 8.5% 7.7%
Equity Ratio 63.9% 61.9% 64.7% 64.1% 64.0%
EPS (Yen) 46.6 51.43 54.0 62.94 61.0
BPS (Yen) 736.00 727.78 778.00 751.72 825.00

Strategy

Valve Manufacturing Business

  1. Narrowing down of the focused market fields and focused areas
    Narrow down the focused market fields to building facility, petrochemistry and general chemistry, and clean energy (hydrogen and LNG) and move forward with the introduction of new specialized products to dig the market deeply and try to expand our market share. Also narrow down the focused areas to Japan + 3 Regional HQs (Europe/The Americas/ASEAN), two hub markets (China and India) and reinforce their multifunctionalization: Sales, Marketing, Engineering, Stock, Maintenance and Service. Especially, our prioritized areas are ASEAN and The Americas.
  2. The Matrix structure with vertical (organizations by functions) and horizontal (company-wide horizontally-based organization) by which we implement business strategy with enhancement of management of both “organization” and “product”.
    By enhancement of function and authority of Business Planning Dept. , try to thorough management of important measures for existing organization and following PDCA cycle.
    Newly establish the Product Management Center, comprehensively introduce the product group based on the strategy in a timely/expeditious manner, and implement the product management. Try to expand the sales and share in the focused market fields and take responsibility for achievement (figures).
  3. Realization of the cost to be able to compete globally by utilizing existing resources with economy and thoroughly to expand sales and profit.
    Enhance the cost improvement promotion system as anchored by the Production Head Office. Put effort into global procurement, self-manufacture, and improvement of productivity. Newly establish the Engineering Center in which estimation/design work is aggregated within the Engineering Head Office and try to improve profitability of the special order products.

Strategy Pyramid

The Matrix structure with vertical and horizontal

Brass bar manufacturing business

<Strategy>
Maximize profit by improvement in productivity.
Expand added value by business reengineering.

<Measures>

  1. Improvement in productivity
    1. Manufacturing cost reduction by reorganization of production line.
    2. Material cost reduction by optimal blending of materials.
  2. Business reengineering
    1. Integration of cutting and forging product manufacturing of KITZ Group.
    2. Business expansion by realizing integration effect.

Others

<Strategy>
Provide thoughtful and thorough services with the viewpoint of customers in mind.

<Measures>
Provide customers services with emotional impact and comfortable facilities.

  1. Provide sincere services to promote inbound costumers’ visit.
  2. Provide security with improving internet reservation system.
  3. Provide one rank up comfort by "renewals of guest rooms."

Strengthen Business Foundation

【Human Resources】

  • Grappling with promoting woman to work actively.
    • Change in corporate culture.
    • Change in rules to allow diversified working style and make development plan.
    • Recruiting plan to strengthen sales and engineering.
  • Establish HR system to allow diversified talented personnel to work actively and make development plan.
  • Make group level HR database to realize the right person in the right place.

【Environment】

  • Strengthen environment management system.
    (①acquire ISO14001, ②establish management system for environment related figures).
  • Decrease environmental stress , respond to environment related laws and rules.
    1. CO2 emissions (t-CO2/100 million yen) -10% decrease 2013→2020.
      (volume per unit : FY2013 58.81 → FY2020 52.71)

【Quality assurance】

  • Provide just fit level of quality for customer needs.

【Corporate governance, Internal control】

  • Promote healthy and transparent management in accordance with‘Corporate governance code’.
  • Improve internal control systems of new group companies joined through M&A.

【Accounting, Finance】

  • Enrich own capital to prepare M&A and improve ROE by dividend policy including acquiring treasury stocks.

【Information systems】

  • Establish global information systems to be able to optimize work process and to strengthen management decision support.

【Corporate social responsibility (CSR)】

  • Plan and promote continuous CSR activities connected with CSR management.

Medium-Term Business Plan