Research Coverage Report by Shared Research Inc. | Coverage initiated on: 2019-11-19 |
Last update: 2023-12-22 | |
3433
TOCALO
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INDEX
Executive summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3. Key financial data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5. Trends and outlook . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6.
Quarterly trends and results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6. Company forecast for FY03/24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17. . Medium-termmanagement plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22. . .
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30. . Business overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30. . Business model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31. . Group structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39. . Profitability analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52. .
Market and value chain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53. . Competitive landscape . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54. . Strengths and weaknesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55. .
Historical results and financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57. . Income statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57. . Balance sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57. . Cash flow statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59. . Historical performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59. .
Other information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .88. . News and topics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .91. .
Company profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .92. .
TOCALO 3433
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Executive summary
Business overview
TOCALO Co., Ltd. (TOCALO) provides surface treatments that improve the performance of materials used across a range of industries by adding properties such as abrasion and heat resistance, conductivity, insulation, and heat shielding and dissipation. Its core technology is thermal spraying, which involves coating target surfaces by spraying metals or ceramics that have been melted using high temperature heat sources (e.g., plasma and gas). The company particularly excels in functional thermal spraying that provides both growth potential and high added value, and leads the Japanese market for thermal spraying with a share of 40% (Shared Research estimate based on data from Yano Research Institute, Digital Research, and other sources). The company also offers other surface treatments as ancillary services. These include the Toyota diffusion (TD) process, zinc alloy coating (ZAC), plasma transferred arc (PTA) process, and physical vapor deposition (PVD) process. (See the box on the next page for details.)
TOCALO's surface treatments are made to order. Accordingly, selling volume is not a business priority. The company procures coating materials and generates sales by applying surface treatments to goods and parts provided by customers. In FY03/23, it reported a GPM of 36.1%, an SG&A ratio of 14.1%, and an OPM of 21.9%, on a consolidated basis. Over half of the parent company's total manufacturing costs in FY03/23 were labor (29% of the total) and outsourcing costs (24%). Other manufacturing costs included materials (14%), consumables (11%), utilities (5%), depreciation (7%), and other costs (10%). TOCALO's business is labor-intensive, with personnel expenses accounting for about 50% of SG&A expenses.
The thermal spraying industry divides into companies that conduct thermal spraying internally and companies that perform thermal spraying as a contracted service. In 2018, the market for contracted treatment in Japan was worth approximately JPY60.0bn, while the global market was about JPY700.0bn (source: Yano Research Institute). Some overseas competitors sell thermal spraying materials and equipment in addition to providing contracted treatment services, but TOCALO specializes in services. Overseas sales accounted for 23.3% of sales in FY03/23 and mainly came from Japanese companies that have expanded abroad. The company also receives royalty income from licensing agreements with overseas companies, including competitors.
By area of application, 20% of thermal spraying in Japan is associated with industrial equipment, 20% semiconductors and flat panel displays (FPDs), 13% steelmaking, 10% bridges and structures, 10% paper manufacturing, and 27% other uses (2018 actual; Yano Research). At TOCALO, semiconductor/FPD-related sales at the parent made up about 48% of consolidated sales in FY03/23. The bulk of sales are to the Tokyo Electron Limited group (TSE Prime: 8035). Semiconductor-related business is TOCALO's growth driver, and TOCALO and Tokyo Electron have built a close relationship that allows them to conduct joint development.
In September 2004, TOCALO acquired all shares of Japan Coating Center Co., Ltd. (JCC), expanding into the thin coating technology known as the physical vapor disposition (PVD) process. PVD is a surface treatment method in which metals (e.g., titanium and chromium) are ionized with reactive gases in a vacuum to form highly adhesive ceramic coatings that are hard and dense but thin. Applied to surfaces of cutting tools, metallic molds, and other items, these coatings add functionality such as abrasion and corrosion resistance. JCC's profit margin is high (14.6% in FY03/23; before segment profit adjustments), but not as high as that of the Thermal Spraying (Parent) business. Shared Research notes that synergies between the parent and the subsidiary have generated.
By segment, Thermal Spraying (Parent) accounted for 75.2% of sales in FY03/23, Domestic Subsidiary (JCC) for 5.0%, Overseas Subsidiaries for 13.8%, Other Surface Treatments for 5.7% and Royalty Income 0.4%. The segment profit margins (recurring profit basis) were 23.1% in Thermal Spraying, 14.6% in Domestic Subsidiary, 25.0% in Overseas Subsidiaries, and 17.0% in Other Surface Treatments (before segment profit adjustments).
Trends and outlook
In FY03/23, sales were JPY48.1bn (+9.9% YoY), operating profit JPY10.6bn (+3.0% YoY), recurring profit JPY11.0bn (+4.1% YoY), and net income attributable to owners of the parent JPY7.4bn (+6.4% YoY). On a full-year basis, business in the core semiconductor and FPD fields grew, resulting in record highs the second consecutive year in sales and all forms of profit, including recurring profit. The expected annual dividend is JPY50.0 per share, up from the company's previous forecast of JPY45.0 per share (JPY45.0 per share in FY03/23), and the actual payout ratio was 41.4% (39.6%).
TOCALO 3433
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The company plan for FY03/24 calls for sales of JPY47.0bn (-2.4% YoY), operating profit of JPY8.7bn (-17.6% YoY), recurring profit of JPY8.7bn (-20.9% YoY), net income attributable to owners of the parent of JPY5.8bn (-21.1% YoY), and EPS of JPY96.7. Factoring in the effects from inventory adjustments at customers in the mainstay semiconductor/FPD industries, management forecasts sales and profit declining YoY for the first time in four years. The company is planning an annual dividend of JPY50.0 per share, the same as in FY03/23, and expects a payout ratio of 51.7%. The company has decided to revise its dividend policy and is targeting to increase the dividend payout ratio to about 50%, effective from FY03/24. At the 1H results announcement (April-September) on October 31, 2023, the company maintained its initial forecast.
On November 9, 2021, the company publicly announced its medium-term management plan for the first time ever. This medium-term management plan clearly defines the company's vision for 2030 and outlines the growth strategy the company plans to implement over the five-year duration of the plan, which concludes with FY03/26. For FY03/26, the company has set a sales target of JPY53.0bn (versus actual sales of JPY39.3bn in FY03/21) and a recurring profit target of JPY12.0bn (versus actual recurring profit of JPY8.9bn in FY03/21). In addition to maintaining and enhancing its financial strength and profitability, the company also clearly indicated that it would aim to increase shareholder returns. However, the company additionally stated that it would periodically monitor and review expansion associated with its business operations targeting semiconductors (expected to be a major driver of results during this medium-term management plan), as it is highly subject to impact from changes in trends within the semiconductor market.
In May 2022, the company announced the progress made on its medium-term management plan. Since only half a year had passed since the plan was created, there had basically been no change. However, the company has indicated that both sales and recurring profit are growing faster than originally envisioned. The company suggested that semiconductor- related sales and recurring profit would be revised when the financial results for FY3/23 were announced, but it has maintained a cautious stance to date.
Strengths and weaknesses
Shared Research believes that TOCALO's three main strengths are its portfolio of diverse surface treatments that makes the company the leader in a niche market; its ability to acquire top-class customers in major industries through joint development focused on meeting future needs; and stable earnings due to high domestic repeat demand for technologies with added value.
Shared Research has identified three notable weaknesses: a lack of peripheral technologies and mass production bases necessary to process large orders; lackluster cultivation of overseas markets; and low profitability of the Other Surface Treatments business. (See the "Strengths and weaknesses" section for details.)
Surface treatment technologies offered by TOCALO
Thermal spraying
A surface treatment technology that involves forming coatings on the workpieces by spraying them with molten metals, ceramics, cermet*, and other materials.
*Cermet: a composite material that is created by combining powder from hard compounds (metal carbide, nitride, etc.) with metal bonding materials, then sintering the mixture
Chemically defined zinc alloy coating (CDC-ZAC)
A chemical densification treatment for forming composite ceramic coatings through chemical reactions. It is characterized by excellent corrosion resistance and high degrees of hardness, which are unique properties of ceramics.
Toyota diffusion (TD) process
A surface treatment method that enables the formation of super-hard coatings. It is essential to the metallic mold industry as a surface treatment technology.
Plasma transferred arc (PTA) process
An overlay-welding method that utilizes plasma and produces excellent impact resistance.
Physical vapor deposition (PVD) process
This process minimizes heat deformation of the workpiece because it allows for a wide selection of temperature ranges, enabling treatments that best suit the substrate (the material to which spraying deposit is applied).
Source: Shared Research based on company data
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KeyIncome statement financialFY03/14 | daFY03/15 | taFY03/16 | FY03/17 | FY03/18 | FY03/19 | FY03/20 | FY03/21 | FY03/22 | FY03/23 | FY03/24 | |||
(JPYmn) | Cons. | Cons. | Cons. | Cons. | Cons. | Cons. | Cons. | Cons. | Cons. | Cons. | Est. | ||
Orders | 23,097 | 27,137 | 28,343 | 29,506 | 36,851 | 38,915 | 38,011 | 39,021 | 45,394 | 48,419 | |||
YoY | 10.2% | 17.5% | 4.4% | 4.1% | 24.9% | 5.6% | -2.3% | 2.7% | 16.3% | 6.7% | |||
Order backlog | 2,774 | 3,843 | 3,440 | 3,983 | 6,725 | 6,081 | 6,195 | 6,143 | 7,896 | 8,349 | |||
YoY | 21.9% | 38.5% | -10.5% | 15.8% | 68.8% | -9.6% | 1.9% | -0.8% | 28.5% | 5.7% | |||
Sales | 22,599 | 26,068 | 28,746 | 28,964 | 34,109 | 39,558 | 37,896 | 39,294 | 43,813 | 48,144 | 47,000 | ||
YoY | 8.0% | 15.4% | 10.3% | 0.8% | 17.8% | 16.0% | -4.2% | 3.7% | 11.5% | 9.9% | -2.4% | ||
Gross profit | 7,564 | 8,964 | 9,727 | 10,536 | 12,646 | 13,761 | 12,780 | 14,814 | 16,585 | 17,365 | |||
YoY | 10.8% | 18.5% | 8.5% | 8.3% | 20.0% | 8.8% | -7.1% | 15.9% | 12.0% | 4.7% | |||
Gross profit margin | 33.5% | 34.4% | 33.8% | 36.4% | 37.1% | 34.8% | 33.7% | 37.7% | 37.9% | 36.1% | |||
Operating profit | 3,483 | 4,568 | 4,806 | 5,646 | 7,110 | 7,741 | 6,550 | 8,890 | 10,255 | 10,558 | 8,700 | ||
YoY | 19.9% | 31.2% | 5.2% | 17.5% | 25.9% | 8.9% | -15.4% | 35.7% | 15.4% | 3.0% | -17.6% | ||
Operating profit margin | 15.4% | 17.5% | 16.7% | 19.5% | 20.8% | 19.6% | 17.3% | 22.6% | 23.4% | 21.9% | 18.5% | ||
Recurring profit | 3,657 | 4,890 | 5,028 | 5,801 | 7,363 | 8,076 | 6,812 | 8,914 | 10,571 | 11,003 | 8,700 | ||
YoY | 19.6% | 33.7% | 2.8% | 15.4% | 26.9% | 9.7% | -15.7% | 30.9% | 18.6% | 4.1% | -20.9% | ||
Recurring profit margin | 16.2% | 18.8% | 17.5% | 20.0% | 21.6% | 20.4% | 18.0% | 22.7% | 24.1% | 22.9% | 18.5% | ||
Net income | 2,176 | 3,031 | 3,016 | 4,070 | 4,836 | 5,441 | 4,404 | 5,463 | 6,909 | 7,350 | 5,800 | ||
YoY | 16.2% | 39.3% | -0.5% | 34.9% | 18.8% | 12.5% | -19.1% | 24.0% | 26.5% | 6.4% | -21.1% | ||
Net margin | 9.6% | 11.6% | 10.5% | 14.1% | 14.2% | 13.8% | 11.6% | 13.9% | 15.8% | 15.3% | 12.3% | ||
Per-share data | |||||||||||||
Issued shares FY-end(000 shares) | 63,200 | 63,200 | 63,200 | 63,200 | 63,200 | 63,200 | 63,200 | 63,200 | 63,200 | 63,200 | |||
EPS | 35.8 | 49.9 | 49.6 | 67.0 | 79.6 | 89.5 | 72.5 | 89.9 | 113.6 | 120.8 | 96.7 | ||
EPS (fully diluted) | - | - | - | - | - | - | - | - | - | - | - | ||
Dividend per share | 12.5 | 15.0 | 18.8 | 21.3 | 26.3 | 30.0 | 25.0 | 35.0 | 45.0 | 50.0 | 50.0 | ||
Payout ratio | 34.9% | 30.1% | 37.8% | 31.7% | 33.0% | 33.5% | 34.5% | 38.9% | 39.6% | 41.4% | 51.7% | ||
DOE | 3.3% | 3.7% | 4.2% | 4.4% | 4.9% | 5.1% | 3.9% | 5.0% | 5.9% | 5.9% | |||
Book value per share | 390.2 | 427.4 | 456.9 | 504.1 | 562.1 | 617.8 | 662.3 | 727.1 | 807.3 | 884.8 | |||
Balance sheet (JPYmn) | |||||||||||||
Cash and cash equivalents | 10,181 | 8,404 | 8,197 | 8,387 | 9,234 | 12,660 | 16,889 | 16,227 | 17,110 | 16,912 | |||
Total current assets | 19,700 | 21,527 | 20,830 | 23,000 | 25,941 | 27,749 | 31,837 | 33,140 | 36,365 | 38,827 | |||
Tangible fixed assets | 12,735 | 14,055 | 16,151 | 20,305 | 24,589 | 27,395 | 26,786 | 28,594 | 30,740 | 33,037 | |||
Investments and other assets | 553 | 597 | 914 | 911 | 1,871 | 1,838 | 2,160 | 2,183 | 2,180 | 2,163 | |||
Intangible assets | 519 | 467 | 97 | 115 | 260 | 295 | 338 | 264 | 231 | 235 | |||
Total assets | 33,507 | 36,647 | 37,992 | 44,331 | 52,664 | 57,278 | 61,122 | 64,183 | 69,517 | 74,263 | |||
Accounts | 2,442 | 3,189 | 3,036 | 1,229 | 1,434 | 1,271 | 1,157 | 1,194 | 1,397 | 1,425 | |||
payable | |||||||||||||
Short-term debt | 1,137 | 943 | 511 | 905 | 879 | 1,218 | 2,153 | 1,802 | 1,460 | 1,490 | |||
Total current liabilities | 7,393 | 8,383 | 7,877 | 8,884 | 14,054 | 13,362 | 11,323 | 12,193 | 13,334 | 14,272 | |||
Long-term debt | 653 | 284 | 117 | 2,419 | 1,701 | 3,337 | 6,045 | 4,267 | 2,825 | 1,449 | |||
Total fixed liabilities | 1,421 | 1,112 | 1,045 | 3,195 | 2,470 | 4,250 | 7,163 | 5,097 | 3,723 | 2,347 | |||
Total liabilities | 8,814 | 9,495 | 8,922 | 12,079 | 16,524 | 17,613 | 18,487 | 17,291 | 17,058 | 16,620 | |||
Total liabilities and net assets | 33,507 | 36,647 | 37,992 | 44,331 | 52,664 | 57,278 | 61,122 | 64,183 | 69,517 | 74,263 | |||
Total interest-bearing debt | 1,790 | 1,227 | 628 | 3,324 | 2,580 | 4,555 | 8,198 | 6,069 | 4,285 | 2,939 | |||
Cash flow statement(JPYmn) | |||||||||||||
Cash flows from operating activities | 3,465 | 4,546 | 4,534 | 5,238 | 7,611 | 8,044 | 6,621 | 10,588 | 9,873 | 9,894 | |||
Cash flows from investing activities | -177 | -4,889 | -895 | -6,537 | -4,681 | -4,617 | -4,217 | -4,615 | -5,044 | -5,094 | |||
Cash flows from financing activities | -165 | -1,475 | -1,743 | 1,581 | -2,217 | 40 | 1,871 | -3,798 | -4,547 | -4,561 | |||
Financial ratios | |||||||||||||
ROA (RP-based) | 11.5% | 13.9% | 13.5% | 14.1% | 15.2% | 14.7% | 11.5% | 14.2% | 15.8% | 15.3% | 11.7% | ||
ROE | 9.5% | 12.2% | 11.2% | 13.9% | 14.9% | 15.2% | 11.3% | 12.9% | 14.8% | 14.3% | 10.7% | ||
Equity ratio | 70.8% | 71.5% | 73.3% | 69.1% | 64.9% | 65.6% | 65.9% | 68.9% | 70.6% | 72.5% | |||
Capex, other (JPYmn) | |||||||||||||
Capital | 2,513 | 2,678 | 3,730 | 5,936 | 6,361 | 5,965 | 2,313 | 4,822 | 4,385 | 4,855 | 5,000 | ||
expenditures | |||||||||||||
Depreciation | 1,388 | 1,440 | 1,560 | 1,703 | 1,948 | 2,658 | 2,991 | 2,771 | 2,783 | 2,987 | 3,200 | ||
R&D expenses | 653 | 746 | 862 | 834 | 905 | 1,003 | 1,159 | 1,296 | 1,296 | 1,400 | 1,450 | ||
R&D ratio | 2.9% | 2.9% | 3.0% | 2.9% | 2.7% | 2.5% | 3.1% | 3.3% | 3.0% | 2.9% | 3.1% | ||
Employee data (JPYmn) | |||||||||||||
No. of employees | |||||||||||||
(ex. temp. | 802 | 824 | 857 | 898 | 955 | 1,021 | 1,060 | 1,121 | 1,176 | 1,300 | |||
workers) | |||||||||||||
Temporary workers | 242 | 243 | 239 | 245 | 236 | 251 | 263 | 253 | 265 | 164 | |||
Total no. of employees (incl. temp. workers) | 1,041 | 1,056 | 1,080 | 1,123 | 1,163 | 1,239 | 1,304 | 1,344 | 1,414 | 1,402 | |||
Sales per employee | 21.7 | 24.7 | 26.6 | 25.8 | 29.3 | 31.9 | 29.1 | 29.2 | 31.0 | 34.3 | |||
Operating profit per employee | 3.3 | 4.3 | 4.5 | 5.0 | 6.1 | 6.2 | 5.0 | 6.6 | 7.3 | 7.5 |
Source: Shared Research based on company data
Notes: Per- share data is adjusted for stock splits. Figures may differ from company materials due to differences in rounding methods.
Citing the application of the accounting standard for revenue recognition from FY03/22, the company has not released YoY growth rates, but Shared Research has provided estimates as the size of the impact appears to be limited.
TOCALO 3433
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Trends and outlook
QuarterlyCumulative | trendsFY03/23and | results FY03/24 | FY03/24 | ||||||||||||||
Cumulative (JPYmn) | Q1 | Q1-Q2 | Q1-Q3 | Q1-Q4 | Q1 | Q1-Q2 | Q1-Q3 | Q1-Q4 | % of Est. | FY Est. | |||||||
Sales | 11,906 | 23,996 | 36,424 | 48,144 | 11,787 | 22,971 | 48.9% | 47,000 | |||||||||
YoY | 10.9% | 13.7% | 13.0% | 9.9% | -1.0% | -4.3% | -2.4% | ||||||||||
Gross profit | 4,444 | 8,931 | 13,302 | 17,365 | 4,112 | 7,940 | |||||||||||
YoY | 3.1% | 8.7% | 7.8% | 4.7% | -7.5% | -11.1% | |||||||||||
Gross profit margin | 37.3% | 37.2% | 36.5% | 36.1% | 34.9% | 34.6% | |||||||||||
SG&A expenses | 1,720 | 3,349 | 5,078 | 6,807 | 1,843 | 3,644 | |||||||||||
YoY | 10.9% | 7.8% | 6.2% | 7.6% | 7.2% | 8.8% | |||||||||||
SG&A ratio | 14.4% | 14.0% | 13.9% | 14.1% | 15.6% | 15.9% | |||||||||||
Operating profit | 2,724 | 5,581 | 8,224 | 10,558 | 2,268 | 4,295 | 49.4% | 8,700 | |||||||||
YoY | -1.3% | 9.2% | 8.9% | 3.0% | -16.7% | -23.0% | -17.6% | ||||||||||
Operating profit margin | 22.9% | 23.3% | 22.6% | 21.9% | 19.2% | 18.7% | 18.5% | ||||||||||
Recurring profit | 2,948 | 6,033 | 8,678 | 11,003 | 2,380 | 4,590 | 52.8% | 8,700 | |||||||||
YoY | 3.8% | 15.5% | 12.1% | 4.1% | -19.3% | -23.9% | -20.9% | ||||||||||
Recurring profit margin | 24.8% | 25.1% | 23.8% | 22.9% | 20.2% | 20.0% | 18.5% | ||||||||||
Net income | 1,912 | 3,919 | 5,669 | 7,350 | 1,539 | 2,985 | 51.5% | 5,800 | |||||||||
YoY | 2.5% | 13.7% | 13.4% | 6.4% | -19.5% | -23.8% | -21.1% | ||||||||||
Net margin | 16.1% | 16.3% | 15.6% | 15.3% | 13.1% | 13.0% | 12.3% | ||||||||||
Cumulative | FY03/23 | FY03/24 | FY03/24 | ||||||||||||||
Quarterly (JPYmn) | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | % of Est. | 1H Est. | |||||||
Sales | 11,906 | 12,090 | 12,428 | 11,720 | 11,787 | 11,184 | 99.9% | 23,000 | |||||||||
YoY | 10.9% | 16.7% | 11.7% | 1.2% | -1.0% | -7.5% | -4.2% | ||||||||||
Gross profit | 4,444 | 4,487 | 4,371 | 4,063 | 4,112 | 3,828 | |||||||||||
YoY | 3.1% | 14.8% | 6.1% | -4.3% | -7.5% | -14.7% | |||||||||||
Gross profit margin | 37.3% | 37.1% | 35.2% | 34.7% | 34.9% | 34.2% | |||||||||||
SG&A expenses | 1,720 | 1,629 | 1,729 | 1,729 | 1,843 | 1,801 | |||||||||||
YoY | 10.9% | 4.8% | 3.1% | 11.8% | 7.2% | 10.6% | |||||||||||
SG&A ratio | 14.4% | 13.5% | 13.9% | 14.8% | 15.6% | 16.1% | |||||||||||
Operating profit | 2,724 | 2,857 | 2,643 | 2,334 | 2,268 | 2,027 | 102.3% | 4,200 | |||||||||
YoY | -1.3% | 21.5% | 8.1% | -13.6% | -16.7% | -29.1% | -24.7% | ||||||||||
Operating profit margin | 22.9% | 23.6% | 21.3% | 19.9% | 19.2% | 18.1% | 18.3% | ||||||||||
Recurring profit | 2,948 | 3,085 | 2,645 | 2,325 | 2,380 | 2,210 | 109.3% | 4,200 | |||||||||
YoY | 3.8% | 29.5% | 5.1% | -17.9% | -19.3% | -28.4% | -30.4% | ||||||||||
Recurring profit margin | 24.8% | 25.5% | 21.3% | 19.8% | 20.2% | 19.8% | 18.3% | ||||||||||
Net income | 1,912 | 2,007 | 1,750 | 1,681 | 1,539 | 1,446 | 106.6% | 2,800 | |||||||||
YoY | 2.5% | 26.8% | 13.0% | -12.1% | -19.5% | -28.0% | -28.6% | ||||||||||
Net margin | 16.1% | 16.6% | 14.1% | 14.3% | 13.1% | 12.9% | 12.2% | ||||||||||
Source: Shared Research based on company data | |||||||||||||||||
Note: Figures may differ from company materials due to differences in rounding methods. | |||||||||||||||||
By segment | FY03/23 | FY03/24 | FY03/24 | ||||||||||||||
Cumulative (JPYmn) | Q1 | Q1-Q2 | Q1-Q3 | Q1-Q4 | Q1 | Q1-Q2 | Q1-Q3 | Q1-Q4 | % of Est. | FY Est. | |||||||
Sales | 11,906 | 23,996 | 36,424 | 48,144 | 11,787 | 22,971 | 48.9% | 47,000 | |||||||||
YoY | 10.9% | 13.7% | 13.0% | 9.9% | -1.0% | -4.3% | -2.4% | ||||||||||
Thermal Spraying (Parent) | 9,010 | 18,205 | 27,615 | 36,184 | 8,797 | 16,748 | 49.2% | 34,063 | |||||||||
YoY | 9.4% | 13.8% | 13.5% | 9.5% | -2.4% | -8.0% | -5.9% | ||||||||||
% of total | 75.7% | 75.9% | 75.8% | 75.2% | 74.6% | 72.9% | 72.5% | ||||||||||
Domestic Subsidiary | 591 | 1,197 | 1,820 | 2,414 | 623 | 1,230 | 46.3% | 2,656 | |||||||||
YoY | -3.3% | -0.7% | 0.4% | 0.6% | 5.4% | 2.8% | 10.0% | ||||||||||
% of total | 5.0% | 5.0% | 5.0% | 5.0% | 5.3% | 5.4% | 5.7% | ||||||||||
Overseas Subsidiaries | 1,577 | 3,140 | 4,814 | 6,622 | 1,607 | 3,422 | 47.2% | 7,254 | |||||||||
YoY | 24.7% | 20.1% | 15.0% | 16.3% | 1.9% | 9.0% | 9.5% | ||||||||||
% of total | 13.2% | 13.1% | 13.2% | 13.8% | 13.6% | 14.9% | 15.4% | ||||||||||
Other Surface Treatments | 697 | 1,367 | 2,060 | 2,745 | 745 | 1,515 | 52.7% | 2,877 | |||||||||
YoY | 16.8% | 14.4% | 14.4% | 9.7% | 6.9% | 10.8% | 4.8% | ||||||||||
% of total | 5.9% | 5.7% | 5.7% | 5.7% | 6.3% | 6.6% | 6.1% | ||||||||||
Royalty income | 29 | 86 | 113 | 177 | 14 | 54 | 36.0% | 150 | |||||||||
YoY | 26.1% | 7.5% | 8.7% | 3.5% | -51.7% | -37.2% | -15.3% | ||||||||||
Segment profit (recurring profit) | 2,948 | 6,033 | 8,678 | 11,003 | 2,380 | 4,590 | 52.8% | 8,700 | |||||||||
YoY | 3.8% | 15.5% | 12.1% | 4.1% | -19.3% | -23.9% | -20.9% | ||||||||||
Recurring profit margin | 24.8% | 25.1% | 23.8% | 22.9% | 20.2% | 20.0% | 18.5% | ||||||||||
Thermal Spraying (Parent) | 2,278 | 4,463 | 6,623 | 8,341 | 1,787 | 3,171 | |||||||||||
YoY | 6.1% | 12.2% | 11.0% | 3.2% | -21.6% | -28.9% | |||||||||||
Recurring profit margin | 25.3% | 24.5% | 24.0% | 23.1% | 20.3% | 18.9% | |||||||||||
Domestic Subsidiary | 85 | 175 | 276 | 352 | 114 | 284 | |||||||||||
YoY | -44.1% | -28.6% | -21.6% | -25.3% | 34.1% | 62.3% | |||||||||||
Recurring profit margin | 14.4% | 14.6% | 15.2% | 14.6% | 18.3% | 23.1% | |||||||||||
Overseas Subsidiaries | 437 | 885 | 1,235 | 1,653 | 376 | 887 | |||||||||||
YoY | 23.8% | 28.4% | 8.9% | 7.5% | -14.0% | 0.2% | |||||||||||
Recurring profit margin | 27.7% | 28.2% | 25.7% | 25.0% | 23.4% | 25.9% | |||||||||||
Other Surface Treatments | 122 | 244 | 359 | 468 | 130 | 260 | |||||||||||
YoY | 4.3% | 8.9% | 8.5% | 0.0% | 6.6% | 6.6% | |||||||||||
Recurring profit margin | 17.5% | 17.8% | 17.4% | 17.0% | 17.4% | 17.2% | |||||||||||
Adjustments | 23 | 264 | 183 | 188 | -29 | -12 | |||||||||||
By segment | FY03/23 | FY03/24 | |||||||||||||||
Quarterly (JPYmn) | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | |||||||||
Sales | 11,906 | 12,090 | 12,428 | 11,720 | 11,787 | 11,184 | |||||||||||
YoY | 10.9% | 16.7% | 11.7% | 1.2% | -1.0% | -7.5% | |||||||||||
Thermal Spraying (Parent) | 9,010 | 9,195 | 9,410 | 8,569 | 8,797 | 7,951 | |||||||||||
YoY | 9.4% | 18.5% | 13.1% | -1.7% | -2.4% | -13.5% | |||||||||||
Domestic Subsidiary | 591 | 606 | 623 | 594 | 623 | 607 | |||||||||||
YoY | -3.3% | 1.8% | 2.8% | 1.2% | 5.4% | 0.2% | |||||||||||
Overseas Subsidiaries | 1,577 | 1,563 | 1,674 | 1,808 | 1,607 | 1,815 | |||||||||||
YoY | 24.7% | 15.8% | 6.5% | 19.9% | 1.9% | 16.1% |
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Other Surface Treatments | 697 | 670 | 693 | 685 | 745 | 770 | |||
YoY | 16.8% | 12.0% | 14.4% | -2.3% | 6.9% | 14.9% | |||
Royalty income | 29 | 57 | 27 | 64 | 14 | 40 | |||
YoY | 26.1% | 0.0% | 12.5% | -4.5% | -51.7% | -29.8% | |||
Segment profit (recurring profit) | 2,948 | 3,085 | 2,645 | 2,325 | 2,380 | 2,210 | |||
YoY | 3.8% | 29.5% | 5.1% | -17.9% | -19.3% | -28.4% | |||
Recurring profit margin | 24.8% | 25.5% | 21.3% | 19.8% | 20.2% | 19.8% | |||
Thermal Spraying (Parent) | 2,278 | 2,185 | 2,160 | 1,718 | 1,787 | 1,384 | |||
YoY | 6.1% | 19.4% | 8.8% | -19.0% | -21.6% | -36.7% | |||
Recurring profit margin | 25.3% | 23.8% | 23.0% | 20.0% | 20.3% | 17.4% | |||
Domestic Subsidiary | 85 | 90 | 101 | 76 | 114 | 170 | |||
YoY | -44.1% | -3.2% | -5.6% | -36.1% | 34.1% | 88.9% | |||
Recurring profit margin | 14.4% | 14.9% | 16.2% | 12.8% | 18.3% | 28.0% | |||
Overseas Subsidiaries | 437 | 448 | 350 | 418 | 376 | 511 | |||
YoY | 23.8% | 33.3% | -21.3% | 3.7% | -14.0% | 14.1% | |||
Recurring profit margin | 27.7% | 28.7% | 20.9% | 23.1% | 23.4% | 28.2% | |||
Other Surface Treatments | 122 | 122 | 115 | 109 | 130 | 130 | |||
YoY | 4.3% | 14.0% | 7.5% | -20.4% | 6.6% | 6.6% | |||
Recurring profit margin | 17.5% | 18.2% | 16.6% | 15.9% | 17.4% | 16.9% | |||
Adjustments | 23 | 241 | -81 | 5 | -29 | 17 |
Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.
Orders | FY03/23 | FY03/24 | ||||||||||||
Cumulative (JPYmn) | Q1 | Q1-Q2 | Q1-Q3 | Q1-Q4 | Q1 | Q1-Q2 | Q1-Q3 | Q1-Q4 | ||||||
Orders | 12,627 | 25,045 | 37,949 | 48,419 | 12,276 | 24,316 | ||||||||
YoY | 16.2% | 16.6% | 12.8% | 6.7% | -2.8% | -2.9% | ||||||||
Thermal Spraying (Parent) | 9,533 | 18,779 | 28,443 | 36,195 | 9,057 | 17,702 | ||||||||
YoY | 15.3% | 16.1% | 12.0% | 5.8% | -5.0% | -5.7% | ||||||||
Domestic Subsidiary | 585 | 1,206 | 1,822 | 2,402 | 659 | 1,295 | ||||||||
YoY | -1.0% | 0.9% | 1.2% | 0.7% | 12.6% | 7.4% | ||||||||
Overseas Subsidiaries | 1,864 | 3,707 | 5,638 | 7,115 | 1,815 | 3,757 | ||||||||
YoY | 36.7% | 32.3% | 25.8% | 16.4% | -2.6% | 1.3% | ||||||||
Other Surface Treatments | 644 | 1,351 | 2,045 | 2,706 | 744 | 1,560 | ||||||||
YoY | -0.5% | 3.9% | 4.1% | 0.9% | 15.5% | 15.5% | ||||||||
Orders | FY03/23 | FY03/24 | ||||||||||||
Quarterly (JPYmn) | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | ||||||
Orders | 12,627 | 12,418 | 12,904 | 10,470 | 12,276 | 12,040 | ||||||||
YoY | 16.2% | 17.1% | 6.1% | -10.9% | -2.8% | -3.0% | ||||||||
Thermal Spraying (Parent) | 9,533 | 9,246 | 9,664 | 7,752 | 9,057 | 8,645 | ||||||||
YoY | 15.3% | 16.8% | 4.8% | -12.1% | -5.0% | -6.5% | ||||||||
Domestic Subsidiary | 585 | 621 | 616 | 580 | 659 | 636 | ||||||||
YoY | -1.0% | 2.8% | 1.8% | -1.0% | 12.6% | 2.4% | ||||||||
Overseas Subsidiaries | 1,864 | 1,843 | 1,931 | 1,477 | 1,815 | 1,942 | ||||||||
YoY | 36.7% | 28.2% | 15.1% | -9.5% | -2.6% | 5.4% | ||||||||
Other Surface Treatments | 644 | 707 | 694 | 661 | 744 | 816 | ||||||||
YoY | -0.5% | 8.3% | 4.5% | -8.1% | 15.5% | 15.4% | ||||||||
Order backlog | FY03/23 | FY03/24 | ||||||||||||
(JPYmn) | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | ||||||
Order backlog | 8,647 | 9,031 | 9,534 | 8,349 | 8,852 | 9,748 | ||||||||
YoY | 37.3% | 36.8% | 24.4% | 5.7% | 2.4% | 7.9% | ||||||||
Thermal Spraying (Parent) | 6,527 | 6,578 | 6,832 | 6,016 | 6,276 | 6,970 | ||||||||
YoY | 34.2% | 31.2% | 15.6% | 0.2% | -3.8% | 6.0% | ||||||||
Domestic Subsidiary | 40 | 56 | 48 | 34 | 70 | 100 | ||||||||
YoY | 2.6% | 14.3% | 0.0% | -26.1% | 75.0% | 78.6% | ||||||||
Overseas Subsidiaries | 1,744 | 2,025 | 2,283 | 1,951 | 2,159 | 2,286 | ||||||||
YoY | 53.0% | 64.9% | 71.1% | 33.8% | 23.8% | 12.9% | ||||||||
Other Surface Treatments | 333 | 370 | 370 | 346 | 346 | 391 | ||||||||
YoY | 30.6% | 19.4% | 0.5% | -10.4% | 3.9% | 5.7% |
Source: Shared Research based on company data
Note: Figures may differ from company materials due to differences in rounding methods.
Factors affecting RP change | FY03/23 | FY03/24 | |||||||||
Cumulative (JPYmn) | Q1 | Q1-Q2 | Q1-Q3 | Q1-Q4 | Q1 | Q1-Q2 | Q1-Q3 | Q1-Q4 | |||
Recurring profit | 2,948 | 6,033 | 8,678 | 11,003 | 2,380 | 4,590 | |||||
YoY change | 109 | 811 | 940 | 432 | -568 | -1,443 | |||||
Sales | 717 | 1,775 | 2,556 | 2,530 | -109 | ||||||
Variable cost ratio | -65 | -90 | -338 | -520 | -280 | ||||||
Personnel expenses | -336 | -721 | -959 | -1,121 | -169 | ||||||
Depreciation | -76 | -116 | -137 | -160 | 14 | ||||||
Forex impact | 194 | 431 | 430 | 342 | -108 | ||||||
Other | -325 | -468 | -611 | -638 | 85 | ||||||
Factors affecting RP change | FY03/23 | FY03/24 | |||||||||
Quarterly (JPYmn) | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | |||
Recurring profit | 2,948 | 3,085 | 2,645 | 2,325 | 2,380 | 2,210 | |||||
YoY change | 109 | 702 | 129 | -508 | -568 | -875 | |||||
Sales | 717 | 1,058 | 781 | -26 | -109 | ||||||
Variable cost ratio | -65 | -25 | -248 | -182 | -280 | ||||||
Personnel expenses | -336 | -385 | -238 | -162 | -169 | ||||||
Depreciation | -76 | -40 | -21 | -23 | 14 | ||||||
Forex impact | 194 | 237 | -1 | -88 | -108 | ||||||
Other | -325 | -143 | -143 | -27 | 85 |
Source: Shared Research based on company data
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1H FY03/24 results (out October 31, 2023)
1H (April-September, six months) results summary
Results for 1H FY03/24 (April-September 2023) were as follows.
Sales: JPY23.0bn (-4.3% YoY, previously forecast JPY23.0bn)
Operating profit: JPY4.3bn (-23.0% YoY, JPY4.2bn)
Recurring profit: JPY4.6bn (-23.9% YoY, JPY4.2bn)
Recurring profit margin: 20.0% (-5.1pp YoY, 18.3%)
Net income attributable to owners of the parent: JPY3.0bn (-23.8% YoY, JPY2.8bn)
Sales
Thermal Spraying (handled by TOCALO, the parent company), which accounts for approximately 73% of consolidated sales, decreased 8.0% YoY.
The decline in sales was mainly due to a temporary adjustment phase in the semiconductor market, resulting in a 19.5% decrease in sales for semiconductors and flat panel displays (FPDs), the mainstay customer fields. However, the increase in sales for applications other than semiconductors and FPDs (industrial machinery and other thermal spraying) limited the decrease in Thermal Spraying (Parent) sales to 8.0%. Sales at Overseas Subsidiaries (mainly China and Taiwan), Domestic Subsidiary, and Other Surface Treatments segments also increased YoY, but could not fully offset the decrease in Thermal Spraying (Parent). As a result, 1H (April-September) consolidated sales decreased 4.3% to JPY23.0bn, but were generally in line with the company's previous forecast.
Recurring profit and recurring profit margin (RPM)
Segment profit decreased 28.9% YoY for Thermal Spraying (Parent), but increased 0.2% YoY for Overseas Subsidiaries, 62.3% YoY for Domestic Subsidiary, and 6.6% YoY for Other Surface Treatments. The company's segment profit is linked to recurring profit in the income statement.
The mainstay Thermal Spraying segment saw a decline in profit due to a decrease in sales from the high-profit semiconductor and FPD industries, and Overseas Subsidiaries profit remained largely flat YoY. The increase in profit at Domestic Subsidiary could not fully offset the overall decline in profit. Consequently, the consolidated recurring profit for 1H (April-September) decreased 23.9% YoY to JPY4.6bn. RPM fell 5.1pp YoY to 20.0% due to changes in the sales mix (decrease in sales for semiconductor and FPD applications) and the impact of rising electricity and personnel costs. Recurring profit and RPM were lower YoY, but exceeded the company's previous forecast.
Orders
1H (April-September) FY03/24 orders decreased 2.9% YoY to JPY24.3bn. Orders for the Thermal Spraying segment's mainstay semiconductor- and FDP-related products declined due to the adjustment phase in the semiconductor market, which became evident from the latter half of the previous fiscal year (FY03/23). Orders for the Domestic Subsidiary segment increased due to the recovery of production in the automobile industry, which is its main customer base, and orders for the Overseas Subsidiaries segment also increased YoY, albeit at a slower pace. However, these were not enough to compensate for the decline in semiconductor-related orders. The breakdown of the JPY24.3bn of orders received in 1H FY03/24 is shown below.
Thermal Spraying (parent): JPY17.7bn (-5.7% YoY)
Semiconductor/FPD-related: JPY10.3bn (-14.8% YoY)
Industrial machinery-related: JPY2.4bn (+30.9% YoY)
Steel making-related: JPY1.9bn (-6.5% YoY)
Other businesses: JPY3.1bn (+9.6% YoY)
Domestic subsidiary: JPY1.3bn (+7.4% YoY)
Overseas subsidiaries: JPY3.8bn (+1.3% YoY)
Other Surface Treatments: JPY1.6bn (+15.5% YoY)
In the semiconductor/FPD-related markets, orders of the company's mainstay thermal spraying in 1H declined 14.8% YoY due to inventory adjustments at semiconductor manufacturing equipment manufacturers, the company's largest customers, against the backdrop of a full-scale adjustment phase in the semiconductor market. In Thermal Spraying,
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orders for industrial machinery-related products saw a 30.9% increase and other businesses saw a 9.6% increase, but steel making-related orders saw a 6.5% decrease. As a result, the decline in orders for semiconductor/FPD-related products could not be covered, and Thermal Spraying orders declined 5.7% YoY to JPY17.7bn, the first YoY drop in 1H in four years.
Aside from Thermal Spraying, Domestic Subsidiary orders increased 7.4% YoY as domestic automobile production bottomed out, and Other Surface Treatments orders increased 15.5% YoY, mainly for agricultural machinery. Also, Overseas Subsidiaries orders increased 1.3% YoY due to contributions from the foreign exchange impact (exchange rate difference resulting from the depreciation of the yen), despite the impact from the adjustment phase of the semiconductor market.
Order backlog
The order backlog grew 7.9% YoY to JPY9.7bn as of end-Q2 FY03/24 (end-September 2024). The breakdown of the JPY9.7bn order backlog as of end-Q2 is shown below.
Thermal Spraying (parent): JPY7.0bn (+6.0% YoY)
Semiconductor/FPD-related: JPY4.5bn (+1.2% YoY)
Industrial machinery-related: JPY629mn (+32.1% YoY)
Steel making-related: JPY1.1bn (+32.3% YoY)
Other businesses: JPY718mn (-10.6% YoY)
Domestic subsidiary: JPY100mn (+78.6% YoY)
Overseas subsidiaries: JPY2.3bn (+12.9% YoY)
Other Surface Treatments: JPY391mn (+5.7% YoY)
Order backlog for the mainstay Thermal Spraying grew 1.2% YoY, and order backlog for both industrial machinery- related and steel making-related increased by more than 30% YoY. Order backlog for Thermal Spraying of JPY7.0bn surpassed the JPY6.8bn recorded at end-December 2022, reaching a record high. Furthermore, as order backlog for Domestic Subsidiary, Overseas Subsidiaries, and Other Surface Treatments segments also grew YoY, consolidated order backlog increased by 7.9% to JPY9.7bn. The JPY9.7bn order backlog exceeded the JPY9.5bn recorded at end- December 2022, reaching a record high, as was the case for the Thermal Spraying segment.
The increase in the order backlog essentially indicates future sales growth, excluding for Domestic Subsidiary. However, the company is adjusting shipments of its mainstay semiconductor/FPD-related products to some customers due to the impact of the weakening semiconductor market. Therefore, the company judges that it would be difficult to recover sales rapidly in Q3 and later.
Factors affecting changes (YoY) in recurring profit
Recurring profit, which is closely linked to segment profit in each segment, decreased by JPY1.4bn YoY, from JPY6.0bn in 1H FY03/23 to JPY4.6bn. Factors contributing to the change are as follows.
- downward impact of JPY661mn due to a decrease in sales
- downward impact of JPY515mn due to a rise in the variable cost ratio
- downward impact of JPY275mn due to an increase in personnel expenses
- upward impact of JPY3mn due to a decrease in depreciation
- downward impact of JPY158mn due to foreign exchange effects
- upward impact of JPY166mn due to other factors
In 1H (April-September), profit decreased by JPY661mn due to a decrease in sales, as the impact of a decrease in sales associated with thermal spraying for semiconductor/FPD-related products (-19.5% YoY) was not offset by higher sales in other fields and for other products. The company partially compensated for the decrease in sales with price revisions (increases), but it could not fully absorb the negative impact due to the significant decrease in semiconductor/FPD-related sales. The increase in the variable cost ratio was attributed to a rise in process material costs and outsourcing costs, as well as a change (deterioration) in the sales mix due to a decline in semiconductor/FPD-related sales, which have relatively high profitability.
The increase in labor costs was mainly attributable to wage increases, including an increase in base pay, and an increase in the number of regular employees (from non-regular to regular employees, in addition to an increase in
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new hires). A decrease in overtime work due to reduced operations for semiconductor-related products (resulting in a decrease in overtime pay) resulted in a reduction in labor costs, but the rise in wages and other costs offset this. According to the company, the decrease in overtime work was not only due to a decrease in the utilization rate, but also to the effects of work-style reforms. The decrease in profit of JPY158mn due to foreign exchange effects broke down to a JPY180mn decrease in foreign exchange gains recorded as non-operating income and a positive JPY22mn in exchange rate differences at overseas subsidiaries. According to the company, these factors behind the decline in profit were generally within expectations, excluding the foreign exchange impact.
Other factors (6 above), include various factors, among which, the YoY decline in the cost of electricity resulted in an increase in profit. This is because the cost of electricity had already significantly increased in 1H FY03/23 (from April to September 2022), resulting in some decrease in 1H FY03/24. However, the company acknowledges that this is merely a YoY comparison, and that energy costs, such as electricity, remain high. The main factor behind the decrease in profit other than higher electricity costs was an increase in R&D expenses, but a decline in the loss on valuation of inventory recorded in 1H FY03/23 also contributed to the decrease in profit. As a result, other factors provided a JPY166mn YoY boost to profit.
Results by segment (April-September, six months)
The results by business segment are as follows. The sales share of each segment is the share of 1H consolidated sales of JPY23.0bn. We note that the total of segment sales share does not equal 100%, because royalty income is also included under sales as well as segment sales. Profit of each business is linked to the company's consolidated recurring profit.
Thermal Spraying (handled by TOCALO, the parent company; 72.9% sales share)
Sales: JPY16.7bn (-8.0% YoY)
Segment profit: JPY3.2bn (-28.9% YoY)
Segment profit margin: 18.9% (-5.6pp YoY)
Orders: JPY17.7bn (-5.7% YoY)
Order backlog: JPY7.0bn (+6.0% YoY)
Sales
The Thermal Spraying segment (parent only) is TOCALO's largest segment, accounting for 72.9% of its consolidated net sales (1H result). Thermal Spraying (parent) sales decreased 8.0% YoY to JPY16.7bn, as the sales of mainstay semiconductor/FPD-related products declined due to a decrease in orders caused by inventory adjustments by major customers, which could not be offset by increases in sales of industrial machinery-related and steel making-related products. The JPY16.7bn in sales generated through this segment breaks down as follows.
Semiconductors and Flat Panel Displays (FPDs): JPY9.7bn (-19.5% YoY)
Of which, thermal spraying for semiconductors: JPY9.0bn (-19.6% YoY)
Of which, thermal spraying for FPDs: JPY740mn (-18.2% YoY)
Industrial machinery-related: JPY2.2bn (+27.9% YoY)
Steel making-related: JPY1.7bn (-1.6% YoY)
Other purposes: JPY3.0bn (+17.4% YoY)
Trends in semiconductors and FPDs
Relatively high-margin semiconductor- and FPD-related sales decreased 19.5% YoY to JPY9.7bn, which was the main factor behind the overall decline in Thermal Spraying sales. In addition, 92.4% of sales are for semiconductor/FPD-related products (1H result), and the percentage of FPD sales is on a declining trend.
The decrease in sales from semiconductor/FPD-related products was mainly due to a global decrease in demand for semiconductors, which became noticeable from the latter half of the previous fiscal year (FY03/23). In particular, the semiconductor manufacturing equipment industry, which has been subject to export restrictions to China in connection with the US-China trade friction issue, has been severely affected by the decline in demand. Thus, the company's largest customers-major semiconductor manufacturing equipment manufacturers, and other related
TOCALO 3433
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Tocalo Co. Ltd. published this content on 22 December 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 25 December 2023 05:01:40 UTC.