For Customer Satisfaction
KOKUYO has established “being useful to customers” as its basic principle in its sales activities, the structuring of its orga-nization, management planning, and other areas. KOKUYO always provides sincere and polite responses to customer inquiries and comments that are received by its Customer Center. In addition, the statements of customers are treated as valuable information to be used for improving KOKUYO products and services as well as are transmitted in real time to the staff inside KOKUYO.
Quality and Safety Management
As KOKUYO expands the percentage of its sales in overseas markets, KOKUYO is striving to adapt its standards for manu-facturing excellence from being a single standard fitting all areas to standards that appropriately meet the needs of indi-vidual markets. When considering quality standards, the oper-ating environment and business conditions vary by country and region for a number of reasons. These include differing cultures and values, such economic factors as per capita GDP, legal requirements for quality and meeting environmental standards, and other factors. While always giving top priority to ensuring safety, KOKUYO is moving forward with the preparation of optimal quality standards that will gain the support of custom-ers in differing countries and regions. To continue to maintain and improve quality, KOKUYO is taking the following initiatives.
• Strengthening Quality Assurance Systems
Along with realignment of its quality assurance organization and strengthening of corporate governance, such as internal audit functions, KOKUYO reviewed its systems for attaining manufacturing excellence, and is carefully examining the content of its quality assurance operations.
• Active Introduction of Quality Cost Indicators The concept of “quality cost” is one indicator of the cost of measures implemented, including investments and expendi-tures devoted to quality control activities, to maintain quality.
These quality costs are divided into three types: preventive measures, evaluation, and dealing with failures. Beginning in 2010, KOKUYO began the full-scale introduction of the concept of “failure costs.” This has involved gaining an understanding, not of the number of defective products and customer complaints, but the actual economic losses incurred in connection with them. These activities include clarifying the seriousness of customer complaints and the implementation of initiatives to make improvements.
• Introducing Product Risk Analysis Using the R-Map Method
To prevent product-related accidents, KOKUYO has begun to use the R-Map (Risk Map) method, taken from the field of “confidence engineering” to analyze the risks that may be inherent in its products. The analysis tool of the R-Map method is a matrix that has “frequency of occurrence” on the vertical axis and “level of seriousness of risk” on the horizontal axis.
This method visually expresses the level of risk.
• Conduct of Plant Diagnoses (Quality Audits)
To maintain and raise the level of product quality of KOKUYO’s more than 10,000 items, KOKUYO implements plant diagno-ses (quality audits) of its facilities in Japan and overseas. These diagnoses involve the examination of individual plants to deter-mine their strengths and weaknesses. Based on these diagno-ses, KOKUYO is endeavoring to improve its operations by increasing productivity and raising product quality at the same time.
Community Involvement and Development
The KOKUYO Group engages in activities that contribute to communities in countries and regions where it conducts busi-ness, in order to advance its social contributions around the world.
Grassroots Support Activities: Notebooks for Underprivileged Children
Since 2006, KOKUYO has been partner in the Ministry of Foreign Affairs’ Grassroots Human Security Grant Aid project, which was introduced in 1989 to address the diverse needs of people in developing countries.
There are still a fair number of villages without schools deep in the mountains of China. The Grassroots Human Security Grant Aid project aims to create learning opportunities and educational environments for children in these regions.
KOKUYO helps this project by supplying Campus notebooks to children. In fiscal 2013, KOKUYO gave 9,960 notebooks to schools in 15 locations. Over the seven-year period since it began donating in 2006, KOKUYO has provided a cumulative total of 430,000 notebooks.
Library Donation Project: Providing Spaces for Children to Learn
KOKUYO Furniture Commerce and Trading (Shanghai) Co., Ltd. was a participant in the Library Donation Project, a project for donating books to elementary schools in Yunnan Province, through the Chinese NPO One School. The project provides
children with a place to learn by donating a library of books to elementary schools in the remote mountainous regions of Yunnan Province.
In collaboration with KOKUYO Commerce (Shanghai) Co., Ltd., KOKUYO Design Consultants (Shanghai) Co., Ltd. and KOKUYO Store Creation (Shanghai) Co., Ltd., KOKUYO Furniture Commerce and Trading (Shanghai) Co., Ltd. donated more than 2,500 books over a four-month period beginning in June 2013, enabling the completion of the libraries without incident. The new libraries were named KOKUYO One School Library, a testament to KOKUYO’s endeavors to provide support for this project.
World’s Largest Art Competition
KOKUYO Camlin Ltd. has been a pioneering promoter of the arts in India, and continues to proactively encourage the arts after it became a consolidated subsidiary in 2011.
For 40 years, KOKUYO Camlin has sponsored its “All India Camel Colour Contest,” a painting contest for children, with the objective of increasing the interest of pupils in the arts and artistic activities in the school educational system in India.
In fiscal 2013, 4,110,626 students attending 4,631 schools participated in the contest. In 2011, this competition was recognized by the Guinness World Records as the largest art competition in the world in terms of the number of participants.
Art contest in India Students in China’s Shandong Province receiving KOKUYO products
Children in China using KOKUYO writing products pose for a photograph in their school library.
Annual Report 2013 37
Eleven-Year Summary
KOKUYO CO., LTD. AND CONSOLIDATED SUBSIDIARIES
The years ended March 31, 2004, 2005, 2006 and 2007 and the years ended December 31, 2007, 2008, 2009, 2010, 2011, 2012 and 2013
2013.12 2012.12 2011.12
For the year:
Net sales ¥288,083 ¥275,822 ¥260,005
Cost of sales 194,675 186,603 173,345
Selling, general and administrative expenses 86,981 84,366 82,587
Operating income 6,427 4,853 4,073
Net income (loss) 4,804 2,429 (5,460)
Capital expenditure 4,870 7,067 7,262
Depreciation and amortization 6,918 6,664 6,531
Net cash and cash equivalents provided by operating activities 10,921 10,788 10,653 Net cash and cash equivalents used in (provided by) investing activities (2,191) 796 (10,818) Net cash and cash equivalents provided by (used in) financing activities (7,561) (2,837) 1,040
At year-end:
Total assets 270,739 258,462 252,794
Working capital 56,614 56,787 41,289
Property, plant and equipment, net 65,558 67,835 70,866
Total liabilities 105,082 105,391 103,213
Interest-bearing debt 40,298 44,839 44,695
Total net assets 165,657 153,070 149,581
Minority interests 2,041 2,437 2,311
Net assets 163,616 150,633 147,270
Per share data:
Basic net income (loss) ¥ 40.62 ¥ 20.53 ¥ (46.16)
Diluted net income — — —
Cash dividends applicable to the year 15.00 15.00 15.00
Net assets 1,383.34 1,273.53 1,245.08
Ratios:
Ratio of operating income to net sales 2.2% 1.8% 1.6%
Return on sales 1.7 0.9 (2.1)
Return on equity 3.1 1.6 (3.6)
Return on assets 1.8 0.9 (2.2)
Equity ratio 60.4 58.3 58.2
Debt-to-equity ratio 24.6 29.8 30.3
Common stock:
Number of shares issued 128,742 128,742 128,742
Note: Due to the change in KOKUYO’s fiscal year-end, the period ended December 31, 2007 was an irregular nine-month period.
Millions of yen
2010.12 2009.12 2008.12 2007.12 2007.3 2006.3 2005.3 2004.3
¥261,874 ¥266,726 ¥326,120 ¥252,824 ¥339,559 ¥303,959 ¥283,519 ¥273,462
175,843 180,260 221,574 175,512 228,959 202,879 187,008 181,279
82,749 85,887 99,192 75,910 99,237 86,975 84,352 83,317
3,282 579 5,354 1,402 11,363 14,105 12,159 8,866
815 595 (11,991) (5,326) 5,622 4,145 5,207 1,949
4,827 3,479 4,988 7,733 4,999 6,042 6,431 9,369
6,009 6,334 6,488 4,430 6,057 6,082 6,220 6,197
8,966 13,737 16,153 3,286 7,936 11,488 10,168 7,457
(4,730) (1,930) (1,012) (11,333) 2,389 (17,217) (20,778) (7,112)
(2,625) (4,746) (12,343) 7,349 (5,272) 2,059 7,075 (4,586)
252,880 252,053 266,419 301,187 320,033 314,573 291,651 289,194
50,601 49,483 50,755 44,584 56,120 50,733 58,486 57,790
77,134 78,050 79,534 81,195 79,349 89,733 94,778 97,134
96,248 93,979 106,599 120,780 130,125 121,063 104,268 103,693
39,797 39,244 41,448 52,069 42,958 36,491 26,770 17,777
156,632 158,074 159,820 180,407 189,908 193,522 187,378 185,501
709 599 741 1,225 1,235 1,678 340 360
155,923 157,475 159,079 179,182 188,673 191,844 187,038 185,141
Yen
¥ 6.89 ¥ 5.03 ¥ (101.36) ¥ (45.02) ¥ 46.94 ¥ 33.82 ¥ 41.88 ¥ 15.38
— — — — — 31.80 41.88 15.38
15.00 15.00 15.00 11.25 15.00 15.00 18.50 15.00
1,318.22 1,331.30 1,344.82 1,514.64 1,594.79 1,587.49 1,522.17 1,506.80
%
1.3% 0.2% 1.6% 0.6% 3.3% 4.6% 4.3% 3.2%
0.3 0.2 (3.7) (2.1) 1.7 1.4 1.8 0.7
0.5 0.4 (7.1) (2.9) 3.0 2.2 2.8 1.1
0.3 0.2 (4.2) (1.7) 1.8 1.4 1.8 0.7
61.7 62.5 59.7 59.5 59.0 61.0 64.1 64.0
25.5 24.9 26.1 29.1 22.8 19.0 14.3 9.6
Thousands of shares
128,742 128,742 128,742 128,742 128,742 128,742 128,742 128,742
Annual Report 2013 39
Management’s Discussion and Analysis
Overview
During the KOKUYO Group’s fiscal year, ended December 31, 2013, concerns surrounding the state of Japan’s economy continued to linger. Despite signs of a moderate recovery thanks largely to the positive economic effects derived from such factors as improved corporate earnings and increased consumption, these concerns were mainly due to the sharp rise in raw material prices attributable to the weakening yen.
Under these circumstances, every effort was made to pursue a strategy that focused on maximizing the Company’s strengths.
Accordingly, the KOKUYO Group took steps to again refine its value chain in Japan while building value chains overseas that best suit the specific conditions of each country.
Analysis of Consolidated Statements of Operations Net Sales
Consolidated net sales for the fiscal year under review increased 4.4% compared with the previous fiscal year, to
¥288.1 billion. The principal factor contributing to this gain was the continued brisk sales of office furniture in Japan.
Gross Profit, SG&A Expenses, and Operating Income
Gross profit rose 4.7% year on year, to ¥93.4 billion, as a result of the growth in net sales. The gross profit margin was essen-tially unchanged from the previous fiscal year, at 32.4%.
Turning to selling, general and administrative (SG&A) expens-es, the ratio of SG&A expenses to net sales was 30.2%, largely reflecting ongoing efforts to curtail expenses. From a profit per-spective, operating income came in at ¥6.4 billion, up 32.4%
compared with the previous fiscal year. The operating income margin improved 0.4 of a percentage point year on year, to 2.2%. These positive results were mainly due to robust trends in the furniture business and thoroughgoing efforts to control expenses.
Other Income (Expenses)
During the fiscal year under review, KOKUYO recorded a gain on the sale of investments in securities, net of ¥0.4 billion and a gain on the sale of property, plant and equipment, net of ¥1.0 billion as other income items. At the same time, the Company incurred an impairment loss of ¥1.2 billion. Foreign exchange gains amounted to ¥1.1 billion. Total net extraordinary income was ¥1.4 billion.
Net Sales and Overseas Sales Ratio
(Millions of yen) (%)
Gross Profit and
Gross Profit Margin on Net Sales
(Millions of yen) (%)
Analysis of Increases/Decreases in Operating Income
(Billions of yen) 350,000
0 250,000
200,000 300,000
150,000
7.0 6.0
5.0
0 4.0 3.0
2.0 100,000
50,000 1.0
2013 2012 2011 2010 2009
288,083 288,083 5.8 5.8
100,000
0 50,000
25,000 75,000
40
0 20
10 30
2013 2012 2011 2010 2009
32.4 32.4
93,408 Change from the previous year (January through December)
2013 2012
4.9 +4.0
+0.2 (2.6)
6.4 Increase in
gross profit ratio
Increase in income +1.6 Increase in SG&A expenses Increase in gross
profit due to increase in sales
쐽 Net Sales (Left Scale)
쐽 Overseas Sales Ratio (Right Scale)
Note: The figures for sales are the sum of the sales of KOKUYO Commerce (Shanghai) Co., Ltd., KOKUYO Furniture Commerce & Trading (Shanghai) Co., Ltd., KOKUYO International Asia Co., Ltd., KOKUYO Vietnam Trading Co., Ltd., KOKUYO International (Malaysia) Sdn. Bhd., and KOKUYO Camlin Ltd.
쐽 Gross Profit (Left Scale)
쐽 Gross Profit Margin on Net Sales (Right Scale)
Income before Income Taxes
and Minority Interests and Net Income
Accounting for each of the aforementioned factors, income before income taxes and minority interests amounted to ¥7.8 billion. Due mainly to a drop in the effective corporate income tax rate, net income was ¥4.8 billion, up 97.8% compared with the previous fiscal year.
Allocation of Net Income and Cash Dividends for the Fiscal Year
Guided by its basic policy with respect to the allocation of net income, management focuses on providing adequate returns to shareholders. In addition to paying a stable dividend, KOKUYO targets a dividend payout ratio of 20% or more based on consolidated operating results.
For the fiscal year under review, the Company has therefore decided to pay an annual cash dividend of ¥15 per share (comprising a ¥7.5 per share interim dividend and a ¥7.5 per share period-end dividend). As a result, the consolidated dividend payout ratio for the fiscal year is 36.9%.
Segment Information
Effective from the fiscal year under review, the KOKUYO Group has revised the allocation of expenses (Group management
and operation fees) between the Company and its consolidat-ed subsidiaries. As a result, operating income in the Stationery and Furniture segments is up around ¥0.6 billion and ¥1.5 bil-lion, respectively, while operating income in the Online and Catalog sales and Retail segment is down approximately ¥0.8 billion compared with the previous fiscal year.
Stationery Segment
The KOKUYO Group’s objective is to establish its position as the No. 1 manufacturer of stationery goods in Asia. In Japan, the Group remains committed to its goals of forging a domi-nant presence and becoming the first choice of its customers.
Overseas, the Group has set its sights on becoming the No. 1 manufacturer of stationery goods in China, India, and Vietnam.
In the domestic market, the Group launched more than 500 new products in a bid to stimulate demand. However, the mar-ket remained challenging due to a variety of factors, including a slower-than-expected recovery in the B-to-B channel.
In overseas markets, the Group took steps to create value chains that best suited the conditions of each country to cap-ture the growing domestic demand in Asia. In India, the Group commenced the introduction of an order placing/receiving sys-tem for use with wholesalers and promoted efforts to optimize inventory and conduct more-efficient sales activities, while
Sales by Business Segment, Operating Income, and Change from the Previous Fiscal Year
Millions of yen Change year on year
2013 2012
Net Sales:
Stationery ... ¥ 90,115 ¥ 92,122 -2.2%
Furniture ... 114,626 105,279 +8.9%
Online and Catalog sales
and Retail ... 110,532 106,426 +3.9%
Operating Income:
Stationery ... ¥ 5,938 ¥ 5,304 +12.0%
Furniture ... 1,593 103 +1,452.2%
Online and Catalog sales
and Retail ... 1,553 2,364 -34.3%
Note: The figures do not include the amounts of adjustments.
Net Income (Loss) and ROE
(Millions of yen) (%)
6,000
-6,000 0
-3,000 3,000
4
-4 0
-2 2
2013 2012 2011 2010 2009
3.1 4,804
쐽 Net Income (Loss) (Left Scale)
쐽 ROE (Right Scale)
Annual Report 2013 41