Fiscal year ended May 31, 2017 (year on year, percentage changes)
Consolidated net sales up 5.2% to ¥61,844 million; operating profit up 5.3% to ¥7,702 million; ordinary profit up 9.2% to ¥8,250 million; and profit attributable to owners of parent up 17.2% to ¥6,112 million (a new record for the Sakata Group).
Economic and other factors affecting operations 1. Global economy
Economic expansion continued in the United States, supported by robust investment in housing and consumer spending.
Strong economic recovery also continued in Europe, despite short-lived turmoil in the financial markets following the British vote to leave the EU.
Among developing countries, the Chinese economy recovered with the aid of stimulus measures, but the Indian economy slowed after a government move to abolish high-denomination banknotes; meanwhile, the Brazilian economy showed signs of recovery but continued to contract.
2. Domestic economy
Improvements in individual incomes and corporate earnings continued to support the ongoing overall recovery of the Japanese economy.
3. Industry trends and impact on the Sakata Group
Domestic demand for seeds remained sluggish, but demand continued to expand in overseas markets due to rising demand for vegetable seeds and flower seeds in developing countries.
Sales revenue from domestic wholesaling operations rose year-on-year due to good sales of vegetable seeds.
Sales revenue from overseas wholesaling operations rose significantly
year-on-year due to substantially higher sales of vegetable seeds and growth in sales of flower seeds.
The Group’s retailing business generated significantly lower sales than in the previous year following the removal of unprofitable product lines, but segment profit improved due to efforts to hold down operating costs.
Stronger sales of high-margin seeds helped to push up gross profit.
4. Financial factors
Lower foreign exchange losses were recorded.
Business segment review
1. Domestic wholesaling: net sales up 2.1% to ¥16,707 million; operating profit down 0.6% to ¥5,296 million
Sales of vegetable seeds increased significantly, but sales of flower seeds fell slightly amid market stagnation.
Vegetable seeds: top sellers included broccoli, bunching onion and lettuce.
Materials: sales increased slightly year-on-year as demand for agricultural pipe and materials for green houses was stimulated by rising oil prices and price hikes for steel pipe.
2. Overseas wholesaling: the segment posted a strong performance, with net sales up 10.1% to ¥35,299 million and operating profit up 1.9% to ¥10,369 million
Performance by region:
1) Asia: strong export performers included broccoli, spinach, lisianthus and sunflower.
2) North America: broccoli, tomato, carrot, spinach, cabbage, beet, melon and other vegetable seeds all posted higher sales.
3) Europe: sales growth for broccoli, spinach, melon and other vegetable seeds and for lisianthus seeds.
4) South America: broccoli, tomato, squash, pepper, melon, lettuce and other vegetable seeds all posted higher sales; the yen’s depreciation against regional currencies boosted the rate of sales growth from the previous year.
Performance by product:
1) Vegetable seeds: strong year-on-year sales growth was driven by top performers such as broccoli, tomato, squash, spinach and melon.
2) Flower seeds: lisianthus and sunflower remained the top performers, driving further positive year-on-year sales growth.
3. Retailing: net sales down 11.7% to ¥8,221 million; the segment recorded operating profit of ¥65 million following the previous year’s loss of ¥290 million.
Home improvement retailers: sales declined significantly due to the impact of unseasonable summer and autumn weather, poor sales of materials, and
continued restraints on sales of unprofitable product lines; profitability
improved significantly, however, due to progress in limiting sales of less profitable product lines, coupled with efforts to constrain operating costs.
Mail order sale: sales of seedlings and bulbs failed to grow due to the impact of unusually heavy autumn rains; with the transition to an online subscriber system complete, costs were cut by switching to electronic publication of mail-order catalogs and other materials.
Garden shop: solid sales of seeds and plants due to more frequent sales events were offset by a significant dip in sales of novelty items, leading to a
year-on-year decline in aggregate sales revenue.
4. Other businesses: net sales up 57.4% to ¥1,615 million; operating profit up by ¥53 million, or 542.9%, to ¥63 million
Sales revenue generated by landscaping and garden construction services increased significantly with the completion of large-scale projects for both government agencies and private-sector companies.
Fiscal year ended May 31, 2016 (year on year, percentage changes)
Consolidated net sales up 3.6% to ¥58,773 million; operating profit up 53.1% to
¥7,317 million; ordinary profit up 30.1% to ¥7,555 million; and profit attributable to owners of parent up 36.5% to ¥5,215 million (a new record for the Sakata Group).
Economic and other factors affecting operations 1. Global economy
Economic recovery continued in the United States, supported by robust consumer spending and investment in housing.
Stronger consumer spending supported a moderate pace of economic recovery in Europe.
Among developing countries, the Indian economy expanded strongly, but the slowdown continued in China amid slumping commodity prices, and Brazil experienced a protracted severe recession.
2. Domestic economy
Improvements in corporate earnings and employment helped to maintain the Japanese recovery in overall terms, but consumer spending remained weak.
Exports to China and other Asian markets declined amid continued uncertainty over regional economic prospects.
3. Industry trends and impact on the Sakata Group
Overall domestic demand for seeds was still sluggish but remained buoyant in overseas markets due to rising demand for vegetable seeds and flower seeds in developing countries.
In domestic wholesaling operations, sales revenue declined from the year before due to significantly lower sales of materials, which offset steady growth in sales of vegetable seeds and seedlings.
In overseas wholesaling operations, sales of vegetable seeds and flower seeds continued to increase.
After an earlier review of unprofitable operations and subsequent measures, the Group’s retailing business generated lower sales than in the previous year.
Strong sales of vegetable seeds contributed to an increase in gross profit.
4. Financial factors
Foreign exchange losses of ¥250 million were recorded, compared with foreign exchange gains of ¥479 million in the previous year.
Business segment review
1. Domestic wholesaling: net sales down 0.2% to ¥16,365 million; operating profit down 8.6% to ¥5,327 million
Sales of vegetable seeds and seedlings increased, but the gains were offset by lower sales of materials.
Vegetable seeds: top sellers included broccoli, sweet corn and tomatoes.
Flower seeds: sales of lisianthus and sunflower seeds increased, but sales of pansy varieties declined as a stagnant market led to reduced cultivation.
Materials: sales declined from the year before despite higher demand for
high-grade liquid fertilizers and specialist culture soils; this mainly reflected the fact that demand in the previous year was boosted by reconstruction demand for greenhouse materials following particularly heavy snowfalls in February 2014.
Seedlings: growth in sales was generated by tomato seedlings sold in cell trays or pots.
The cost of sales increased due to higher production and input costs.
2. Overseas wholesaling: the segment posted a good performance, with net sales up 7.6% to ¥32,074 million and operating profit up 44.7% to ¥10,174 million.
Performance by region:
1) Asia: strong export performers included carrots, broccoli, lisianthus and sunflower.
2) North America: broccoli, squash and other vegetable seeds posted higher sales.
3) Europe and South America: broccoli, tomato and other vegetable seeds posted higher sales.
Performance by product:
1) Vegetable seeds: strong year-on-year sales growth was driven by top performers such as broccoli, tomato, carrots and squash.
2) Flower seeds: lisianthus and sunflower seeds were the top performers, driving positive year-on-year sales growth.
3. Retailing: net sales declined 3.6% to ¥9,306 million; the operating loss of ¥290 million was an improvement from the previous year’s loss of ¥351 million, reflecting successful efforts to constrain operating expenses.
Home improvement retailers: sales fell due to limited sales of unprofitable product lines, but operations became more profitable due to significant reductions in administrative costs.
Mail order sale: revenues generated by the subscriber base were lackluster after the transition to a new system for mail-order subscribers.
Garden shop: sales were higher than in the previous year, in part due to
favorable weather in autumn, a popular season for gardening in Japan. Online and in-store sales both showed encouraging signs of growth.
4. Other businesses: net sales up 20.6% to ¥1,026 million; operating profit of ¥9 million, an improvement of ¥79 million compared with an operating loss of ¥69 million in the previous year
Sales revenue generated by landscaping and garden construction services increased with the completion of large-scale projects.
The turnaround in profitability reflected higher gross profit combined with a reduction in operating expenses.