Annual Report 2014
Fiscal year ended December 31, 2014
Focusing
on the Future
Honing Performance by Serving More Markets
with More and Better Products
Profile
Aiming to be the
“Honor of Asia”
Over 100 years ago, KOKUYO got its start as a manufacturer of covers for Japanese-style account ledgers. The name “KOKUYO,” means “Honor of the Country” in Japanese.
Continuing to expand our product lines and business territory from that starting point, we are now a comprehensive manufacturer of stationery and ofice furniture active not only in Japan but also in China, Vietnam, India, and other countries as well. We also offer online sales of ofice products and operate interior furnishing stores.
Going forward, we intend to grow together with the economies of Asia, further expand our activities in the region, and establish ourselves as an Asian company active at the global level
— we aim to become the “Honor of Asia.”
Since Our Founding in 1905
110
Years of Company
History
Brand recognition
in Japan
%
Over 98
in Japan 293
Consolidated Net Sales
billion yen
(Fiscal year ended December 31, 2014)
C o n t e n t s
Management’s Discussion and Analysis
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income
Consolidated Statements of Cash Flows
Consolidated Statements of Changes in Net Assets
Notes to Consolidated Financial Statements
Independent Auditors’ Report
Corporate Data
25 31 33 34 35 37 38 67 68 1
2 3 4 5 6 7 15 21 23
Disclaimer Regarding Forecasts and Projections:
Forecasts of future financial performance and projections of future business conditions contained in this report reflect judgments that were made by the Company based on information available as of the time this report was prepared, and entail potential risks and uncertainties. Actual financial performance and business conditions, therefore, may differ significantly from the forecasts and projections contained in this report. The Company bears no duty whatsoever to change or revise, in reflection of information newly obtained in the future, or events or discoveries occurring in the future, statements regarding the forecasts and projections contained in this report.
Proile
Business Overview and Sales Breakdown
KOKUYO’s Positions and Strengths
Strategic Network
Financial Highlights
To Our Stakeholders
Special Feature: Strategy for Fiscal 2015
Review of Operations in FY2014
CSR Management and Corporate Governance
Eleven-Year Summary
Note: Starting from fiscal 2012 (ended December 31, 2012), segment information is disclosed based on the following three segments: “stationery segment,” “furniture segment,” and
“online and catalog sales and retail segment.” Accordingly, the historical figures for fiscal 2011 are reclassified using the new segments.
KOKUYO’s first product, covers for Japanese-style account ledgers
KOKUYO Co., Ltd. Annual Report 2014
1
Stationery Business
26.0%
76.0
Furniture Business
40.3%
118.2
33.7%
billions yen
98.7
Online and Catalog Sales and Retail Business
Online and Catalog Sales and Retail Business
Online and Catalog Sales and Retail Business
We offer online and catalog sales of ofice supplies and consumer goods, and operate interior furnishing stores.
Kaunet online and catalog sales website
Take notes Cut Paste
Bind File Write
We help to drive evolution in the knowledge work customers pursue in their jobs and at school.
billion yen
Business Overview and Sales Breakdown
(Fiscal year ended December 31, 2014) Note: Net sales include consolidation adjustmentsWe make company ofices, stores, public facilities and other spaces comfortable, safe, and more eficient.
billion yen
Online and catalog sales Retail
Shanghai Showroom
Ofices
Healthcare facilities Educational facilities Store fixtures
Stationery Business
KOKUYO’s Positions and Strengths
In Japan
Number one share in the
stationery market
In China
In India
2011
2013
Third largest market share of the office
supplies online and catalog sales market
Second largest share of the office
furniture market
1 st
Camlin Ltd., India’s third-largest stationery manufacturer, is acquired. Company’s name is changed to KOKUYO Camlin Ltd.
Riddhi Enterprises is acquired to strengthen notebook manufacturing.
2012 Construction of the Shanghai notebook plant is completed. Hot Rocks Stationery is acquired to gain control of the Gambol brand, which enjoys high awareness in the Chinese market.
In Vietnam
2007 Plant construction is completed and production of binders for the Japanese market begins.
Production and sales of notebooks for the Vietnamese market begin.
Number of wholesale partners is increased. Television commercials begin airing.
Photo 2 Photo 1
Map 3
2011 2013
Furniture Business
In Japan In China
1997
2 nd
Plant construction is completed. Production of steel desks and other products for export begins.
In Singapore
2003 Sales of ofice furniture to Japanese companies in China begin. Investment is made in a local furniture manufacturer to secure production capacity.
Showroom is opened in Shanghai.
Strategic products for inland markets are introduced.
2012 Branch is opened. 2011
2012 2014
Online and Catalog Sales and Retail Business
In Thailand
2004 Sales of ofice furniture begin.
In Japan In China
3 rd
2005“Easybuy” online and catalog sales service for ofice supplies is started.
1 2 3
In Maraysia
See P13
Shanghai Beijing
Harbin
Dongguan Wuhan
Shenyang See P12
See P11
KOKUYO Camlin Ltd. products Campus notebooks in Vietnam Furniture business in China moves inland from the coast
KOKUYO Co., Ltd. Annual Report 2014
3
KOKUYO is locating business facilities with an eye toward creating a network spanning the breadth of Asia - the center of global economic growth. Nothing else could show as clearly that we are committed to making Asia the platform for our own growth.
Strategic Network
We’re building a business network
that places emphasis on Asia, as the
center of global economic growth.
Japan China
Vietnam
KOKUYO (Shanghai) Management Co., Ltd. ◎ KOKUYO Commerce (Shanghai) Co., Ltd. ◎ S&T Logistics (Shanghai) Co., Ltd. KOKUYO Furniture (China) Co., Ltd. ◎
KOKUYO Design Consultants (Shanghai) Co., Ltd. ◎ KOKUYO International Asia Co., Ltd. ◎
KOKUYO Vietnam Co., Ltd. ◎ KOKUYO Vietnam Trading Co., Ltd. ◎
KOKUYO-IK (Thailand) Co., Ltd. KOKUYO International (Thailand) Co., Ltd.
KOKUYO Camlin Ltd. ◎
KOKUYO Riddhi Paper Products Private Ltd.
Thailand
India
KOKUYO Furniture Co., Ltd. Singapore Branch
Singapore
KOKUYO Malaysia Sdn. Bhd. ◎
KOKUYO International (Malaysia) Sdn. Bhd. ◎
Malaysia
KOKUYO Co.,Ltd. ◎ KOKUYO S&T Co., Ltd. ◎ KOKUYO Marketing Co., Ltd. ◎ KOKUYO Product Shiga Co., Ltd. ◎ KOKUYO MVP Co., Ltd. ◎ KOKUYO Supply Logistics Co., Ltd. KOKUYO Furniture Co., Ltd. ◎
KOKUYO Engineering & Technology Co., Ltd. ◎ KOKUYO Logitem Co., Ltd. ◎
Kaunet Co., Ltd. ◎ Actus Co., Ltd. ◎
n China Malaysia
China
Japan
India
Vietnam
Singapore
Malaysia
Thailand
Locations
7
Countries5
Plants1
Management Stationery business Furniture Business Online and Catalog Sales and Retail Business Stationery 2 Furniture 2
( (
(Stationery)
4
Plants1
Plants(Stationery)
1
Plants(Stationery) Plants
(Stationery)
1
Plants(Furniture)
Financial Highlights
Net Sales
2013 2012
2011
2010 2014
(Millions of yen)
Operating Income /
Ratio of Operating Income to Net Sales
2013 2012
2011
2010 2014
4.0
3.0
2.0
1.0
0
(Millions of yen) (%)
2.6
2.2 1.8
1.6 1.3
8,000
6,000
4,000
2,000
0 300,000
225,000
150,000
75,000
0
261,874 260,005
275,822
293,054
288,083
3,282
4,073
4,853
6,427
7,599
Net Income (Loss) /
Return on Equity
2013 2012
2011
2010 2014
(Millions of yen)
Total Assets /
Equity Ratio
2013 2012
2011
2010 2014
80
60
40
20
0
(Millions of yen) (%)
6.0
4.0
2.0
0.0
– 6.0
(%) Total Assets
61.5 Equity Ratio
58.3 60.4 58.2
61.7 300,000
225,000
150,000
75,000
0 6,000
4,000
2,000
0
– 8,000
815
2,429
5,066
4,804 252,880 252,794 258,462
270,739
273,772
Net Income ROE–5,460 0.5
–3.6 1.6
3.1 3.1
2013 2012
2011
2010 2014
300
225
150
75
0 20
15
10
5
0
15 15 15 15
15
217.6
73.1
36.9 35.0
Earnings per Share
2013 2012
2011
2010 2014
(yen)
Dividends per Share /
Payout Ratio
(yen) (%)
Dividends per Share Payout Ratio
60
40
20
0
– 60
6.89
–46.16 20.53
40.62
42.83
Operating Income
Ratio of Operating Income to Net Sales
KOKUYO Co., Ltd. Annual Report 2014
5
For the glory of Ecchu. Born in present-day Toyama Prefecture, company founder Zentaro Kuroda vowed to establish himself in business and set out for Osaka with the intent of being an honor to his hometown. In Osaka, he started Kuroda Hyoshi-Ten, a workshop that produced cover paper for account books, which was the beginning of the business of KOKUYO. In October of this year, KOKUYO will mark its 110th anniversary.
The founder’s resolution came to be incorporated into the KOKUYO trademark in 1917. In 1961, the present-day name of the company was adopted. And now the resolution isembraced by the entire KOKUYO group and would constitute the basis for decision-making process in the company. We believe that our company name is a significant reason that we can celebrate our 110th anniversary despite having encountered numerous difficulties throughout our history. It is because each employee has been inspired to go forth and prevail over each new complication by revisiting the KOKUYO company name.
The company has not managed to survive for 110 years on its own. We owe our existence today to the many stakeholders including customers who have great expectations of our company and countless business connections who have lent us a helping hand along the way. We express our heartfelt gratitude to those leaders who helped shape our history based on respect for the founder’s resolution and to those stakeholders who supported us day in and day out.
Our corporate philosophy of enriching the world through our products has remained unchanged since we were founded. We have been promoting our day-to-day business by supporting the growth of our customers (individuals and companies) through our products and services so as to enrich society. In recent years, however, societal values have diversified and the growth of people and companies has come to take on varied forms. In order to achieve sustainable growth even as it becomes more difficult to determine what it means to enrich the world, we are presently engaged in efforts to undertake management reforms for rebuilding a foundation for management and business.
In the first phase of reforms begun in 2010, Group businesses were broadly divided into three sections: stationery, furniture, and
To Our Stakeholders
By seriously accepting
the difficult challenges
that confront customers
and communities,
we aim to help realize
a sustainable society
Akihiro Kuroda
Representative Director of the Board, Chairman
Hidekuni Kuroda
Representative Director of the Board, President and CEO
Representative Director of the Board, Chairman
Representative Director of the Board, President and CEO
mail orders and retail. By tightening up and streamlining value chains for each business, we achieved business-focused management for enhancing value provided. At the same time, we proactively moved forward with overseas expansion while attempting to figure out new ways of enriching the world based on our experience in high-growth Asian countries. After reflecting on compliance violations in the past, we embraced CSR-based management and reviewed our system of corporate governance thoroughly Consequently, results have been yielded as seen in steadily recovering performance results up to fiscal year 2014.
In 2015, with a rejuvenated management system in place, phase 2 of our reforms was launched. In October, two key operating companies will be merged with KOKUYO Co., Ltd., and we will go beyond the framework of our business and seek to create value that is truly desired by customers. We will build on our early successes, enhance the value that we have been providing based on a new mid- to long-term vision, and take on the challenge of generating new value. At the same time, we will continue to strive to resolve such societal issues as the protection of the global environment and respect for human rights.
We have managed to survive and prosper for 110 years by seriously dealing with customer issues that vary with the times and finding solutions to each one of these issues along the way. This approach will not change even as we operate presently in a time described as uncertain and in a society that finds itself more and more beset by societal issues and business-related problems. By valuing an approach to dealing seriously with both customer problems and societal issues within the context of a new management system and flexibly modifying our way of resolving these problems and issues, we will try our hardest to bring about a sustainable society. We respectfully ask for your continued support and understanding. Thank you very much.
Focus on Earning Power (Gross Profit) While
Continuing to Increase Sales and Profits
Special Feature: Strategy for Fiscal 2015
Performance Data and Information
KOKUYO Co., Ltd. Annual Report 2014
7
For iscal 2015 (ending December 31, 2015), KOKUYO will strive to achieve net sales of 302 billion yen, an increase of 3.1% versus the result for iscal 2014, and operating income of 9.3 billion yen, an increase of 22.4%. We are aiming, in other words, to achieve a fourth consecutive increase in annual net sales and a sixth consecutive increase in annual operating income.
With raw material and procurement costs rising as the yen depreciates, and factors such as changes in domestic sales channels, success will not come easily. Nevertheless, we are committed to drawing on all of our Group’s domestic and overseas capabilities to make the most of our earning power in not only recording higher gross proit on higher sales but also achieving higher productivity and curbing the impacts of yen depreciation to maintain our sales and proit growth.
2013 2012 2011 2010 2009
2008 2014 2015
(Plan) 400
320
240
160
8
0
20
16
12
8
4
0 (Left axis)
(Billions of yen) (%)
(Left axis) Net Sales Operating Income 326
267 262 260 276
288
302
20
16
12
8
4
0 (%)
Domestic
Overseas
Draw on the Group’s overall capabilities to achieve higher sales and productivity, and increase gross profits.
3.1 %
year-on-year increase Billions of yen
Net sales
Objectives for the Coming Fiscal Year
(Ending December 31, 2015)
302
22.4 %
year-on-year increase
Operating income
9.3
Billions of yen
1 % pt.
Overseas net sales percentage
8 %
293
5.4
1 1
2 2
5
6 7
8
0.6 3.3 4.1
4.9 6.4
7.6
9.3
Resolve issues going forward and achieve profitability.
In Japan
In Japan
In Japan
In China
In China
In China
In India
In India
In India
In Vietnam
In Vietnam
In Vietnam
(Right axis) Overseas Sales Ratio
(Ending December 31, 2015)
year-on-year increase
Market Trends:
Bring over 500 new products to market.
Pursue cost cuts and introduce revised pricing.
Domestic Stationery Business
Self-manufacturing and other steps will be pursued to counter the impacts of yen depreciation. Prices for key products will be raised in January and July 2015.
Further strengthen approaches to wholesale channels.
Sales of stores that introduced the KiSPA (See P15) wholesale catalog issued in January 2014 have shown solid performance. Plans are now to increase the number of KiSPA catalogs issued, the number of stores handling them, and the number of KiSPA catalog users.
Market scale has been approximately
500 billion yen in recent years, but is seen as
slowly declining going forward.
Uses rings that are made of plastic and are easy on hands that bump them when writing.
arket.
Soft-Ring Notebook
The cover this Campus Notebook will feature a cute birthday cake design commemorating the 40 years customers have continued to purchase this product since its introduction in 1975. Birthday Cake Notebook Marking the 40th Anniversary of the Introduction
of the Campus Notebook
Hosomi Slim Scissors Slim scissors that provide the three most desired qualities of scissors – easy storage, comfortable hold, and ease in making long straight cuts. Increase the gross profit margin by bringing a large number of high-value-added products to market. With regard to the Campus Notebook, in particular, launch new products and
focus on sales promotions commemorating 2015 as the 40th anniversary of the introduction of this iconic product.
1
Key Measure
2
Key Measure
3
Key Measure
KOKUYO Co., Ltd. Annual Report 2014
9
Domestic Furniture Business
The offices of KOKUYO Group companies are “Live Offices,” where customers can come and observe our employees using our products. The KOKUYO Group has established 25 Live Offices - the greatest number in the industry – and emphasizes a consultative sales approach in which Live Offices are a key element.
Emphasize a consultative sales approach
applying KOKUYO’s Live Office.
Improve productivity by increasing capacity utilization at KOKUYO Group manufacturing plants and moving forward with cost cuts. Increase the profit margin by offering high-value-added products that enhance worker creativity.
Improve productivity.
Nationwide 25 places Live Office
Supply of Large-Scale Office Building in Tokyo 23 Words
Source: “Market Trend Survey of Large-Scale Office Buildings in Tokyo’s 23 Wards” prepared by Mori Building Company
(Supply area: Millions of m2) (Supply number)
2013 2014 2015 2016 2017 150
120 90 60 30 0
25 20 15 10 5 0
The Bezel office chair was developed specifically to address the change in sitting posture brought about by the greater use of IT. It features a design that supports the hips and a mechanism that permits the seat to be adjusted to the optimal angle.
Bezel Office Chair for Posture Support and a More Beautiful Office Space
Mie Factory Shibayama Factory
D
E h
Market Trends:
With the economy recovering, companies are investing
more in offices. Market conditions are good, as exemplified
by the stream of new large office buildings being
completed in the 23 wards of central Tokyo.
(Ending December 31, 2015)
Special Feature: Strategy for Fiscal 2015
Bring new products and differentiating
products to market.
2
Key Measure
3
Key Measure
1
Key Measure
The Kaunet online and catalog sales channels gives users the ability to purchase products by various manufacturers in a single source. Within the Kaunet, high-value-added private brand products are distinguished by the “Kaucore Premium” name and available only at Kaunet.
Kaucore Premium Private Brand Products
Octachalk Chromatic File Series Free To Choose Colored Adhesive Notes
Market Trends:
The office online and catalog sales market
has been growing by about 4% annually
in recent years.
Catalogs are issued twice a year and feature innovative touches that make product selection easy.
Six new ACTUS consumer-oriented interior furnishing stores will be opened mainly in the Kanto Region during 2015.
For Example,
Open six stores mainly in the Kanto Region,
where opportunities for
new retail locations abound.
ACTUS stores offer consumers selections of imported furniture, mainly from Northern Europe, original furnishings, and other interior goods that suggest a new urban lifestyle.
ACTUS Interior Furnishing Stores
stores 5.
he Kanto Region,
d.
Retail Business
Retail Business
Domestic Online and Catalog Sales, and Retail Business
Online and Catalog Sales
Retail
Provide catalogs that facilitate
product selection.
Instant coffee selections are plotted on a coordinate plane to show how they stack up against each other in terms of flavor and aroma, and pens are shown together with actual size of the thickness. Information such as this makes product selection easy.
We are expanding sales of Kaucore Premium high-value-added private brand products on the Kaunet online and catalog sales channels.
Expand sales of private brand products via
online and catalog sales.
1
Key Measure
2
Key Measure
3
Key Measure
Business Activities in Asia
KOKUYO Co., Ltd. Annual Report 2014
11
KOKUYO is manufacturing and selling stationery and ofice furniture in China and India, as well as Vietnam and other ASEAN countries.
Wholesalers, retail stores, volume sellers
Writing instruments, art supplies, notebooks,
etc.
Wholesalers, stationery stores
Notebooks, scissors, document files, etc.
Direct sales, wholesalers, retail stores
Office furniture, Store fixtures
Direct sales, retail stores, dealers
Office Furniture
China
Vietnam
Malaysia
India
Singapore
Thailand
Product Offerings
Product Offerings
Product Offerings Product Offerings
Sales Channels
Sales Channels
Wholesalers, bookstores
Notebooks
Product Offerings
Sales Channels
Sales Channels Sales Channels
Patalganga Mumbai Build new manufacturing plants and consolidate
production to increase production capacity.
India
Actively introduce new products.
KOKUYO Camlin
Overseas Stationery Business
Market Trends:
In India
(Ending December 31, 2015)
Special Feature: Strategy for Fiscal 2015
a
The stationery market is now growing at an annual rate of about 10%.
“No-brand” products by small and medium-size manufacturers have dominated
the market, but, with a burgeoning middle class and changing lifestyles,
demand for high-quality products is growing and major brands are expected
to gain market share.
New Manufacturing Plant (Patalganga Plant) Planned Completion: 2016
Area: 54,000 ㎡（2nd largest KOKUYO plant） Products: Writing instruments and other products Investment: Approx.1.0 billion yen
Increase the production efficiency and production capacity
of manufacturing plants.
Introduce writing instruments and other new products.
Major manufacturer of art supplies and stationery products in India. Camlin became a subsidiary of KOKUYO S&T Co., Ltd. in 2011, and its name was changed to KOKUYO Camlin Ltd.
1
Key Measure
2
Key Measure
Laying glue down in a dot pattern means smooth, even application every time. Dot Liner Glue Tape
This product series is characterized by a rich array of colors. Highly transparent pockets allow users to clearly see the documents inside.
COLOR TAG Colored Document Files
Designed to cut with relatively little effort, and with blade surfaces that resist tape adhesives, these scissors deliver long-lasting cutting performance. AIROFIT SAXA Scissors
Increase sales of products for elementary school children
in the north, and sales of small products in the south.
KOKUYO has already secured high market shares in notebooks for junior high and high school students in the north. Emphasis will, therefore, be placed on expanding sales of products for elementary school students.
In the south, small-size notebooks are more popular than in the north, so sales efforts in the south will focus on expanding market share for these products.
Vietnam
Hanoi
Ho Chi Minh City
Vietnam
Vietnam
Han Ha
Ho C
Ho Chi MC Citity Preferred
Notebook Size
in the North Notebook SizePreferred
in the South
Market Trends:
The market for notebooks is currently growing at annual rates
of 10% or more. KOKUYO enjoys high market share
in the northern part of the country, where its plant is located.
In Vietnam
Market Trends:
In China
The stationery market is expected to grow by 10% a year.
Elaborately designed products and products
with innovative features are gaining popularity.
Expand markets by introducing new Design notebooks and high-value-added stationery.
Expand markets by introducing high-value-added products. dded pr d roductts. roductts
1
Key Measure
1
Key Measure
252mm
179mm
210mm
148mm
(Ending December 31, 2015)
Special Feature: Strategy for Fiscal 2015
KOKUYO Co., Ltd. Annual Report 2014
13
2
Key Measure
Guangzhou Shanghai Beijing
Greater Mekong
Singapore Kuala Lumpur
Overseas Furniture Business
Adjust sales models to area market sizes
and stages of development.
In coastal Chinese and principal ASEAN cities, which have large markets and strong demand for office furniture and fixtures, a direct sales approach will be pursued. In contrast, for inland Chinese markets and ASEAN local cities, sales will be pursued through dealers.
Offer product grades suited to particular geographic areas.
Offer middle-to-high-grade products in coastal Chinese and principal ASEAN cities, and mainly middle-grade products developed in 2014 in inland Chinese markets and ASEAN local cities.
Inland Chinese cities / ASEAN local cities Costal Chinese and
principal ASEAN cities
Sell middle-grade
products through
dealers.
Sell middle-to-high
grade products
directly.
B B
S
S S
G G G G G G
Jakarta
Philippines
Market Trends:
Low-grade products now dominate the Chinese and
ASEAN markets, but demand for middle-grade products
is expected to grow. The Chinese market is seen as
growing by about 5% a year.
ade pro
directl
Sell m
gra Inland Chinese
cities
PRESENCE Ⅱ
steel furnishings for simplicity in office spaces
PRESENCE II workstations, made with steel frames and tiles, are easy to set up. The ability to adjust panel heights and colors means office layouts that are both simple and colorful in design.
1
Key Measure
Bangkok
Creating an Unified Organization Better Suited
for Increasing Profits and Maintaining Growth
in a Difficult Domestic Market
Reorganization
To be a brand that customers and society continue to rely on, the KOKUYO Group introduced in 2011 a management approach based on three business segments.
Under the corporate divisions, the Stationery Segment, Furniture Segment, and Online and Catalog Sales and Retail Segment each work to maintain strong value chains that allow them to pursue dynamic management, develop timely products, and offer products and services based on the customer’s perspective.
Under this management model, the KOKUYO Group has continued to report annual increases in both net sales and income.
We have been successful. However, remaining at the forefront of an extremely competitive domestic market,
continuing to generate profits, and maintaining our growth now requires that we cross the boundaries of business segments to draw on all of our capabilities as a single entity to overcome the various issues confronting us. Going forward we will also have to make decisions with even greater speed than we have in the past.
Given these needs, we have decided to restructure the KOKUYO Group as shown below beginning in October 2015. By integrating the business segments and corporate divisions, we will reconstitute business resources in a way that promotes new awareness of our needs for overall optimization and high efficiency. In creating a new manage- ment model, we will not only boost our profitability but also strengthen the foundations of our operations.
From 2011
Stationery Business
Furniture Business
Online and Catalog Sales and Retail Business
Reorganization From 2015
Stationery Business Division
Furniture Business Division
“Kaunet” Business Division
International Business Division
Wholesale Management
Corporate Planning ofice
Corporate Administrations
Review of Operations in FY2014
Review of Operations in FY2014 (Ended December 31, 2014) (Ended December 31, 2014)
Review of Operations in FY2014 (Ended December 31, 2014)
The KiSPA catalog contains office supplies from 450 manufacturers, including KOKUYO. Beginning in 2015, it is being supplemented with the Mobile KiSPA smart- phone/tablet ordering system for stationery suppliers.
Net Sales*
(Millions of yen) 150,000
120,000
90,000
60,000
30,000
0
2013 2014
2012 2011
2013 2014
2012 2011
2015 (Plan)
93,646
4,450
96,500
4,100 Operating Income
(Millions of yen)
Note: Percentage composition figures in the pie charts in this Review of Operations are based on sales after eliminations for internal transactions. Bar graphs are based on sales before eliminations for internal transactions.
10,000
8,000
6,000
4,000
2,000
0
2015 (Plan)
7,050
92,122 90,115
5,938
Stationery
Business
86,880
5,304
As of December 31, 2014, 39 years after the 1975 introduction of Campus notebooks – the product synonymous with the KOKUYO brand – sales had topped 2.7 billion units.
Campus notebook
2.7Billions sales per 39 years
➊
KiSPA Millions of yenShare of Total Net Sales*
*
26.0 %
76,058
3.9 %
Increase
3.0
%
Increase-25.1 %
decrease
% -7.9 %
decreaseKOKUYO Co., Ltd. Annual Report 2014
15
Results
Product Introductions and Initiatives
In fiscal 2014 （ended December 31, 2014）, much of our attention in the domestic market was focused on product development. Over 400 new items were introduced and a variety of sales promotions for Campus notebooks and other products were implemented to stimulate demand. To strengthen the wholesale channel, steps were taken to promote use of the KiSPA
➊
ordering system, which is intended to make the purchasing of office supplies more convenient.Turning to overseas markets, new products
➋
were introduced and sales activity efficiency gains were achieved by employing a tablet-based ordering system in India, efforts to expand sales channels and improve manufacturing productivity were made in China, and Campus notebooks➌
with eye-catching covers and cleverly designed page formats were introduced to expand market share in Vietnam.As a result, net sales in both the domestic and overseas businesses rose, by a combined 3.9% compared to fiscal 2013 (ended December 31, 2013), to ¥93,646 million. Operating income, however, declined 25.1% year on year, to ¥4,450 million.
This was due to changes in the net sales percentage breakdown by sales channel and by product in the domestic business, and to a smaller gross margin owing to both steep increases in raw material costs and higher product development and distribution expenses incurred to expand sales.
Plans for fiscal 2015 (ending December 31, 2015) include a 3.0% year-on-year increase in net sales, to ¥96,500 million, and a 7.9% year-on-year decrease in operating income, to ¥4,100 million. (See the Special Feature on P7.)
The “Beetle Tip 2 way marker
➍
,” a highlighter pen with two colors, was introduced in June 2014.In October 2014, the “Harinacs Press
➎
” stapleless stapler was introduced. This product makes novel use of a press-lock approach that applies compression by metal teeth to bind up to five pages without making holes in the paper. The Harinacs Press product series was awarded with the fiscal 2014 Invention Prize at the National Commendations for Invention sponsored by the Japan Institute of Invention and Innovation.➋
Poster promoting a newmechanical pencil product in India
➍
Two-color “Beetle Tip 2 way marker” (ended December 31, 2013), to ¥93,646 million. Operatincome, however, declined 25.1% year on year, to ¥4,4
➌
Campus notebooks introduced in Vietnam➎
“Harinacs Press” stapleless staplerLive Offices are actual KOKUYO offices that are outfitted with the latest in office products and furniture to give customers a chance to see and experience them. At the recently renovated Shinagawa Live Office SHIPP (Shinagawa Practical Place), for example, visitors can see how a space has been arranged and how people work to disseminate information and make it visible, how work gets accomplished across departments, and how cooperation occurs inside the company and with outside partners.
Live Office Actual Office Where the Latest in Office Environments Can Be Experienced
Review of Operations in FY2014
Review of Operations in FY2014 (Ended December 31, 2014) (Ended December 31, 2014)
Review of Operations in FY2014 (Ended December 31, 2014)
Net Sales*
(Millions of yen) 180,000
160,000
120,000
80,000
40,000
0
2013 2014
2012 2011
2013 2014
2012 2011
2015 (Plan)
120,695
4,155
124,000
Operating Income
(Millions of yen) 12,000
9,000
6,000
3,000
0
−3,000
2015 (Plan)
1,593
Furniture
Business
101,927
103
105,279 114,626
5,900
40.3 %
Millions of yen
118,215
Share of Total Net Sales*
INSPINE office chair based on a completely new design
➌
➊
Note: Percentage composition figures in the pie charts in this Review of Operations are based on sales after eliminations for internal transactions. Bar graphs are based on sales before eliminations for internal transactions.
*
5.3 %
Increase
2.7
%
Increase160.9 %
Increase
% 42.0 %
Increase−1,558
KOKUYO Co., Ltd. Annual Report 2014
17
Results
Product Introductions and Initiatives
Fiscal 2014 (ended December 31, 2014) endeavors in the domestic market focused on expanding market shares in the private-sector office, medical, education, and government sectors. Manufacturing-sales collaboration in proactively putting forth solution proposals to gain new customers was a key aspect of this effort. Measures aimed at stimulating demand included completing the renovation of the Shinagawa Live Office SHIPP (Shinagawa Practical Place
➊
) and the holding of the KOKUYO Fair, where attendees were able to experience new products for themselves. Both the SHIPP and KOKUYO Fair are venues where new approaches to work in an office environment can be promoted to customers.Overseas, progress was made in developing direct sales customers in China’s urban markets, while also cultivating and strengthening relationships with sales representatives in inland markets. Office furniture products
➋
designed to reflect local needs were introduced, and efforts were made to develop customers among Chinese companies.With solid progress in advancing sales proposals to customers in the domestic business and with growth overseas, net sales rose by 5.3% compared to fiscal 2013 (ended December 31, 2013), to
¥120,695 million. Operating income, helped by factors such as higher sales and an improvement in the gross margin on domestic direct sales, rose 160.9% year on year, to ¥4,155 million.
Fiscal 2015 (ending December 31, 2015) objectives include a 2.7% year-on-year increase in net sales, to ¥124,000 million, and a 42.0% year-on-year increase in operating income, to ¥5,900 million. (See the Special Feature on P7.)
In February 2014, we introduced the INSPINE office chair, based on a completely new design.
The backrest is the first ever to use wired lumbar support, in which a single wire adjusts flexibly to the back, giving rise to an optimal sitting posture and the best possible support for a wide range of working styles. In addition, the unique “posture support seat” is comprised of a cushion layered on top of a contoured surface that supports the pelvis and has a “forward incline support” function that permits optimal adjustment of the seating angle. These innovations deliver comfortable seating by supporting various working postures and differences in individual body dimensions.
➌
➋
Entry office furniture for Chinese markets➋
PRESENCE II office furniture for Chinese markets“SAIBI” is workstations Offering Functionality and Beauty
Kaunet offers a broad selection of stationery, office-supply, and furniture products from KOKUYO and various other manufac- turers, as well.
Kaunet
Japan’s Third Largest Online
and Catalog Seller of Office Supplies
Review of Operations in FY2014
Review of Operations in FY2014 (Ended December 31, 2014) (Ended December 31, 2014)
Review of Operations in FY2014 (Ended December 31, 2014)
Net Sales*
(Millions of yen) 150,000
150,000
120,000
80,000
40,000
0
2013 2014
2012 2011
2013 2014
2012 2011
Note: Percentage composition figures in the pie charts in this Review of Operations are based on sales after eliminations for internal transactions. Bar graphs are based on sales before eliminations for internal transactions.
*
2015 (Plan)
Operating Income
(Millions of yen) 3,750
3,000
2,250
1,500
750
0
2015 (Plan)
1,783
1,553
Online and Catalog
Sales and Retail
Business
100,764
2,364
33.7 %
Millions of yen
98,781
Share of Total Net Sales*
107,139 108,300 106,426 110,532
2,074
➊
Kaucore is the line of private-brand products marketed through Kaunet.2,000
-3.1 %
decrease
1.1
%
Increase33.5 %
Increase
% -3.5 %
IncreaseKOKUYO Co., Ltd. Annual Report 2014
19
Results
Product Introductions and Initiatives
Fiscal 2014 (ended December 31, 2014) in the Online and Catalog Sales business was a year for enhancement of the selection of original products offering added value through their unique features. This was done to achieve greater awareness of the Kaucore
➊
private brand established the previous year under Kaunet. Meanwhile, the With Kaunet office-supply bulk purchasing system continued to perform solidly.In the Retail business (sales of interior and daily goods), ACTUS produced positive results based on new store openings
➋➌
and steadily rising customer traffic.Kaunet and ACTUS net sales rose compared to the previous fiscal year. However, due to the exclusion of FOREST Co., Ltd. and LmD Co., Ltd. from the scope of consolidation, net sales for the Online and Catalog Sales, and Retail Business as a whole fell by 3.1%
compared to fiscal 2013 (ended December 31, 2013), to ¥107,139 million. Operating income, reflecting higher earnings at Kaunet and ACTUS, increased by 33.5% year on year, to ¥2,074 million. Fiscal 2015 (ending December 31, 2015) plans include a 1.1% year-on-year increase in net sales, to ¥108,300 million, and an 3.5% year-on-year decrease in operating income, to ¥2,000 million. (See the Special Feature on P7.)
The PIQUSA II
➍
desk series was introduced in August 2014. This new product line, for small offices, offers color, design, and functional refinements at economical prices and is being well received as a product only the KOKUYO Group, with its advanced know-how in office furniture design and manufacturing, could produce.➋
The ACTUS Sendai store was opened in October 2014. It is the first ACTUS store located in northeastern Japan.
The PIQUSA II desk series was launched as a new, original Kaunet product line in August 2014.
The ACTUS lifestyle store, SLOWHOUSE, was opened in Tennozu, Tokyo in April 2014. Its underlying concept is to promote discerning lifestyles.
➌
➍
Review of Operations in FY 2014
Review of Operations in FY 2014 (ended December 31, 2014) (ended December 31, 2014)
CSR Management and Corporate Governance
Efforts for Promoting Corporate Governance
KOKUYO reaffirms the significance of corporate governance for top management to proceed with management reforms. Since 2010, we drastically have reformed the corporate governance to lay the foundation of governance structure and have been making efforts to maintain and operate proper corporate governance structure while enhancing the management transparency. The Nominating and Compensation Committee established in 2010 as the advisory panel for the board of directors consists of a majority of the independent directors and external intellectuals, and it considers candidates for directors, auditors, and managing officers (“board members”), as well as their appointment and dismissal, and discusses compensation plans, evaluates individual board members, and then verifies compensation to inquire and make proposals to the board of directors. Beginning in April 2015, new top management structure was introduced including the replacement of the chief executive officer, president and director, etc., and it was determined through a fair process based on the objective assessment of the Nominating and Compensation Committee, which took nearly three years.
System for the Promotion of CSR
The KOKUYO Group promotes CSR activities on a group-wide basis through linkages among CSR-related sections. We also operate an environmental committee, a central health and safety committee, and a diversity promotion committee, among other such organs tasked with dealing with important concerns. With special sections leading the way, our entire group pursues these concerns in a coordinated fashion. In aspiring to become an Asian company, the establishment of a system for the promotion of CSR in a global context will become an issue that will need to be addressed. We will continue to strive to achieve sustained growth
Basic Concepts
The KOKUYO Group began when founder Zentaro Kuroda opened a small shop selling ledger covers made with Japanese paper in 1905. It was his understanding that high value-added businesses were already being operated by others, leaving behind only low value-added pickings from among which someone likes him could choose. The founder nevertheless believed that even troublesome work can enrich the world if it were to be infused with original ideas in a simple and honest manner and held fast to this ideal his entire life. For over a hundred years, the KOKUYO Group has ceaselessly adhered to this founding spirit as captured in this business of KASU and operated under our corporate philosophy of enriching the world through our products. The founder also bequeathed us with his basic ideas on CSR: We do not pursue business profits. Profit is the reward conferred onto us by society for contributing to society through our business.
In 2004, based on our corporate philosophy we enacted the KOKUYO Group CSR Charter to establish better relations with various stakeholders as a good corporate citizen (which was partially revised in 2012). Our basic policy for ensuring the ongoing growth of society and the KOKUYO Group has been clarified in line with five key themes: our customers, regional communities, environmental conservation, corporate activities, and respect for human rights.
Basic Concepts
With the aim of ensuring the reproducibility and continuity of transparent, apt, and efficient business administration, we established a structure for corporate governance. In order to ensure that business and operations are carried out without improprieties, without mistakes, and efficiently, we developed and are operating a system of internal control that we are striving to improve and enhance on an ongoing basis. Headed by various board members, key committees linked to internal control appoint members from among multiple related sections and endeavor to systematically promote and fortify responses to important issues concerning CSR on a group-wide basis.
for society and the Group while maintaining a state of harmony with stakeholders through CSR information disclosure and dialogue.
HOLDING COMPANY
Appointment and dismissal Appointment and dismissal Appointment and dismissal
Advice
Advice
Oversight
Reports
Cooperation Cooperation and reports
Independent Audits Appointment.
dismissal and supervision
Accounting audit Cooperation
Reports
Reports
Instructions Instructions
Internal audit
Internal Audits EXECUTIVE
COMMITTEE Principal Internal Control
Committees
BOARD OF DIRECTORS NOMINATING &
COMPENSATION COMMITTEE
GROUP COMPANIES
President & CEO
Audit & Supervisory Board
ADMINISTRATIVE DEPARTMENTS
INTERNAL AUDIT DEPARTMENT Risk Management
Committee Investment Council
Internal Accounting Control Committee
GENERAL MEETING OF SHAREHOLDERS
INDEPENDENT AUDITOR
Approval of important operational matters Inquiries
Inquiries
KOKUYO Co., Ltd. Annual Report 2014
21
Members of the Board, Audit & Supervisory Board Members, and Managing Officers
Members of the Board
Akihiro Kuroda
Representative Director of the Board, Chairman
Hidekuni Kuroda
Representative Director of the Board, President and CEO
Yasuhiro Kuroda
Director of the Board, Vice Chairman
Takuya Morikawa
Director of the Board, Senior Managing Officer
Nobuyuki Miyagaki
Director of the Board, Senior Managing Officer
Hisao Sakuta
Independent Director of the Board
Hiroshi Hamada
Independent Director of the Board
Taketsugu Fujiwara
Independent Director of the Board (As of March 27, 2015)
Audit & Supervisory Board Members
Yoichi Kotani
Standing Audit & Supervisory Board Member
Tsutomu Sumitani
Standing Audit & Supervisory Board Member
Tomomi Yatsu
Outside Audit & Supervisory Board Member
Yutaka Mizuno
Outside Audit & Supervisory Board Member
Takuya Morikawa
Senior Managing Officer International Business Division
Naotaka Umeda
Managing Officer Corporate Planning Office
Kozo Sakagami
Managing Officer Furniture Business Division (President & CEO,
KOKUYO Furniture Co., Ltd.)
Takuji Yaso
Managing Officer
Stationery Business Division (President & CEO, KOKUYO S&T Co., Ltd.)
Kenichiro Takahashi
Managing Officer
“Kaunet” Business Division (President & CEO, Kaunet Co., Ltd.)
Hidekuni Kuroda
President and CEO
Managing Officers
Nobuyuki Miyagaki
Senior Managing Officer Corporate Administrations
From left to right: Hiroshi Hamada, Nobuyuki Miyagaki, Yasuhiro Kuroda, Akihiro Kuroda, Hidekuni Kuroda, Takuya Morikawa, Hisao Sakuta, Taketsugu Fujiwara
From left to right: Yutaka Mizuno, Tsutomu Sumitani, Yoichi Kotani, Tomomi Yatsu
KOKUYO Co., Ltd. And Consolidated Subsidiaries
The years ended March 31, 2005, 2006 and 2007 and the years ended December 31, 2007, 2008, 2009, 2010, 2011, 2012, 2013 and 2014
Eleven-Year Summary
2014.12 2013.12 2012.12
Note: Due to the change in KOKUYO’s fiscal year-end, the period ended December 31, 2007 was an irregular nine-month period.
For the year: Net sales Cost of sales
Selling, general and administrative expenses Operating income
Net income (loss) Capital expenditure
Depreciation and amortization
Net cash and cash equivalents provided by operating activities Net cash and cash equivalents used in (provided by) investing activities Net cash and cash equivalents provided by (used in) financing activities
At year-end: Total assets Working capital
Property, plant and equipment, net Total liabilities
Interest-bearing debt Total net assets Minority interests Net assets
Per share data: Basic net income (loss) Diluted net income
Cash dividends applicable to the year Net assets
Ratios:
Ratio of operating income to net sales Return on sales
Return on equity Return on assets Equity ratio Debt-to-equity ratio
Common stock:
Number of shares issued
20.53
— 15.00 1,273.53
2.6 1.7 3.1 1.9 61.5 19.2
2.2 1.7 3.1 1.8 60.4 24.6
1.8 0.9 1.6 0.9 58.3 29.8
128,742 128,742 128,742
¥275,822 186,603 84,366 4,853 2,429 7,067 6,664 10,788 796 (2,837)
258,462 56,787 67,835 105,391 44,839 153,070 2,437 150,633
¥288,083 194,675 86,981 6,427 4,804 4,870 6,918 10,921 (2,191) (7,561)
270,739 56,614 65,558 105,082 40,298 165,657 2,041 163,616
¥293,054 196,604 88,851 7,599 5,066 5,780 7,139 15,883 (703) (9,107)
273,772 73,792 63,993 103,420 32,339 170,352 2,078 168,274
¥ ¥
% % %
¥ 42.83
— 15.00 1,422.75
40.62
— 15.00 1,383.34
KOKUYO Co., Ltd. Annual Report 2014
23
2011.12 2010.12 2009.12 2008.12 2007.12 2007.3 2006.3 2005.3
(46.16)
— 15.00 1,245.08
6.89
— 15.00 1,318.22
5.03
— 15.00 1,331.30
(101.36)
— 15.00 1,344.82
(45.02)
— 11.25 1,514.64
46.94
— 15.00 1,594.79
33.82 31.80 15.00 1,587.49
41.88 41.88 18.50 1,522.17
1.6 (2.1) (3.6) (2.2) 58.2 30.3
1.3 0.3 0.5 0.3 61.7 25.5
0.2 0.2 0.4 0.2 62.5 24.9
1.6 (3.7) (7.1) (4.2) 59.7 26.1
0.6 (2.1) (2.9) (1.7) 59.5 29.1
3.3 1.7 3.0 1.8 59.0 22.8
4.6 1.4 2.2 1.4 61.0 19.0
4.3 1.8 2.8 1.8 64.1 14.3
128,742 128,742 128,742 128,742 128,742 128,742 128,742 128,742
¥260,005 173,345 82,587 4,073 (5,460)
7,262 6,531 10,653 (10,818)
1,040
252,794 41,289 70,866 103,213 44,695 149,581 2,311 147,270
¥261,874 175,843 82,749 3,282 815 4,827 6,009 8,966 (4,730) (2,625)
252,880 50,601 77,134 96,248 39,797 156,632 709 155,923
¥266,726 180,260 85,887 579 595 3,479 6,334 13,737 (1,930) (4,746)
252,053 49,483 78,050 93,974 39,244 158,074 599 157,475
¥326,120 221,574 99,192 5,354 (11,991)
4,988 6,488 16,153 (1,012) (12,343)
266,419 50,755 79,534 106,599 41,448 159,820 741 159,079
¥252,824 175,512 75,910 1,402 (5,326)
7,733 4,430 3,286 (11,333)
7,349
301,187 44,584 81,195 120,780 52,069 180,407 1,225 179,182
¥339,559 228,959 99,237 11,363 5,622 4,999 6,057 7,936 2,389 (5,272)
320,033 56,120 79,349 130,125 42,958 189,908 1,235 188,673
¥303,959 202,879 86,975 14,105 4,145 6,042 6,082 11,488 (17,217)
2,059
314,573 50,733 89,733 121,063 36,491 193,522 1,678 191,844
¥283,519 187,008 84,352 12,159 5,207 6,431 6,220 10,168 (20,778)
7,075
291,651 58,486 94,778 104,268 26,770 187,378 340 187,038
Millions of yen
Yen
%
Thousands of shares
% % % % % % % %
¥ ¥ ¥ ¥ ¥ ¥ ¥ ¥
Management’s Discussion and Analysis
Overview Profit and Loss
Net Sales
During the fiscal year ended December 31, 2014, the Japanese economy traced a path of mild recovery as the yen depreciated and stock prices rose in response to the Japanese government’s economic policies and the Bank of Japan’s monetary policies, and export industries led upturns in corporate profits and capital expenditures. Nevertheless, given the impacts of economic trends in China and other emerging economies, political uncertainties abroad, and factors such as sharp increases in raw material prices, the outlook for Japan’s economy remains cloudy.
Despite the transfer of business operations and exclusion from consolidation of two subsidiaries, net sales in fiscal 2014 rose by 1.7% compared with the previous fiscal year, to ¥293,054 million. Supporting this increase were strong sales of office furniture in the Japanese market and growth in overseas businesses.
The two subsidiaries mentioned above include FOREST Co., Ltd., an online and catalog office supplies retailer whose shares were sold to J. FRONT RETAILING Co., Ltd. in December 2013, and LmD Co., Ltd., the operator of THE CONRAN SHOP home furnishings stores. Shares in the latter were sold to CASSINA IXC. Ltd. in September 2014.
Net Sales and Overseas Sales Ratio
2013 2012
2011
2010 2014
8.0
6.0
4.0
2.0
0
(Millions of yen) (%)
7
6
5
2 2
300,000
225,000
150,000
75,000
0
Net Sales Overseas Sales Ratio
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.
261,874 260,005
275,822 288,083
293,054
KOKUYO Co., Ltd. Annual Report 2014
25
Other Income
Allocation of Net Income
and Cash Dividends for the Fiscal Year
Income before Income Taxes
and Minority Interests, and Net Income
Gross Profit, SG&A Expenses,
and Operating Income
For fiscal 2014, a ¥1,353 million gain on the sale of investment securities was recorded as extraordinary income.
An extraordinary loss of ¥331 million was also recorded following the recognition of impairment losses on fixed assets for the stationery business in China. Separately, a ¥331 million loss was also recorded on the sale of LmD Co., Ltd. shares.
Income before income taxes and minority interests fell 2.5% compared with the previous fiscal year, to ¥7,629 million. Net income, however, rose 5.4%, to ¥5,066 million, due to factors such as tax savings related to the dissolution of a subsidiary.
The basic policy on the allocation of net income is to practice management emphasizing the interests of shareholders and to reflect that by not only paying a stable dividend, as has been the case to date, but also targeting a dividend payout ratio of 20% or more based on consolidated operating results.
In line with that policy, the cash dividend for fiscal 2014 has been set at ¥15 per share (consisting of an interim dividend of ¥7.5 per share and a fiscal-year-end dividend of ¥7.5 per share). At that level, the consolidated dividend payout ratio is 35%.
Net Income (Loss)
2013 2012
2011
2010 2014
(Millions of yen)
6,000
3,000
0
–3,000
–6,000
815
–5,460
2,429
4,804
5,066
In fiscal 2014, gross profit increased by 3.3% year on year, to
¥96,450 million, on the strength of higher sales and a higher gross profit margin in the furniture business. The overall gross profit margin, at 32.9%, was up 0.5 percentage points from the previous fiscal year.
Regarding SG&A expenses, sales promotion activities were intensified, but with ongoing efforts to cut costs, the SG&A expense ratio came to 30.3%, approximately what it was the previous fiscal year.
Reflecting the above, operating income rose by 18.2% year on year, to ¥7,599 million, and the operating income margin, at 2.6%, was 0.4 percentage points higher than for the previous fiscal year.
Gross Profit and Gross Profit Margin on Net Sales
2013 2012
2011
2010 2014
40
30
20
10
0
(Millions of yen) (%)
32.9
32.4 33.3 32.3
32.9 100,000
75,000
50,000
25,000
0
Gross Profit
Gross Profit Margin on Net Sales
86,031 86,660 89,219
93,408
