The Nidec Group’s consolidated net sales increased 2% to ¥1,199.3 billion, and operating profit increased 19% to ¥140.3 billion for the fiscal year ended March 31, 2017 (FY2016), compared to the prior fiscal year, recording the highest figures in our history. In addition, profit before income taxes increased 21%, and profit attributable to owners of the parent increased 24% compared to the prior year, both of which were record-high results. Profit attributable to owners of the parent exceeded ¥100 billion mark for the first time in our history. The forecasts for the year ending March 31, 2018 (FY2017) are net sales of ¥1,350 billion and operating profit of ¥160 billion. Particularly, we expect that our two key growth areas, Automotive, and Appliance, Commercial and Industrial Products businesses will expand. For Automotive business, we are anticipating the sales growth of automotive motors including electric power steering motors, our flagship products. For Appliance, Commercial and Industrial businesses, we are anticipating sales increase due to the contribution of newly consolidated business, European business of Emerson Electric Co. of which acquisition was completed in February 2017. These positive factors led us to expect increased revenues and profits in both net sales and operating profit in FY2017.
We uphold shareholder-oriented management and pursue high growth, high profitability, and high share value to build long-term, sustainable growth in shareholder value. Placing importance on regular dividend payments, we seek to increase our dividend payout to around 30% of our consolidated net income. The annual dividend for FY2016 increased by ¥5 to ¥85 per share compared to the prior fiscal year. We are targeting to increase the annual dividend amount by ¥5 to ¥90 per share for FY2017. We will continue to take measures to return more profits to our shareholders by considering the fluctuation of our company’s stock price as well as requests from our individual shareholders.
Increasing likelihood of achieving mid-term strategic goal, Vision 2020
Vision 2020, our mid-term strategic goal that we announced in April 2015 aims for the Nidec Group to achieve annual consolidated net sales of ¥2 trillion, consolidated operating profit ratio of 15% or higher, and a return on equity (ROE) of 18% or higher in the fiscal year ending March 31, 2021.
The businesses of Automotive Products and Appliance, Commercial and Industrial Products, which we regard as our key growth areas, have been growing faster than initially projected. Both businesses are already likely to achieve the sales of ¥600 billion per year. Also promising is the Small Precision Motor business that is growing faster. Though its target net sales were initially set to ¥400 to ¥600 billion per year, this business is already likely to achieve ¥600 billion, the upper limit of the initial target range, because of strong demand for HDD motors and our successful expansion to the new applications such as tactile devices.
We have started strategically working on enhancing gross profit ratio, which we believe will be the key to achieving operating profit ratio of 15%. Gross profit ratio in FY 2016 increased slightly more than 1% to 23.9% compared to the prior year. Our latest target is to improve the ratio to 31% or higher in FY2020. Specific actions to be executed in full-scale to achieve this target include expansion of the group-wide in-house component production, and cost reduction of externally procured materials via further group-wide joint purchasing, based on globally consolidated management. Furthermore, we will accelerate automation pace at our factories. We will introduce to our factories the i611* which can perform manual operations for humans, as well as S-Cart** which is an autonomous-running transportation machine to reduce direct labor cost. We aim to achieve the target operating profit ratio of 15% founded on an improvement in gross profit ratio.
In addition to these two key growth businesses, our plan includes entering into newly emerging fields with great future growth potential, as well as modularization. As the world currently experiences unprecedented waves of technological innovations, new markets are born one after another, requiring autonomous driving, Internet of Things (IoT), drones, virtual reality (VR), and many other new technologies. We will modularize our products and create new additional values by integrating our core motor drive technology with electro-mobility and other technologies, boldly enter into these emerging markets, and evolve into a solution provider.
*i611: Compact and light industrial robot manufactured by Nidec
**S-Cart: Automated guided vehicle with guideless capabilities manufactured by Nidec
Turning pipe dreams into reality
The target sales of ¥10 trillion might sound like a pipe dream; however, Nidec started from zero when founded by only four people in 1973, after which we reached major sales milestones of ¥10 billion, ¥100 billion, and ¥1 trillion. Looking back, it took us approximately the same number of years to reach each milestone. The hardest time was, though, before we reached ¥1 billion after we started from zero. Remembering how hard it was to reach the one billion-yen point, ¥10 trillion sales by FY2030 does not seem impossible at all. Though the figure might appear to be nothing more than a pipe dream, I believe that we will be able to achieve this dream eventually.
Keys to achieving these targets will be basic research and development capabilities, production engineering capabilities, and globally competitive human resources. To enhance our basic research and development capabilities, we opened Nidec Research and Development Center in June 2012. To strengthen our production technology competence, we opened Nidec Center for Industrial Science in October 2015, for which a construction of a new building in Kansai Science City in Kyoto, Japan has started. The main two purposes of establishing this Nidec Center for Industrial Science are to build fundamental technologies that will be needed in the future, and to address the quality- and production engineering-related issues that our business units, group companies, and technological centers encounter. Lastly, as for developing globally competitive human resources, we built a new training center in March 2017 which has enabled us to further improve our employee training system. In FY2016, we opened the Nidec Global Business School to gather executive candidates from Nidec’s group companies across the world, and train them as our next generation of leadership. In FY2017, we have started both the second year of the Nidec Global Business School and a Next Generation Global Business Leader Training Program, intended for a wider range of candidates.
We will not rest on our laurels, and continue on this road to become a 10 trillion-yen company. I truly appreciate our shareholders’ and investors’ continued support.
Chairman of the Board, President and Chief Executive Officer