Executive Message

We will pool all of the Group’s efforts into providing total solutions, so as to help create an affluent living environment. Kunio Ishikawa, President

I would like to express my deepest gratitude to all our shareholders for the invaluable and ongoing support you have extended to KYOWA EXEO.

The following is an overview of the consolidated results of KYOWA EXEO for fiscal 2016 (ended March 31, 2017).

Fiscal 2016 Operating Climate and Consolidated Results

During the consolidated fiscal year under review, the Japanese economy remained on a path toward moderate recovery, reflecting the continued upward trend of corporate earnings and employment backed by economic and monetary policies by the government and the Bank of Japan. However, the economic outlook remained uncertain, given some underlying downside risks such as a growing sense of caution about the economic policies in the United States and the adverse effects of the Brexit decision in the United Kingdom.

In the field of information and communications in Japan, while the reduction in fixed line-related projects continued, such as optical-fiber access, the growth of new value-added services such as the Hikari Collaboration Model is expected. In mobile-related projects, the construction and improvement of the network environment made progress associated with a surge in mobile traffic, and its higher speeds, reflecting the growing popularity of smart devices such as broadband-capable smartphones and tablet devices, as indicated by the further establishment of LTE-Advanced.

In the public and private sectors, we also anticipate accelerated increases in infrastructure investment, including municipal-level projects to bolster ICT capability that tap into the government’s national resilience plan and regional revitalization programs, as well as projects ahead of the 2020 Tokyo Olympic and Paralympic Games and other redevelopment plans around the Tokyo metropolitan area, such as large-scale electrical facility upgrades and construction, the expansion of power line burial, and the renewal of aging social infrastructure. In addition, an uptick in investment to bring systems in line with the rapidly emerging IoT is also expected, such as bolstering cyber security and a shift to cloud services.

In this business climate, we will strive to rebuild our business portfolio to grow SYSTEM-SOLUTIONS as a second pillar of operations by expanding the scope of our engineering peripheral business, which involves Group-wide efforts to develop total ICT solutions to build a solid base for growth by combining existing technologies with services under the new vision in the medium-term management plan (fiscal 2016 through fiscal 2020) announced in May 2016. At the same time, we will work to strengthen our earnings power by improving productivity and quality in our core business of telecommunications infrastructure and taking comprehensive steps to ensure efficiency.

In our efforts to promote proactive sales activities in each area of new energy, geo-solutions, cloud security and global as an initiative to expand the growth businesses, we exhibited the mesh network EXBeacon at CEATEC JAPAN 2016 and the IoT/M2M Expo Autumn to develop our geospatial business in earnest. In this way, we worked to establish a more solid management platform by integrating various technologies and services in our telecommunications infrastructure business, software development, and other operations as well as actively expanding business in areas where growth is expected in the future.

We also earned the gold medal in Information Network Cabling at the 54th National Skills Competition held in October 2016. We will continue to contribute to society with our high construction technology by developing excellent engineers.

In addition, we issued the Labor and Management Joint Declaration for Work Style Reforms made by senior management and labor to promote work-life balance. We will undertake work style reforms, such as shortening total working hours and encouraging the use of annual paid leave. As part of our efforts in work style reforms, we have assigned a full-time official in charge of promoting diversity in the Human Resources Division, to advance it more efficiently and systematically. We will continue to seek a working environment in which every employee can enjoy an active working life.

KYOWA EXEO FY16 Results (Consolidated)
Orders Received ¥324.1 billion 108% YOY
Net Sales ¥298.8 billion 104% YOY
Operating Income ¥20.8 billion 113% YOY
Net income attributable to owners of parent ¥13.7 billion 113% YOY
Results by Segment
    ENGINEERING-SOLUTIONS
Orders Received ¥283.8 billion   109% YOY
Net Sales ¥259.0 billion  104% YOY
    SYSTEM-SOLUTIONS
Orders Received ¥40.2 billion 101% YOY
Net Sales ¥39.7 billion 105% YOY

Performance Forecast and Management Policies

Looking at the field of information and communications, demand for mobile telecommunications projects to expand and upgrade network services and bring service quality in line with increased traffic will remain strong for the time being. However, capital investment by telecom carriers is declining over the medium to long term, and the environment surrounding the Company is expected to remain uncertain.

Meanwhile, in the public and private sectors, we anticipate continued infrastructure investment, including municipal-level projects to bolster ICT capability that tap into the government’s national resilience plan and regional revitalization programs, as well as projects ahead of the 2020 Tokyo Olympic and Paralympic Games and other redevelopment plans around the Tokyo metropolitan area, such as large-scale electrical facility upgrades and construction, the expansion of power line burial, and the renewal of aging social infrastructure. In addition, the steady expansion of investment to bring systems in line with the burgeoning IoT is also expected, such as bolstering cyber security and a shift to cloud services.

In this fiscal year, as the first year of the medium-term management plan (fiscal 2016 through fiscal 2020), and with this business environment, based on our vision “focus Group strengths to take total solutions to a new growth stage,” we expanded the scope of our engineering peripheral business by applying existing technologies and combining services in a group-wide effort aimed at rebuilding our business portfolio and growing SYSTEM-SOLUTIONS as a second pillar of operations. At the same time, we worked to strengthen our earnings power by improving productivity and quality in our core business of telecommunications infrastructure and taking comprehensive steps to ensure efficiency.

In the next consolidated fiscal year, we will continue to respond flexibly to changes in the business environment and work to build a more solid management platform by expanding the solutions business in growth areas such as new energy, geo-solutions, cloud security and global, drawing on our strengths of total process, total solutions and the nationwide telecommunication construction system based on the high technical capabilities we have developed over many years.

Thank you again. I look forward to your continued support and backing of KYOWA EXEO into the future.


June 2017
Fuminori Kozono

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