Company overview: Daiki Axis’s business centers on water treatment. The company manufactures and sells household and industrial wastewater treatment systems. In addition, the company sources and sells household equipment, most of which is used in wet areas (baths and kitchens). In 2018, the company commenced sales of electricity generated using renewable energy. In FY12/20, revenue was JPY34.6bn, operating profit was JPY1.0bn, and OPM was 3.0%. The company has four business segments: the Environmental Equipment, Household Equipment, Renewable Energy, and Other businesses.
The customer bases for the Household Equipment and Environmental Equipment segments overlap, creating synergy. Shared Research understands that this synergy is one reason for the company’s industry-leading share in its mainstay product category (medium-sized and large wastewater treatment tanks—also known as “johkasou”).
Environmental Equipment: This segment posted FY12/20 revenue of JPY17.7bn, which constituted 51.0% of total revenue and 59.0% of total operating profit, while segment OPM was 6.8%. In this segment, the company mainly makes, sells, installs, and maintains wastewater treatment tanks and other wastewater treatment equipment. Wastewater treatment tanks, which are usually installed in areas without sewage systems, treat sewage and household wastewater. The tanks sterilize and disinfect the wastewater to environmental standards so it can be released into public waterways and rivers. The company has four factories in Japan that produce compact wastewater treatment tanks, medium-sized and large wastewater treatment tanks, and industrial wastewater treatment equipment.
Compact wastewater treatment tanks (priced at JPY150,000) are for household use. The company manufactures around 6,000 per year. These compact units account for approximately 10% of segment revenue. GPM on these tanks is at several percent because more than 10 companies make such tanks, and price competition is high. Medium-sized and large wastewater treatment tanks are installed mainly in condominiums and commercial facilities, while industrial wastewater treatment equipment is used in factories. Each year, the company produces about 600 of these tanks each year, which are manufactured to order and include installation. Prices per unit range from tens of millions to hundreds of millions of JPY (including installation), and these tanks account for around 60% of segment revenue. These made-to-order tanks require special expertise in supply and installation, with each unit modified to suit customer needs. GPM is around 20%.
The company also maintains medium-sized and larger equipment; maintenance services account for 30% of segment revenue. As annual maintenance is legally mandated, this is a recurring-revenue business. GPM is approximately 40%. The company receives orders via construction companies with whom it has long-term relationships. Maintenance ensures a stable source of earnings after equipment has been installed.
In this segment, the company also provides maintenance services (cleaning and fire inspections of DIY stores) and wastewater treatment tank maintenance for DCM Co., Ltd. (unlisted). DCM is the company’s main customer in the Household Equipment segment. It was established on March 1, 2021 through a merger of DCM Kahma Co., Ltd., DCM Daiki Co., Ltd., DCM Homac Co. Ltd., DCM Sanwa Co., Ltd., and DCM Kuroganeya Co., Ltd. (all unlisted). The founder of DCM Daiki started Daiki Axis by splitting it off from its predecessor company. Currently, Daiki Axis and DCM Daiki have no capital relationships.
Household Equipment: This segment recorded revenue of JPY14.7bn in FY12/20, which comprised 42.6% of total revenue and 15.4% operating profit, while segment OPM was 2.1%. In this segment, the company primarily sources and sells household equipment used in wet areas (modular kitchens, toilets, and modular baths), as well handling construction housing equipment and exterior walls. The company has been involved in the sourcing and sales of household fixtures since establishment (1958).
In this segment, the company obtains around 70% of revenue from construction companies, less than 15% from DIY stores, and below 15% from work involving construction of other household fittings and exterior walls. DCM accounts for around 20% of segment revenue (including for construction). Segment GPM is around 10%. By location, more than 80% of revenue is from the Shikoku (where the company is headquartered), Kinki, and Chugoku regions. In the construction category, the company provides exterior wall and flooring materials for public facilities and installs equipment in customers’ stores. The company also handles some store renovation for DCM.
Renewable Energy: This segment logged FY12/20 revenue of JPY905mn, which constituted 2.6% of total revenue and 17.1% of operating profit, while segment OPM was 38.4%. Within this segment, the company conducts business in the areas of biodiesel fuel, solar power generation, and small wind turbine generation. The company began refining and selling biodiesel fuel in FY12/05, collecting used cooking oil in Ehime Prefecture. Daiki Axis began solar power generation in FY12/18. As of FY12/19, solar power accounted for around 80% of segment revenue, with biodiesel accounting for the remaining 20%.
For electricity sales, the company uses the feed-in tariff system (FIT) and has 20-year sales agreements in place with seven electric utilities. The agreement with Shikoku Electric Power Company, Inc. (TSE1: 9507), for example, stipulates JPY21 per kWh (JPY18/kWh in some cases). Daiki Axis erects the solar panels that generate this electricity on the roofs of DIY stores operated by DCM Holdings Co., Ltd. (TSE1: 3050, which includes the aforementioned DCM). As the panels are on rooftops, the company need not invest in land development. The company expects this business to deliver OPM of around 50%. In FY12/19, the company also began selling electricity generated by small wind turbines (FIT: JPY55/kWh).
In FY12/20, the company had revenue of JPY34.6bn (-3.1% YoY, 100.7% of full-year forecast), operating profit of JPY1.0bn (+4.4% YoY, 103.5%), recurring profit of JPY1.2bn (+4.8% YoY, 104.4%), and net income attributable to owners of the parent of JPY477mn (-39.0% YoY, 86.7%). Revenue was down YoY due to comparison with FY12/19, when the company booked large projects (electrical component factories and final waste disposal sites) and a downturn in overseas revenue stemming from the COVID-19 pandemic. Profit was up on comparison with FY12/19, when the company booked unprofitable projects (JPY345mn) in the Environmental Equipment segment. Operating profit in the Renewable Energy segment (+35.7% YoY), which is centrally focused on the solar power generation business, contributed to the companywide rise in operating profit.
The company forecast for FY12/21 (out February 12, 2021) calls for revenue of JPY35.4bn (+2.2% YoY), operating profit of JPY1.2bn (+10.0% YoY), recurring profit of JPY1.3bn (+7.3% YoY), net income attributable to owners of the parent of JPY700mn (+46.7% YoY), and annual dividends per share of JPY24.00 (flat YoY). The company forecast assumes economic activity will remain lackluster in FY12/21 due to the ongoing impact of the COVID-19 pandemic.
The company has announced a three-year (FY12/21 to FY12/23) medium-term management plan dubbed “PROTECT X CHANGE.” The company has not announced numeric targets for the final year of the plan; it says COVID-19 makes the outlook too uncertain to set targets at this stage but also maintains that these targets will be set when possible. The company has also withdrawn the numeric targets it had set for a three-year (FY12/19 to FY12/21) medium-term plan titled “Make FOUNDATION Plan (Promote ESG* management).” Qualitatively, however, the company has said its strategy will focus on boosting profitability. The company’s long-term strategy focuses on promoting ESG management aimed at improving the global environment. A key tenet of the plan is to concentrate on overseas demand rather than the shrinking Japanese market.
In Japan, the company anticipates little growth from spot earnings, due to a decline in housing starts. Instead, Daiki Axis aims to focus on expanding its recurring-revenue businesses: maintenance of wastewater treatment systems and groundwater-to-drinking-water conversion (the clean water ESCO business). Overseas, the company plans to expand business in Southeast Asia, India, and Africa, where sewage systems are insufficient. The company explains that its wastewater treatment tanks can be built at less cost than sewage systems. In addition, the company says its systems are unique to Japan, so it has no overseas competitors. The company believes developing countries represent a major business opportunity.
In line with the previous medium-term management plan, in 2020, the company issued green bonds (unsecured corporate bonds limited to qualified institutional investors), which can only go toward environmental fields and will be used to develop overseas business. The company has also put in place a sustainability finance plan for developing its renewable energy business. By raising its profile as a company engaged in environmental businesses, Daiki Axis believes it can build better relationships with customers and gain preferential funding access.
*ESG stands for “environmental, social, and governance.”
1) The company has long-term relationships in place with construction companies, including large general contractors. These relationships help the company increase orders for medium- and large-sized wastewater treatment tanks and industrial wastewater treatment facilities, as well as obtain profitable maintenance contracts (GPM of more than 40%).
2) The company has been quicker than competitors to embark on the overseas production of wastewater treatment tanks, a type of low-cost wastewater treatment system unique to Japan. As a result, the company has accumulated expertise in this area.
3) In the solar power generation business, the company can install solar panels on the roofs of stores operated by DCM Holdings.
1) In compact wastewater treatment tanks, the company has no way to expand sales except to compete on price.
2) The overseas business, which is driving growth, requires time-consuming personnel development. This time constraint limits growth.
3) In Japan, the company provides compact wastewater treatment tanks. This business, and the Household Equipment segment, are linked to housing starts.
|Gross profit margin||17.4%||18.6%||18.6%||18.9%||19.5%||19.0%||19.5%||21.2%|
|Operating profit margin||1.7%||2.6%||2.9%||2.8%||3.4%||2.5%||2.8%||3.0%||3.2%|
|Recurring profit margin||2.2%||3.0%||3.3%||3.5%||4.0%||3.0%||3.2%||3.5%||3.7%|
|Per-share data (split-adjusted; JPY)|
|Shares issued (year-end; '000)||3,102,200||6,204,400||6,204,400||12,408,800||12,408,800||12,408,800||12,408,800||12,788,800|
|EPS (fully diluted; JPY)||-||-||-||-||-||-||-||39.4|
|Dividend per share (JPY)||8.3||15.0||15.0||15.0||20.0||24.0||24.0||24.0||24.0|
|Book value per share (JPY)||768||820||950||512||569||560||595||615|
|Balance sheet (JPYmn)|
|Cash and cash equivalents||3,640||3,289||3,367||3,430||4,517||6,014||7,166||7,896|
|Total current assets||13,998||13,779||13,656||14,519||15,034||18,764||18,906||17,448|
|Tangible fixed assets||3,157||3,728||4,331||4,115||4,727||6,338||8,363||8,047|
|Investments and other assets||1,182||1,153||1,308||1,305||1,780||1,388||1,606||1,541|
|Total current liabilities||11,571||11,367||11,599||12,303||13,259||18,864||18,625||15,879|
|Total fixed liabilities||2,066||2,141||2,072||1,531||1,543||1,455||2,079||4,265|
|Total net assets||5,181||5,556||5,741||6,190||6,824||6,718||9,203||7,634|
|Total liabilities and net assets||18,817||19,064||19,411||20,024||21,626||27,037||29,908||27,779|
|Total interest-bearing debt||7,149||7,436||7,418||7,100||7,673||11,093||11,881||12,567|
|Cash flow statement (JPYmn)|
|Cash flows from operating activities||439||737||1,369||608||1,868||-105||2,416||2,358|
|Cash flows from investing activities||-198||-1,008||-815||105||-122||-1,402||-2,846||-3,048|
|Cash flows from financing activities||840||-88||-438||-452||-635||3,030||1,643||1,620|
|Total asset turnover||176.2%||166.3%||168.2%||166.4%||161.2%||148.9%||125.6%||120.1%|
|By business segment||FY12/12||FY12/13||FY12/14||FY12/15||FY12/16||FY12/17||FY12/18||FY12/19||FY12/20||FY12/21|
|% of total||80.8%||85.8%||77.1%||69.9%||75.8%||76.6%||80.0%|
|% of total||14.5%||9.3%||18.7%||18.4%||9.9%||12.7%||14.7%|
|% of total||0.0%||0.0%||0.0%||0.6%||0.6%||0.8%||0.6%|
|% of total||4.7%||4.9%||4.2%||11.1%||13.6%||9.9%||4.7%|
|% of total||77.1%||85.0%||86.4%||66.3%||72.0%||63.6%||84.3%|
|% of total||22.9%||14.2%||13.6%||26.7%||11.9%||14.7%||15.7%|
|% of total||-||-||-||-||0.0%||0.1%||-|
|% of total||-||0.7%||-||7.0%||16.1%||21.6%||-|
|% of total||47.8%||48.5%||48.4%||47.6%||48.5%||49.0%||51.1%||51.9%||51.0%||53.3%|
|% of total||49.7%||49.4%||49.3%||50.4%||49.3%||46.4%||43.7%||41.0%||42.6%||42.1%|
|% of total||0.0%||0.0%||0.0%||0.0%||0.0%||0.5%||0.8%||2.0%||2.6%||2.8%|
|% of total||2.5%||2.1%||2.3%||2.0%||2.2%||4.0%||4.4%||5.1%||3.8%||1.9%|
|Operating profit margin||1.2%||1.7%||2.6%||2.9%||2.8%||3.4%||2.5%||2.8%||3.0%||3.2%|
|Operating profit margin||4.9%||6.4%||7.5%||7.4%||7.5%||8.3%||7.5%||5.8%||6.8%||7.7%|
|% of total||77.5%||81.3%||75.1%||70.2%||69.8%||69.6%||69.9%||57.9%||59.0%||63.4%|
|Operating profit margin||2.3%||2.3%||3.0%||3.5%||3.1%||3.7%||3.6%||2.5%||2.1%||2.8%|
|% of total||38.0%||29.6%||30.7%||35.0%||28.9%||29.7%||28.5%||19.9%||15.4%||18.1%|
|Operating profit margin||-||-||-||-||-||-||-||36.6%||38.4%||33.8%|
|% of total||-||-||-||-||-||-8.4%||-3.3%||13.9%||17.1%||14.5%|
|Operating profit margin||-||-||-||-||3.0%||13.1%||6.1%||8.3%||13.1%||14.0%|
|% of total||-15.5%||-10.9%||-5.9%||-5.2%||1.3%||9.1%||4.9%||8.3%||8.5%||4.0%|
On November 12, 2021, Daiki Axis Co., Ltd. announced earnings results for Q3 FY12/21; see the results section for details.
At its board of directors meeting held on October 22, 2021, Daiki Axis Co., Ltd. resolved to conclude a transfer agreement to acquire 100% of the shares in Aluminum Kobo Hagio
(Click the link to be taken to the official press release).
Aluminum Kobo Hagio is a company based in Niihama, Ehime Prefecture, that installs and sells window sashes and external building materials for housing. One of the core businesses of Daiki Axis is the Household Equipment segment, which sells household equipment, particularly relating to water supply, to general contractors, local contractors and house builders.
By partnering with Aluminum Kobo Hagio, Daiki Axis will be able to present its clients with proposals for window sashes and exterior building materials, in addition to water supply equipment. Daiki Axis believes the partnership will generate synergy and enable both companies to provide higher quality products and services.
Daiki Axis expects the share acquisition to have a negligible impact on its consolidated earnings. However, it will promptly disclose any material information should this arise.
Daiki Axis Co., Ltd. announced a change to the planned use of funds raised via third-party allocation of series two share acquisition rights.
At a board of directors meeting on October 1, 2021, the company decided to change the allocation of funds raised via third-party allocation of series two share acquisition rights disclosed on August 21, 2020.
The company had planned to use the funds to invest in facilities as part of overseas development of water related infrastructure, one of the key elements of its medium-term plan, “PROTECT X CHANGE,” aimed at rolling out ESG management. It decided to change the allocation of funds following a rethink of its overseas development approach in light of delays to projects amid the global COVID-19 pandemic and changes to the social situation in Myanmar. As part of its ESG management initiatives, it plans to invest in renewable clean energy businesses with prospects for stable earnings and a lower burden on the environment, another key priority of the medium-term plan.
Changes to overseas strategy due to COVID-19
The COVID-19 pandemic has had a significant impact on business activities in Myanmar, Sri Lanka, Bangladesh, and Kenya, where the company had planned to build plants when it issued the rights. The company has also been developing business in India, and the timing of capex on plant construction was previously undetermined. However, it has worked to tap into the market during the pandemic by collaborating with central and state governments and educational institutions. It plans to prioritize boosting production capacity in India by establishing infrastructure to respond to increasing demand in the country. It thus decided to include the construction and operation of plants to produce wastewater treatment tanks in India in its uses of funds.
Focus on renewable energy business
The company is focusing on the renewable energy business, which it sees as a key segment.
For solar power electricity sales, the company has leased rooftop space from DIY store operator DCM group, and has solar power equipment installed on the roofs of 130 stores, taking advantage of the feed-in tariff (FIT) system. However, the end of the FIT scheme has necessitated a rethink. On September 17, 2021, the company decided to purchase shares in Sanei EcoHome Inc. This was designed to give the company the capability to offer comprehensive, speedy proposals with a suite of one-stop renewable energy solutions from installation through operations.
The company said that the acquisition of Sanei EcoHome Inc. comes under the umbrella of ESG management, so included it in its uses of funds. In light of the use of funds raised through the share acquisition rights and project progress, funds for the acquisition will be procured under an additional loan agreement dated October 1, 2021, concluded in accordance with terms of the initial loan agreement with MUFG Bank on August 21, 2020. Funds raised through the exercise of share acquisition rights will be used to repay the loan.
Refer to release dated August 21, 2020, for details of the loan agreement with MUFG Bank. Note: There is no change to the total value of the loan agreement from the previously disclosed JPY2.1bn.
The company said that there would be no impact on FY12/21 earnings, and it would promptly disclose any material matters that arose.
|Specific uses||Amount (JPYmn)||Schedule|
|Build and operate factories to produce wastewater treatment tanks (in Myanmar, Sri Lanka, Bangladesh, Kenya, and India)||1,074||October 2020–December 2023|
|Wastewater treatment systems (BOO /BOT)||265||October 2020–December 2024|
|Drinking water (Water Kiosk business)||42||October 2020–December 2024|
|Solar power equipment development, operation, and sales (repayment of loan to acquire Sanei EcoHome)||800||October 2021–September 2023|
Daiki Axis Co., Ltd. announced the establishment of a subsidiary company (sub-subsidiary) and manufacturing plant in India.
The company resolved to establish the sub-subsidiary company Daiki Axis Environment (PVT) Ltd. at a meeting of the Board of Directors held on May 21, 2021, in order to set up a company-owned manufacturing plant in India, and the company entered into an agreement to acquire land for that manufacturing plant.
The company is to establish the self-owned manufacturing plant in order to enhance its manufacture and provision of septic tank products in India. Subsidiary company Daiki Axis Singapore Pte. Ltd. established Daiki Axis Environment as its own subsidiary.
The company increased its capital investment in Daiki Axis Singapore by JPY400mn in August 2021, to fund the creation and operation of Daiki Axis Environment's manufacturing plant and enable an agile capital strategy overseas.
According to the company, the plant is expected to become operational in June 2022, with an initial manufacturing capacity of 350 units per year. The company has announced that it forecasts a final annual manufacturing capacity of 600 units, which is a similar level to that of company subsidiary (sub-subsidiary) Pt. Daiki Axis Indonesia. The plot for the new manufacturing facility has a land area of approximately 16,000 sqm and is located in Baghola, Palwal District, Haryana State.
The company said that the impact of this matter on FY12/21 consolidated results would be minor.
Daiki Axis Co., Ltd. announced the acquisition of shares in Sanei EcoHome Inc. (making it a subsidiary).
At a meeting of the board of directors held on September 17, 2021, the company resolved to enter into an agreement to acquire 100% of shares in Sanei EcoHome Inc. (making it a subsidiary company). The agreement execution date is September 17, 2021, and the share transfer date is October 1, 2021.
An outline of Sanei EcoHome is provided below.
Renewable Energy, which includes solar, biodiesel and wind, is one of the companies main segments. The company decided to acquire shares in Sanei EcoHome because it expects that it will be possible to achieve synergies between the two companies, and to provide a higher quality of service by collaborating with Sanei EcoHome.
The company states that collaboration with Sanei EcoHome will allow it to provide the full sequence of services relating to renewable energy, from installation to maintenance, in the manner of a complete and one-stop service. The company explains that it will be able to bring proposals to the market that are comprehensive and have a sense of pace.
The company thinks that this agreement will enable it to adjust installation environments to suit a given region, working from group company bases within Japan and overseas, which will significantly contribute to environmental protection. The company also believes that collaboration with Sanei EcoHome could help contribute to the provision of electricity to many non-electrified areas, both within Japan and around the world.
The company said that the impact on FY12/21 consolidated results would be minor, and that it will make a timely announcement if any matters arise that require disclosure.
|(JPYmn)||Q1||Q1–Q2||Q1–Q3||Q1–Q4||Q1||Q1–Q2||Q1–Q3||Q1–Q4||Q1||Q1–Q2||Q1–Q3||% of Est.||FY Est.|
|Gross profit margin||19.9%||18.7%||19.2%||19.5%||21.3%||21.7%||21.1%||21.2%||20.7%||21.0%||21.1%|
|Operating profit margin||4.8%||2.8%||2.8%||2.8%||5.2%||3.9%||3.2%||3.0%||4.6%||4.1%||3.3%||3.2%|
|Recurring profit margin||5.3%||3.2%||3.2%||3.2%||5.7%||4.3%||3.7%||3.5%||5.0%||4.5%||3.8%||3.7%|
|Gross profit margin||19.9%||17.2%||20.4%||20.3%||21.3%||22.3%||19.9%||21.3%||20.7%||21.3%||21.4%|
|Operating profit margin||4.8%||0.4%||2.9%||2.7%||5.2%||2.3%||1.8%||2.4%||4.6%||3.6%||1.7%|
|Recurring profit margin||5.3%||0.8%||3.2%||3.3%||5.7%||2.7%||2.5%||2.8%||5.0%||4.0%||2.0%|
|By segment (cumulative)||FY12/19||FY12/20||FY12/21||FY12/21|
|(JPYmn)||Q1||Q1–Q2||Q1–Q3||Q1–Q4||Q1||Q1–Q2||Q1–Q3||Q1–Q4||Q1||Q1–Q2||Q1–Q3||% of Est.||FY Est.|
|% of total||58.1%||53.3%||52.4%||51.9%||52.6%||49.6%||49.6%||51.0%||52.4%||53.0%||52.2%||53.3%|
|% of total||36.1%||39.6%||40.0%||41.0%||41.5%||42.3%||43.2%||42.6%||44.2%||42.9%||43.3%||42.1%|
|% of total||1.2%||1.7%||1.9%||2.0%||1.7%||2.6%||2.7%||2.6%||1.9%||2.4%||2.6%||2.8%|
|% of total||4.5%||5.4%||5.6%||5.1%||4.2%||5.5%||4.5%||3.8%||1.6%||1.7%||1.8%||1.9%|
|Operating profit margin||4.8%||2.8%||2.8%||2.8%||5.2%||3.9%||3.2%||3.0%||4.6%||4.1%||3.3%||3.2%|
|Operating profit margin||9.8%||5.1%||5.0%||5.8%||9.9%||6.8%||6.3%||6.8%||9.3%||8.7%||8.0%||7.7%|
|% of total||79.6%||55.2%||51.4%||57.9%||69.9%||51.7%||52.3%||59.0%||65.4%||64.8%||62.9%||63.4%|
|Operating profit margin||2.5%||2.9%||3.0%||2.5%||3.1%||3.6%||2.7%||2.1%||4.5%||3.6%||3.0%||2.8%|
|% of total||12.8%||22.9%||24.0%||19.9%||17.2%||23.5%||19.7%||15.4%||26.8%||21.5%||19.4%||18.1%|
|Operating profit margin||19.7%||35.3%||39.3%||36.6%||18.3%||41.0%||40.8%||38.4%||16.0%||26.8%||30.7%||33.8%|
|% of total||3.2%||12.1%||14.9%||13.9%||4.2%||16.2%||18.5%||17.1%||4.0%||8.9%||12.1%||14.5%|
|Operating profit margin||6.9%||9.0%||8.7%||8.3%||15.6%||10.2%||12.7%||13.1%||17.6%||19.4%||20.2%||14.0%|
|% of total||4.4%||9.8%||9.7%||8.3%||8.7%||8.7%||9.5%||8.5%||3.8%||4.7%||5.6%||4.0%|
|By segment (quarterly)||FY12/19||FY12/20||FY12/21|
|% of total||58.1%||47.5%||50.6%||50.5%||52.6%||46.0%||49.6%||55.2%||52.4%||53.7%||50.5%|
|% of total||36.1%||43.7%||40.9%||43.8%||41.5%||43.2%||45.2%||40.5%||44.2%||41.5%||44.2%|
|% of total||1.2%||2.3%||2.4%||2.0%||1.7%||3.6%||3.0%||2.4%||1.9%||2.9%||3.2%|
|% of total||4.5%||6.5%||6.1%||3.7%||4.2%||7.2%||2.2%||1.9%||1.6%||1.9%||2.1%|
|Operating profit margin||4.8%||0.4%||2.9%||2.7%||5.2%||2.3%||1.8%||2.4%||4.6%||3.6%||1.7%|
|Operating profit margin||9.8%||-1.7%||4.6%||8.1%||9.9%||2.3%||5.2%||8.1%||9.3%||8.1%||6.2%|
|% of total||79.6%||-35.7%||44.2%||75.7%||69.9%||20.2%||54.3%||79.1%||65.4%||64.2%||57.1%|
|Operating profit margin||2.5%||3.2%||3.4%||1.1%||3.1%||4.2%||0.9%||0.4%||4.5%||2.5%||1.6%|
|% of total||12.8%||60.4%||26.0%||8.8%||17.2%||34.4%||8.6%||2.7%||26.8%||15.4%||13.2%|
|Operating profit margin||19.7%||44.7%||45.1%||29.4%||18.3%||54.3%||40.5%||30.6%||16.0%||34.2%||37.2%|
|% of total||3.2%||45.2%||20.4%||11.0%||4.2%||36.8%||25.2%||12.9%||4.0%||14.7%||21.4%|
|Operating profit margin||6.9%||10.8%||8.1%||6.6%||15.6%||6.3%||26.1%||15.9%||17.6%||21.0%||21.7%|
|% of total||4.4%||30.1%||9.4%||4.5%||8.7%||8.6%||11.9%||5.3%||3.8%||5.7%||8.3%|
Revenue was up 7.3% YoY in cumulative Q3 FY12/21, due primarily to growth in orders and revenue from large projects in the Environmental Equipment and Household Equipment segments.
Gross profit, operating profit, and recurring profit all increased YoY.
The company posted an extraordinary gain totaling JPY10mn, comprising a JPY1mn gain on sale of fixed assets and a JPY9mn gain on sale of investment securities. On the other hand, a JPY69mn extraordinary loss included a JPY11mn loss on the retirement of fixed assets related to the disposal of manufacturing equipment and a JPY55mn impairment loss from fixed assets (BDF manufacturing equipment) related to its biodiesel fuel business.
Revenue from wastewater treatment tanks and wastewater treatment systems rose YoY. Japan and overseas revenues both increased. In Japan, the posting of sales based on the percentage of completion method for a large project for industrial wastewater treatment facilities at a food products plant contributed to the revenue growth.
Overseas revenue increased YoY on the completion of a large project in China for industrial water treatment facilities at a food products factory and robust orders from customers in India. The increase in revenue from China and India overcame the continued impact of the COVID-19 pandemic on some of the company’s overseas business.
Recurring business revenue rose YoY as the company promoted growth in maintenance contracts, on the basis of its growth strategy.
In the groundwater-to-drinking-water conversion business, revenue from ESCO contracts and maintenance revenue increased on new contracts. Groundwater-to-drinking-water plant sales were also up YoY owing to the improved operations.
Although labor costs increased year-on-year, SG&A expenses were largely flat travel and transportation expenses were decreased by COVID-19 restrictions on business travel. As a result, segment operating profit increased 43.8% YoY.
The increase in labor costs reflects the fact that the company reduced its provision for bonuses for executives and employees for cumulative Q3 FY12/20 owing to the difficulty of forecasting results amid the COVID-19 pandemic.
Revenue from construction companies (general contractors, local construction companies, and housing manufacturers) was up YoY. The main contributors to the increase were the Installation of radiation heating/cooling systems for gymnasiums, sales of environmentally friendly products (thinned wood), renovation and renewal of air conditioning and sanitary equipment for home centers (DCM), delivery of sanitary equipment for condominiums, and delivery of furniture for educational facilities. In addition, COVID-19 related subsidies boosted demand for contact-free toilets (automated lids, automated flushing, etc.).
COVID-19 has pushed back the start of some construction projects and lengthened the construction period of others. However, the negative impact on revenue has been offset by the completion of several large-scale projects.
In retail products for DIY stores, revenue was strong. Manufacturer shipments were delayed in through Q3 FY12/20 due to the pandemic, causing delays in delivery. Through Q3 FY12/21, shipments of high-in-demand non-contact products continued to come in slowly, but procurement of other commercial products was largely unaffected. In addition, sales of new products with model changes supported the growth in revenue.
Housing equipment construction (exterior walls, new store construction, freezer/refrigerator installation, etc.) revenue fell YoY. Revenue from exterior wall construction and freezing and refrigerating equipment increased owing to the effect of midsize and large projects, but revenue from agricultural greenhouses decreased. Furthermore, sales related to DCM store construction were not recorded through Q3 FY12/21.
The e-commerce business (online orders for construction related to household equipment) had to cope with restrictions which led to limited areas to provide service throughout the first three quarters of the fiscal year, and the pandemic stalled efforts to establish relations with collaborating companies. Although sales increased steadily in Q3, they grew slower than initially expected by the company, and revenue was low. In addition to the e-commerce business that the company has already developed in collaboration with DCM, the company is also building a self-managed e-commerce business for construction related to household equipment throughout Japan.
Revenue from solar-power electricity was up YoY. The sale of unlisted subsidiary DAD Co., Ltd., at the end of Q2 FY12/20, had a negative impact on revenue, but this was outweighed by the increase in the number of facilities connected to the power grid (see below) and longer daylight hours than the previous financial year.
Since FY12/18, the company has been leasing the rooftops of DIY stores operated by DCM Holdings (TSE1: 3050), part of the DCM Group, making use of the space to install solar panels and sell electricity using a feed-in tariff (FIT) system. The company had 130 sites connected to the power grid in place at end-Q3 FY12/21 (128 at end-Q3 FY12/20). The company has completed the installation of panels at all facilities in its original plan.
A total of 12 more facilities with small wind turbine generation equipment were connected to the power grid through Q3 FY12/21, boosting electricity sales generated by the company’s small wind turbine generation business. The company plans to have installed small wind turbine generation facilities at 70 sites by 2025.
Revenue from biodiesel fuel operations increased YoY. The increase reflects the growth in number of contracts for its B5 light oil, a light oil with a 5% biodiesel fuel mixture that can be used as a replacement for light oil.
Segment operating profit declined YoY. The fall in segment profit is due to costs related to the inspection of certain solar panel–equipped facilities that were found to have some installation defects.
Revenue from civil engineering work declined YoY due to the sale of unlisted subsidiary DAD Co., Ltd., which handled civil engineering work, at end-Q2 FY12/20. The household drinking water business turned in steady performance owing to an increase in the number of rental contracts for its water filtration units.
For details on previous quarterly and annual results, please refer to the Historical financial statements section.
|(JPYmn)||1H Act.||2H Act.||FY Est.||1H Act.||2H Est.||FY Est.||YoY|
|Cost of revenue||13,651||13,661||27,312||15,110|
|Gross profit margin||21.7%||20.6%||21.2%||21.0%|
|Operating profit margin||3.9%||2.1%||3.0%||4.1%||2.3%||3.2%|
|Recurring profit margin||4.3%||2.6%||3.5%||4.5%||2.7%||3.7%|
|(JPYmn)||1H Act.||2H Est.||FY Est.||1H Act.||2H Est.||FY Est.||YoY|
|Operating profit margin||6.8%||6.8%||6.8%||8.7%||6.6%||7.7%|
|Operating profit margin||3.6%||0.6%||2.1%||3.6%||1.8%||2.8%|
|Operating profit margin||41.0%||35.9%||38.4%||26.8%||39.6%||33.8%|
|Operating profit margin||10.2%||21.2%||13.1%||19.4%||8.6%||14.0%|
The company did not amend its full-year FY12/21 forecast (announced on February 12, 2021) when announcing its cumulative Q2 FY12/21 results (on November 12, 2021).
The following description is from before the announcement of the company's cumulative Q3 results (on November 12, 2021), and will be updated by Shared Research following interviews with the company.
On February 12, 2021, the company announced its forecast for FY12/21.
The company expects the Environmental Equipment segment to serve as the primary force driving a companywide revenue increase of JPY1.2bn YoY (+6.6% YoY).
Overseas revenue is projected to rise 72.8% YoY (JPY729mn YoY) to a total of JPY1.7bn for the full year. By country, the company forecasts revenue of around JPY425mn for China, about JPY560mn for Indonesia, some JPY290mn for Singapore, and about JPY240mn for India.
The company believes that the recouping of work delays caused by lockdowns implemented in FY12/20 to deal with the COVID-19 pandemic will be a key factor contributing to revenue increase in FY12/21. With growing demand for wastewater treatment tanks in India, the company is making plans to produce about 200 units locally and ship more from Indonesia.
The company plans to start operations at a new plant in India in June 2022 (announced on September 21, 2021). In June 2021, the company established a new company in India (Daiki Axis Environment Pvt. Ltd., a second-tier subsidiary of the company) to manufacture wastewater treatment tanks. The company plans for a production capacity of 350 units per year in the first year, eventually rising to 600 units per year, which is equivalent to the production capacity of the company's Indonesian plant.
In Japan, revenue in the Environmental Equipment segment is forecast to rise by JPY292mn YoY (+1.8% YoY) to JPY16.2bn. The company projects that revenue from compact wastewater treatment tanks (for 5—50 people) will stay almost flat YoY, revenue from medium-sized and large tanks, as well as industrial wastewater treatment systems, will increase (Shared Research projects a 7.0% YoY rise), and revenue from maintenance will rise 6.0% YoY.
As for maintenance, the company expects more maintenance work on wastewater treatment tanks installed at DIY stores operated by group companies under DCM Holdings, as well as major convenience stores chains. In the past, each store had commissioned maintenance work to various service providers, but the company has brought economy of scale to customers by acquiring maintenance orders in large lots and reducing cost per order.
In the Household Equipment segment, the company expects revenue from construction companies to rise (up JPY275mn YoY, +2.6% YoY), while seeing more revenue from retail products for DIY stores (up JPY195mn, +10.1%) and e-commerce (up JPY117mn, 40×). In housing equipment construction, the company had projected that the absence of large orders in FY12/20 (store renovation) would reduce revenue 19.2% YoY. However, revenue increased 7.0% YoY in 1H, outpacing the company’s initial projections. That said, e-commerce revenue progressed only 7.5% versus the 1H plan.
By product type, the company projects year-long growth in revenue from so-called “non-contact” products, such as warm-water washing toilet seats with automatic lids (Toto’s Washlet) and sensor-equipped automatic water faucets for lavatories.
In the Renewable Energy segment, the company projects that revenue will rise in the solar generation and electricity retail business (up JPY39mn YoY, +4.9% YoY), the biodiesel fuel business (up JPY28mn, +25.1%), and the small wind turbine generation business (up JPY20mn, about 19×).
In accordance with prior projections, the company has completed the establishment of power generation equipment at 130 locations in its solar power sales business. The company anticipates that sales generated through its compact wind power generation business will grow thanks to the launch of operations at plants in Aomori and Hokkaido.
The company forecasts YoY rises in operating profit in the Environmental Equipment segment (up JPY261mn) and the Household Equipment segment (up JPY104mn). In the former category, Shared Research understands that the company’s maintenance services, a recurring-revenue business with a GPM of around 40%, is likely to increase revenue and contribute to profit growth. In the latter category, the company expected factors in profit growth at the start of the term to include more revenue in the so-called “non-contact” products (details above) and the e-commerce business. However, Shared Research understands that e-commerce revenue in 1H was lower than expected, which had the effect of reducing profit below the expected level.
In the Renewable Energy segment, operating profit is expected to decrease by JPY13mn YoY on growing costs on launching small wind turbine generation projects. In the Other business, the sale of subsidiary DAD Co. in FY12/20 has led to a revenue drop, and this will affect segment profit in FY12/21 as well.
On the cost front, Daiki Axis believes companywide expenses will likely increase by JPY220mn YoY on factors such as higher business trip costs. Although the company reduced domestic business trips in FY12/20 to deal with the pandemic, it now expects such expenses to return to pre-pandemic levels in FY12/21.
On February 22, 2021, the company announced a new medium-term management plan (starting in FY12/21 and ending in FY12/23) called “PROTECT X CHANGE.” The previous plan, “Make FOUNDATION Plan (Promote ESG management),” had been scheduled to run through FY12/21. However, in FY12/20, the company grew uncertain about how COVID-19 would affect the plan’s long-term strategies to boost medium- to long-term growth. Accordingly, the company withdrew its quantitative goals stated in the plan.
Nor has the company indicated quantitative goals for the new medium-term plan. Daiki Axis says the business fallout from COVID-19 that began to be felt in 2020 still makes the environment uncertain in 2021, making it difficult for the company to set such targets for the medium term. But the company says it will announce quantitative goals when possible. A long-term strategy of the previous medium-term plan centered on the qualitative goal of raising profitability. The company says this goal remains a feature of the new medium-term plan.
“PROTECT X CHANGE” is a corporate slogan designed to convey a message: “Protect what deserves protection, change what deserves a change.” Daiki Axis defines itself as a company that focuses on water-related businesses and contributes to efforts to build a sustainable society and change the future of society by protecting various environments, including the global environment and living environments. Likewise, the company says its employees must adapt to social changes and be able to distinguish what needs to be maintained from what needs to be changed, with an aim of building a sustainable organization.
Undecided (as indicated above)
Establish the organizational infrastructure to achieve high productivity
Develop high-quality and environmentally friendly products and wastewater treatment tanks to overseas specs
Expand overseas business (not just sales, but also focusing on steady quality improvement)
Establish a renovation business centered on e-commerce
Use M&A to expand marketing areas and products handled
Increase involvement in special projects (public facilities and eco-products) in areas outside the Chugoku/Shikoku region (such as the Kanto and Kansai areas)
Create structures to drive the shift toward a carbon-free society
Cultivate high-value-added businesses and products in preparation for conclusion of FIT policies
Search for new businesses and products so the business development department can help address climate change
In addition, the company will pursue ESG management (discussed later).
The strategy has seven focuses:
Overseas development: In the Environmental Equipment segment, manufacture wastewater treatment tanks locally in the growth markets of India and Southeast Asia.
Recurring-revenue business: In Japan, redouble initiatives in the maintenance and clean water ESCO businesses.
Technology and product development capabilities: Reinforce technological and development capabilities in response to diverse water-related demands.
Transition from stability to growth: Move toward growth businesses in the Household Equipment segment.
Renewable energy: Promote the sale of solar-power electricity, as well as the biodiesel fuel and wind power generation businesses.
M&A promotion: Promote synergies with existing businesses and initiatives involving new technologies.
IT promotion: Leverage big data and artificial intelligence to streamline business operations, promote marketing, and develop new products.
The company plans to proactively develop overseas business for wastewater treatment tanks, where it believes potential demand to be large. Daiki Axis aims to cultivate demand, manufacture tanks locally, and work to increase sales volume. Specific steps are detailed below:
In January 2021, the company established a new section for the oversight of technological matters associated with overseas markets and another section directly under the president’s office for overseas management. On top of the conventional overseas sales section, these additions are aimed at strengthening internal corporate resources for overseas development.
In India, the company will consider the construction of a second factory, which can manufacture wastewater treatment tanks of the cylindrical type (medium-sized and large tanks) in addition to the capsule type (compact tanks). Production capacity will be twice as large as the first factory (200 units a year) or more.
The company plans to build factories to produce wastewater treatment tanks in Myanmar, Sri Lanka, Bangladesh, and Kenya.
In India, the company sets up and operates shops that sell drinking water (Water Kiosks). The company filters water to make it potable and provides the drinking water to nearby consumers, stores, and food stalls.
The company is considering BOO* and BOT** businesses in India, Myanmar, Sri Lanka, Bangladesh, and Kenya. In both categories, the company installs wastewater treatment tanks, retaining ownership. Customers pay the company either at a fixed rate or based on the volume of treated water they use. The company promotes this business as a way to install wastewater treatment tanks while keeping initial costs low. Daiki Axis expects the market for wastewater treatment tanks to increase as more people recognize their effectiveness.
* Under a build-own-operate (BOO) agreement, the Daiki Axis group raises funds for and builds infrastructure-related facilities, and then continues to maintain and operate these facilities. After the contract ends, the company retains ownership of these facilities, which it can then dismantle or sell.
** With a build-operate-transfer (BOT) agreement, the group raises funds for and builds infrastructure-related facilities, and then continues to maintain and operate these facilities as under a BOO agreement. However, ownership rights transfer after the contract ends.
The company positions recurring-revenue business as a driver of future growth, alongside overseas business. The medium-term plan identifies two categories of recurring-revenue business for expansion in Japan: the maintenance and clean water ESCO businesses.
In the maintenance business, the company aims to increase bulk orders for wastewater treatment facilities and maintenance from large convenience store chains and large restaurant chains. To expand the biodiesel business, the company plans to target large convenience store chains, making use of the waste oil in the kitchens of individual convenience stores and central kitchens. The company also plans to configure IT systems to handle administrative tasks surrounding statutory inspections.
As part of its overseas development efforts, Daiki Axis plans to augment its technology and product development capabilities to respond to diverse water-related needs, which differ according to conditions in different countries. The company aims to offer new high-end household wastewater treatment tanks and commence full-fledged production of household wastewater treatment tanks designed for regions with regulations restricting phosphorous content.
Water pollution in China, Southeast Asian countries, and India contrasts with the sort of pollution found in Japan, due to lifestyle differences. For instance, in these countries, household wastewater typically contains more cooking oil. Also, bathtub use tends to be less frequent, so water consumption is around one-fourth Japan’s level.
In addition to meeting detailed requirements on water quality, the company is working to develop products that are cost-competitive. To this end, the company’s development department strives to reduce quantities of parts and materials. Simultaneously, the company is trying to make production technologies and processes themselves less costly and more efficient. For instance, the company has developed a wastewater treatment tank that uses contact bed filtration. This type of tank makes internal cleaning and inspection work more efficient. Daiki Axis has also developed wastewater treatment tanks using the “lateral flow method of removing impurities” to treat sewage. This method does not require the anaerobic filter media needed for conventional tanks.
In the Household Equipment segment, the company is changing its business model to focus on wholesaling household equipment to DCM DIY stores. The company plans to expand this business by through the launch of an online shopping site and M&A.
In July 2020, DCM Holdings’ online shopping site (DCM Online) began accepting orders nationwide for construction related to household equipment. Daiki Axis intends to achieve revenue growth through this route. To date, business in the Household Equipment segment has centered on the Shikoku, Chugoku, and Kyushu regions. Through online shopping, the company hopes to expand its business nationwide. Specifically, the company aims to expand into the Kanto region, focusing on the Tokyo Metropolitan Area.
The company expects to run into certain issues (particularly the need to cultivate contractors) as it expands its service network throughout Japan. The company intends to improve profitability through centralized purchasing. To date, departments sourced materials independently. The company believes centralization will help it lower costs.
The company plans to expand the business by taking advantage of products and customer bases from the two companies it converted to subsidiaries in October 2019. These two companies are Fujiwara Reiki Co., Ltd. (unlisted) and Nihon Air Solutions Co., Ltd. (unlisted). Fujiwara Reiki designs, builds, and maintains air conditioning/ventilation and electrical equipment (for offices, schools, homes, and other buildings), as well as freezing and refrigeration equipment, frozen and refrigerated showcases, kitchen equipment, and refrigerated showcases for flowers (for use in distribution outlets and food product factories). Nihon Air Solutions handles the construction side of Fujiwara Reiki’s air conditioning/ventilation equipment business.
The company will continue to sell electricity from solar generation and promote the biodiesel fuel and wind power generation businesses.
In solar generation and electricity sales, the company plans to continue to leverage the DCM network to generate solar power on the sites of DCM-affiliated DIY stores. During the period of the medium-term management plan, the company aims to have solar power generation equipment in place at 130 stores (in place at 129 stores as of December 2020). Electricity is sold at the FIT price of JPY21/kWh (JPY18/kWh in some cases).
In the wind power generation business, the company uses small wind turbine generators (horizontal axis). The company plans to increase the number of sites on which these generators are placed to 70, focusing on areas with good wind quality (Tohoku and Hokkaido). For this business, companies are awarded IDs that permit them to expand their sites. The company has received permission for seven sites in Hokkaido and five in Aomori Prefecture. Construction began in FY12/20. For windmills, Daiki Axis uses other companies’ assemblies. Truss-shaped support pillars help maintain strength and keep costs down. This electricity is priced at JPY55/kWh under FIT policies.
The company intends to acquire companies that offer synergies with existing businesses or offer new technologies.
Since its establishment in 2005, the company has repeatedly acquired companies to expand its business of providing wastewater treatment systems using its wastewater treatment tanks. These acquisitions, which include overseas companies, were made within the Environmental Equipment segment. In 2019, the company also acquired companies to achieve synergies in the Household Equipment segment. The “History” section later in this report provides company names and other details.
The company aims to resolve issues along the value chain related to facility management and on-site issues overseas (accounting and HR). The company also expects to make sales activities more efficient. Through big data, the company aims to gain new perspectives for promoting growth. To attain these goals, the company plans to strengthen its IT-related sections and cultivate human resources specializing in data science and other areas.
In the previous medium-term plan, “Make FOUNDATION Plan (Promote ESG management),” targets for the final year of the plan, FY12/21, were revenue of JPY40.0bn (JPY36.2bn in FY12/18), operating profit of JPY1.7bn (JPY923mn), recurring profit of JPY1.8bn, ROE of 13.2% or more (12.7%), and ROIC of 5.5% or higher (4.2%). All revenue and profit targets amounted to record highs.
The plan called for overseas revenue to reach 2.6× its prior level over the course of the plan, compared with cumulative growth of 5.5% for domestic business. Thus, the plan clearly outlines the company’s intention to expand by advancing in overseas markets.
While the plan targeted a 5% increase in revenue in the Japanese market, it also called for higher profitability through expansion in recurring-revenue businesses such as maintenance and the clean water business (groundwater-to-drinking-water conversion) and the Renewable Energy segment. At the same time, the plan called for the use of IT to increase business efficiency (higher productivity).
Shared Research estimated that OPM at the end of the medium-term plan would amount to 4.3% (up from 2.5% in FY12/18), and the recurring profit margin 4.5% (3.0%). All revenue, profit, and profitability figures were projected to reach their highest levels since the company’s listing in FY12/13.
|Operating profit margin||2.5%||4.3%||-||-|
|Recurring profit margin||3.0%||4.5%||-||-|
|Net income attributable to owners of the parent||861||1,100||27.7%||8.5%|
|ROE||12.7%||13.2% or higher||-||-|
|ROIC||4.2%||5.5% or higher||-||-|
|Revenue by segment|
|Revenue by region|
|Japan (SR est.; Total - Overseas)||35,071||37,000||5.5%||1.8%|
The company carries a slogan aimed at building a firm management base, contributing to building a sustainable environment and society through its business and cooperation with local communities, and improving the quality of life. The company explains that promotion of ESG management is indispensable to the achievement these goals.
The company recognizes that protecting the global environment is a common challenge associated with the achievement of sustainable social development, and is working to reduce its environmental impact. In addition, the company hopes to contribute to building a sustainable society by improving workstyles through collaboration with customers, local communities, and administrative authorities. Specific steps are as follows:
Contribution as a company in the water-related business: Through its products and services, the company aims to convert dirty water into clean water and improve the water environment on a global scale. Wastewater treatment tanks, Japan’s unique water-treatment system, can process household sewage on the spot. Those tanks are effective in areas overseas, not just in domestic areas where public sewage systems have not been established.
Contribution through drinking water (overseas): The company aims to offer safe drinking water in developing countries where access to clean water is difficult.
Contribution as a producer of biodiesel fuel: The company collects used cooking oil from households, restaurants, convenience stores, and other establishments, and refines the oil into a clean alternative to light oil. The company has obtained the government’s Eco Mark certification for this business, and provides the fuel for use in civil service, convenience store delivery trucks, and other capacities. The company hopes this business will contribute to efforts aimed at achieving carbon neutrality.
Contribution through clean energy produced with solar and wind power generation: They company has installed rooftop solar panels at DIY stores operated by DCM group companies. This means the company has theoretically reduced negative impact on the environment while generating clean energy by saving forests where trees would have been cleared to construct solar panels. The company also plans to use these facilities as lifeline equipment in cases of disaster. The company hopes these efforts will help Japan achieve its goal of net zero emissions by 2050 (equating the amount of greenhouse gas emissions with the amount absorbed by forests by 2050).
Contribution as a supplier of housing equipment: The company aims to expand the lineup of environment-friendly products, such as energy-saving products and those using timber from forest thinning.
Awareness-raising campaigns for environmental improvement: The company plans to offer lectures on clean energy for young students through visits to schools.
Workstyle reform and diversity: By accepting diverse cultures and ways of thinking, the company aims to realize workstyles in line with the “new normal” post-COVID era, recruit human resources from overseas, and appoint female executive board members.
In this category, the company aims to promote efficient and swift business operations; put in place and improve the internal control system; ensure transparency by separating managerial and executive functions; install outside directors and establish the Audit Committee; and disseminate information through company briefings and the disclosure of non-financial information.
Daiki Axis considers environmental improvement to be its main business. The medium-term plan outlines initiatives for overseas development of the water treatment business (water-related infrastructure business) and expansion of the Renewable Energy segment. To raise cash for these core businesses, the company adopted an approach that differs from typical bond issuance or borrowing. Instead, it issued green bonds* and engaged in sustainability finance** during 2020.
The point of green bonds is to emphasize that cash is being used for projects that have a positive environmental effect (green projects). The aim is to raise social awareness of the company’s business and gain support among investors.
Prior to issuing these bonds, in June 2019 a subsidiary, Sylphid Inc., raised capital through a third-party allotment of shares. The Shikoku Energy Investment Limited Partnership (Shikoku Energy Fund), established by Shikoku Alliance Capital Co., Ltd.*** (unlisted) provided Sylphid with JPY2.0bn in exchange for non-voting stock. This fund invests in renewable energy projects, such as solar and wind power, and in businesses developing such projects.
Sylphid used the funds it raised to obtain solar power generation assets from Daiki Axis. In the interest of operating efficiency, the Daiki Axis group has made Sylphid centrally responsible for wind and solar power generation management.
*Green bonds are issued to raise funds for green projects (domestic or overseas businesses designed to address global warming or other environmental problems) companies intend to pursue. Green projects come in many varieties. Key areas include renewable energy, energy conservation, sustainable waste treatment, soil use, and water management for addressing environmental problems, businesses targeting biodiversity preservation, construction of traffic systems with low environmental impact, and businesses that address climate change. In addition to raising funds like other corporate bonds, green bonds help companies publicize their fundraising efforts for businesses aimed at environmental improvements. This visibility can help issuers gain support from investors and society at large.
**Sustainability finance refers to financing projects that meet both Green Bond Principles and Social Bond Principles. The Green Bond Principles are guidelines for issuing green bonds to finance green projects. Similarly, the Social Bond Principles are guidelines related to the issuance of social bonds, which finance projects targeting positive social outcomes. Social projects are wide-ranging and might involve water and sewage systems, energy, education, medical welfare, housing supply, food security, and expanded access to government services.
***Shikoku Alliance Capital Co., Ltd. is a fund management company established and jointly funded by four regional banks on the island of Shikoku: Awa Bank (TSE1: 8388), Hyakujushi Bank (TSE1: 8386), Iyo Bank (TSE1: 8385), and Shikoku Bank (TSE1: 8387). In addition to the Shikoku Energy Fund, this fund management company operates the Shikoku Revitalization Fund (addresses customers’ business succession and growth needs) and the Shikoku Small and Medium-Sized Company Support Fund (mainly helps to reinvigorate small and medium-sized companies in Shikoku).
The company issued JPY3.0bn in green bonds with a payment date of February 28, 2020 and a 10-year maturity. On February 28, 2020, the company used all the cash it raised to refinance capital investments related to the sale of solar power electricity and the small wind turbine generation business. See the table below for details.
The company enlisted an outside assessment firm, DNV GL Business Assurance Japan K.K. (DNV GL)*, to judge whether these two businesses were suitable uses (whether the projects were eligible) for the cash raised via green bonds.
For eligible projects, each year the company is required to publicly report on the status of fund allocation and quantify the environmental benefit. The company is required to report on the state of progress for projects under development. After construction is complete, the company must conduct impact reporting each year from the start of operations until the green bonds mature.
To fulfill these reporting requirements, each month the company discloses project generation capacities (kW), annual outputs (kWh), and environmental improvement effects (amount of CO2 reduction, expressed in kilograms) on its website. CO2 reduction quantities (kg-CO2) are calculated by multiplying the amount of energy generated (kWh) by the CO2 emission factor (amount of CO2 emissions [kg-CO2] per unit of energy generated [kWh]). The emission factor, also called emission reduction intensity, is expressed as the amount of CO2 emissions reduced per unit of energy generated when compared to conventional energy generation methods. The figure is less than 1 (0.462 in FY12/20).
|Green project category||Renewable energy|
|Redemption period||10 years, entire amount subject to refinancing|
|Project 01||Solar power generation business|
|Event||Solar panels are mounted on the roofs of the DCM group’s existing DIY stores, so no new land development is required.|
|Output, scale||A total of 133 site candidates (maximum)|
|50kW to 900kw/site, total of 23,750kW (maximum)|
|Location of facilities||A total of 133 site candidates (maximum)|
|53 sites in the Chugoku region, 32 sites in the Shikoku region, 19 sites in the Kansai region, 29 sites in other regions|
|Project 02||Small wind turbine generation business|
|Event||Horizontal axis small wind turbine generation, the type of wind power generation the Daiki Axis group is pursuing|
|Output, scale||Total of around 24 site candidates (maximum)|
|Two 10kW-class turbines per location: Total of around 240kW (maximum)|
|Location of facilities||A total of 24 site candidates (maximum)|
|Throughout Japan, including Kagoshima and Hokkaido|
|Contribution to the SDGs||7. Affordable and clean energy|
|13. Climate action|
*DNV GL, established in 1864, is a third-party evaluation institution headquartered in Oslo, Norway. DNV has extensive experience in providing second-party opinions (SPOs) concerning green bonds, both domestically and abroad. The organization undertakes global activities, serving as a registered party designated by the Ministry of the Environment to support the issuance of green bonds (external review department) and a verifier accredited by the Climate Bond Initiative (an international NGO that promotes large-scale investment toward a low-carbon economy).
The company’s sustainability finance comprises the issuance of sustainability share acquisition rights (third-party allocation of series two share acquisition rights) and the establishment of a viable-period term loan as a backup loan for this financing. DNV GL assessed the appropriateness of this financing alongside its evaluation of the green bond issue.
The amount raised was JPY2.2bn. This cash will be used to further long-term strategies associated with the overseas business as described in the medium-term plan. Specifically, the cash is to be used in three areas: building and operating factories to produce wastewater treatment tanks, the wastewater treatment business, and the clean water business. Details are provided in the table below. The exercise price for the share acquisition rights is between a maximum of JPY875 and a minimum of JPY805 (can be reduced to JPY725 by a Board of Directors resolution). The exercise period is three years.
The backup loan provides a borrowing facility (JPY2.2bn) to prevent project delays in the event the share acquisition rights fail to generate funds. The loan has a three-year viability period, the same length as the exercise period. If an unpaid balance remains on this loan and the company receives funds through the exercise of share acquisition rights, these funds will be used to repay the remaining unpaid balance.
|Project 01||Build and operate factories to produce wastewater treatment tanks|
|Amount of funding||JPY916mn|
|Countries||Myanmar, Sri Lanka, Bangladesh, Kenya|
|Business overview||Funding the acquisition of factory buildings, equipment, and land to increase production and commence new production of wastewater treatment tanks|
|Project 02||Installation and operation of wastewater treatment systems (BOO and BOT**)|
|Amount of funding||JPY1.1bn|
|Countries||India, Bangladesh, Kenya, Sri Lanka, Myanmar|
|Business overview||Provision of wastewater treatment systems as BOO and BOT businesses (whether BOO or BOT undetermined at this stage)|
|Project 03||Provision of clean water via Water Kiosks|
|Amount of funding||JPY210mn|
|Business overview||Construction and operation of sales facilities to provide clean water produced using reverse osmosis membranes|
** Under a build-own-operate (BOO) agreement, the Daiki Axis group raises funds for and builds infrastructure-related facilities, and then continues to maintain and operate these facilities. After the contract ends, the company retains ownership of these facilities, which it can then dismantle or sell. With a build-operate-transfer (BOT) agreement, the group raises funds for and builds infrastructure-related facilities, and then continues to maintain and operate these facilities as under a BOO agreement. However, ownership rights transfer after the contract ends.
Workstyle reforms include shortening overlong working hours and reforming HR systems. In FY12/16, the company introduced “no-overtime days” to encourage employees in leisure pursuits.
As social support, the company works with local communities to dispose of used cooking oil and helps people with disabilities to play an active role in society. In the biodiesel business, the company works with local communities to collect used cooking oil. It helps people with disabilities to play an active role in society. In addition, the company holds lectures on biomass to raise awareness regarding environmental improvement efforts.
In the diversity category, the company promotes the active participation of women and aims to welcome people from diverse cultures and with different perspectives.
In 2015, Daiki Axis received Kurumin certification*, which enables the company to publicly promote itself as a “company that supports child-rearing.” The company also interviews people on child-rearing leave.
To support employees, the company has set up an external consultation desk and put internal personnel in charge of promoting mental health.
In March 2019, the company appointed a female board member (outside director and member of the Audit Committee).
*Kurumin certification is given by Japan’s Minister of Health, Labour and Welfare to “companies that support child-rearing.” This designation is based on the Act on Advancement of Measures to Support Raising Next-Generation Children (specific-duration legislation through March 31, 2015). To earn Kurumin certification, companies must formulate a general employer action plan, meet certain designated targets and satisfy certain standards. Companies with Kurumin certification may use the associated logo (nicknamed “Kurumin”) on their products and advertising to publicize their efforts to support child-rearing. For assets (buildings and fixtures acquired, built, or expanded during the relevant period [first day of the action plan’s period to the final day of the fiscal year including the date when the period of designation ends]) contributing to support for the next generation, companies may increase their depreciation deductions by up to 32% above ordinary depreciation limits. During the period of the plan, from 2011 to 2015, the company met its goals of at least one male employee taking childcare leave and 75% or more of eligible female employees taking this leave. The company also met its goals for encouraging employees to take four or more days per year of annual paid leave and providing young people (non-employees) with internships and other work-experience opportunities.
As part of management structure reform, the company introduced an executive officer system in FY12/19 (on March 26) to separate managerial and executive functions more clearly. For risk management, Daiki Axis transitioned to the form of a company with an Audit Committee in FY12/19 (March 26). In FY12/20, the company increased the number of outside directors from two to five. The company takes a proactive approach to disseminating information, holding company briefings and providing ESG reports.
|SDG 6. Clean water and sanitation|
|[Daiki Axis initiatives]|
|Build bases for manufacturing wastewater treatment tanks in countries with large populations: China, India, and Indonesia|
|Sign distribution agreements with local companies in Asian countries (Vietnam, Myanmar, and Sri Lanka) and in Africa (Kenya)|
|[Business segments] Mainly the Environmental Equipment segment|
|SDGs 7. Affordable and clean energy and 13. Climate action|
|[Daiki Axis initiatives]|
|Work to reduce CO2 through renewable energy businesses, mainly solar and compact wind power generation|
|[Business segments] Mainly the Renewable Energy segment|
|SDG 12. Responsible consumption and production|
|[Daiki Axis initiatives]|
|Focus on using energy-saving products in each business|
|Promote initiatives to ensure 100% renewable energy generation through the company’s business activities|
|[Business segments] Companywide|
|SDGs 5. Gender equality and 8. Decent work and economic growth|
|[Daiki Axis initiatives]|
|Workstyle reform and promotion of diversity|
|・Appoint a female board member|
|・Obtain Kurumin certification (certification system by the Ministry of Health, Labour and Welfare) for promotion of active female participation|
|[Business segments] Companywide|
Daiki Axis’s business centers on water treatment. The company manufactures and sells household and industrial wastewater treatment systems. In addition, the company sources and sells household equipment, most of which are used in wet areas (baths and kitchens). The company is also engaged in the sale of electricity produced from renewable sources. Multiple business models exist within the corporate group: manufacturing, construction, wholesaling, electric power, and retailing.
In FY12/20, revenue was JPY34.6bn, operating profit was JPY1.0bn, and OPM was 3.0%. The company has four business segments.
The Environmental Equipment segment posted FY12/20 revenue of JPY17.7bn, which constituted 51.0% of total revenue and 59.0% of total operating profit. In this segment, the company manufactures wastewater treatment tanks, installs and maintains wastewater treatment systems, and engages in clean-water business (groundwater-to-drinking-water conversion).
The Household Equipment segment recorded revenue of JPY14.7bn in FY12/20, which comprised 42.6% of total revenue and 15.4% operating profit. In this segment, the company primarily sources and sells household equipment and performs interior and exterior construction on condominiums and store buildings.
The Renewable Energy segment logged FY12/20 revenue of JPY905mn, which constituted 2.6% of total revenue and 17.1% of operating profit. In this segment, the company sells electricity generated by solar and wind power and refines biodiesel fuel.
The Other business segment posted FY12/20 revenue of JPY1.3bn, which were 3.8% of total revenue and 8.5% of operating profit. In this business, the company sells drinking water to homes on a subscription basis.
In 2005, Daiki Axis was established as a wholly owned subsidiary of Daiki Co., Ltd. (now DCM Daiki Co., Ltd.: unlisted). The company took over Daiki’s manufacturing division (the Environmental Equipment segment and the biodiesel fuel business) and wholesaling division (the Household Equipment segment). The company and DCM Daiki have no capital relationship. However, they do have a transactional relationship, as outlined below. The percentage of Daiki Axis revenue from the DCM group was 13.4% in FY12/20.
The company leases its headquarters and some other branches from DCM Daiki.
The company sells household products through DIY stores operated throughout Japan by DCM Holdings Co., Ltd. (TSE1: 3050) group companies DCM Daiki, DCM Kahma Co., Ltd. (unlisted), and DCM Homac Co., Ltd. (unlisted), and others.
The company manages some facility maintenance for companies in the DCM group. For instance, the company maintains wastewater treatment tanks and cleans stores.
The company has agreements in place with DCM group stores to lease roof space, used in the solar power generation business.
|Revenue from DCM group||3,552||4,774||4,210||4,601||6,021||4,660||4,934||4,114||4,631|
|% of total revenue||13.1%||15.5%||13.4%||14.2%||18.4%||13.9%||13.6%||11.5%||13.4%|
|Revenue by segment|
|Revenue from DCM group||769||802||795||928||1,034||1,123||1,270||1,409||3,013|
|% of total revenue||5.9%||5.4%||5.2%||6.0%||6.5%||6.8%||6.9%||7.6%||17.0%|
|Revenue from DCM group||2,768||3,956||3,399||3,656||4,969||3,531||3,618||2,652||1,591|
|% of total revenue||20.5%||26.1%||21.9%||22.4%||30.7%||22.7%||22.9%||18.1%||10.8%|
|Revenue from DCM group||-||-||-||-||-||-||41||47||19|
|% of total revenue||-||-||-||-||-||-||14.3%||6.7%||2.1%|
|Revenue from DCM group||15||16||16||17||18||6||5||6||8|
|% of total revenue||2.2%||2.5%||2.2%||2.5%||2.4%||0.4%||0.3%||0.3%||0.6%|
|% of total||3.4%||3.1%||3.6%||4.3%||3.4%||3.6%||3.9%||4.7%||4.2%||4.8%|
|Johkasou, wastewater treatment systems||12,556||14,452||14,718||14,742||15,374||15,861||17,789||17,705||16,936||17,956|
|% of total||96.6%||96.9%||96.4%||95.7%||96.6%||96.4%||96.1%||95.3%||95.7%||95.2%|
|Water purification systems||16||49||19||149||18|
|% of total||0.1%||0.3%||0.1%||0.8%||0.1%|
|Domestic small Johkasou (5–50 people)||1,671||1,628||1,722||1,671||1,468|
|% of total||10.5%||9.9%||9.3%||9.0%||8.3%|
|Wastewater treatment systems||9,675||9,999||11,589||10,956||10,312|
|% of total||60.8%||60.8%||62.6%||59.0%||58.3%|
|Johkasou, wastewater treatment systems||14,718||14,742||15,374||15,861||17,789||17,705||16,936||17,956|
|% of total||0.0%||94.6%||92.8%||91.8%||91.6%||88.1%||89.9%||89.1%||90.1%||86.0%|
|% of total||0.0%||2.3%||3.7%||3.9%||5.0%||8.3%||6.2%||6.2%||5.7%||9.2%|
|Johkasou, wastewater treatment systems||12,556||14,452||14,718||14,742||15,374||15,861||17,789||17,705||16,936||17,956|
|Water purification and wastewater||-||10,960||11,112||10,966||11,358||11,679||13,329||12,783||11,792||12,504|
|% of total||0.0%||73.5%||72.8%||71.2%||71.4%||71.0%||72.0%||68.8%||66.7%||66.3%|
|Maintenance (incl. overseas)||-||3,492||3,606||3,776||4,016||4,182||4,460||4,922||5,144||5,452|
|% of total||0.0%||23.4%||23.6%||24.5%||25.2%||25.4%||24.1%||26.5%||29.1%||28.9%|
|Operating profit margin||4.9%||6.4%||7.5%||7.4%||7.5%||8.3%||7.5%||5.8%||6.8%||7.7%|
In the clean water business, the company converts customers’ groundwater to drinking water, building systems that provide an alternative to waterworks.
The company builds intermediate water supply systems, which reuse treated household and industrial wastewater. The recycled water is used in ways that do not involve direct human contact, such as in toilets, for watering greenery, and in factories.
In Japan, the company manufactures, sells, and installs compact wastewater treatment tanks—mainly wastewater treatment equipment for detached homes.
In the category of wastewater treatment systems, the company manufactures, sells, and installs medium-sized and large wastewater treatment tanks and industrial wastewater treatment equipment.
Regarding maintenance, compact wastewater treatment tanks are outside the scope of the company’s maintenance services. The company only maintains medium- and large-sized wastewater treatment tanks, as well as industrial wastewater treatment equipment.
Wastewater treatment tanks internally purify household water (sewage and household wastewater emitted from kitchens, baths, clothes washing, and sinks). These tanks are mainly installed in locations without access to public sewage systems. As of March 31, 2020, 79.7% of the Japanese population (101.1mn people) had access to public sewage systems. Conversely, 9.3% (11.7mn) of the population uses wastewater treatment tanks.
Sometimes wastewater treatment tanks are necessary even where sewage systems are available. Large-scale condominiums and commercial facilities that produce substantial quantities of wastewater may need to treat that water before releasing it into sewage systems. The company installs large wastewater treatment tanks for that purpose.
|Centralized treatment system||Decentralized treatment system||Other|
|Rural community sewerage||2.6%||(Vault toilet)|
Wastewater treatment tanks accumulate wastewater internally and filter out (separate) solids. The tanks mainly use bacteria to break down organic matter that causes environmental pollution. The top layer of purified water is released from the tanks into waterways. Environmental standards are stipulated by the Purification Tank Act. Whereas less expensive personal computers and smartphones that offer lower functionality are available, such decreases in functionality are not permitted for treatment tanks. The tanks also must be regularly maintained and inspected, as with automobile engines.
The company categorizes wastewater treatment tanks by capacity: compact (5–50 people), medium (51–500 people), and large (501 or more people). Equipment for handling industrial wastewater, which contains different substances from household wastewater, is outside the scope of the Purification Tank Act and categorized as purification equipment. Compact wastewater treatment tanks are used mainly for detached homes. Medium- and large-sized wastewater treatment tanks are mostly used in condominiums and commercial facilities.
Johkasoud for individual homes
Johkasou for condominium
Johkaso system for industrial wastewater
Compact wastewater treatment tanks are typically divided into four compartments. The tanks process wastewater in four stages and emit purified water.
In the first compartment, solids are separated out of sewage, and liquid sewage is broken down by anaerobic bacteria (bacteria that breed and multiply without oxygen).
In the second compartment, substances removed by the first compartment are again broken down using anaerobic bacteria.
In the third compartment, substances not broken down in the first and second compartments are broken down using aerobic bacteria (which breeds and multiplies in the presence of oxygen). Ammonia is oxidized. Suspended matter is precipitated, and the water that rises is sent to the disinfection compartment.
In the final disinfection compartment, treated water is disinfected with chlorine and released.
Compact wastewater treatment tanks have the following main components:
The outer layer is typically plastic, usually a synthetic resin such as fiberglass reinforced plastic (FRP) or polypropylene (PP). Tank exteriors differ in terms of ease of processing, strength, durability, and weight. Some tanks are made of concrete. Concrete may be used to provide better design flexibility in cases where location makes tank shape a factor, or for large facilities where plastic tanks are too small.
Bacteria are applied to structures called “contact media.” Contact media are designed for broad contact between bacteria and wastewater, promoting efficient decomposition. Blowers are affixed to wastewater treatment tanks to oxygenate aerobic bacteria and keep them healthy.
Filtration devices are used to eliminate supernatant substances. Sand may be used for filtration. Alternatively, wastewater may pass through carrier materials loaded with bacteria (filtering materials). Different manufacturers have developed wastewater treatment tanks employing a variety of treatment methods.
The Purification Tank Act sets water quality standards for the water released by wastewater treatment tanks. Biochemical oxygen demand (BOD) is one measure used to determine water quality. BOD indicates the amount of oxygen bacteria in wastewater treatment tanks need to break down pollutants. BOD of 20 means that 20mg of oxygen is needed to break down pollutants in one liter of water. The smaller the number, the less pollutant the water contains. The standards stipulate a BOD removal rate, indicating the percentage BOD must be reduced during wastewater treatment.
The BOD standard under the Purification Tank Act stipulates a removal rate of 90% or more for compact wastewater treatment tanks, and BOD of 20 for released water. For medium-sized tanks, the corresponding figures are ≥70% and ≤60; for large tanks, ≥85% and ≤30. Local governments may set ordinances with stricter standards than under the Purification Tank Act.
In addition to BOD, performance tables show chemical oxygen demand (COD), total nitrogen (T-N), total phosphorous (T-P), and suspended solids (SS).
|(Released March 2019)|
|Model: XF||Effluent standards|
|(Home, for 5–10 people)||(Limit: mg/l)|
More than 10 companies in Japan manufacture wastewater treatment tanks. The company says this business has a low barrier to entry. Construction materials can help reduce the cost of manufacturing compact wastewater treatment tanks. In addition to performance, technology development focuses on such factors as shapes that are easy to install, strength, lightness of tank weight that reduces transportation costs, and energy-saving blowers.
Another differentiating factor is the simplicity of a tank’s internal structure, which facilitates post-installation cleaning (waste collection) and maintenance. Some end-users are satisfied with any wastewater treatment tank that meets environmental standards, making tanks a price-sensitive commodity item. This tendency is particularly evident with compact wastewater treatment tanks for households.
To create barriers to entry and ensure its survival in the category of compact wastewater treatment tanks, the company situates manufacturing facilities close to demand areas (lowering transportation costs) and maintains sales offices throughout Japan to allow consistent interaction with customers (construction companies).
In the categories of medium- and large-sized wastewater treatment tanks and industrial wastewater treatment equipment, the company supplies products that treat wastewater to various levels of water quality. These product categories also require construction and management capabilities. Daiki Axis has relationships in place with the construction companies that order such products, and the company employs personnel to maintain these relationships. These relationships serve as a barrier to entry for other companies.
Waste matter that has been separated out from wastewater and retained within wastewater treatment tanks must be removed periodically. Cleaning companies that collect this waste material must hold waste treatment qualifications. Cleaning is typically performed by local authorities or industrial waste treatment companies that have been subcontracted to handle the task. Vacuum trucks go site to site (door to door), collecting waste matter and transporting it to waste treatment facilities.
To maintain functionality, the Purification Tank Act stipulates that wastewater treatment tanks must be managed, including regular cleaning, maintenance, and inspection. For household compact wastewater treatment tanks, often the homeowner is the manager. However, maintenance may be outsourced to licensed operators. Legally mandated cleaning and maintenance of wastewater treatment tanks is a recurring-revenue business with steady demand.
In FY12/20, wastewater treatment business (intermediate water supply, sewage, and maintenance) accounted for 95.7% of revenue in the Environmental Equipment segment, with overseas business making up around 6% of this amount. The clean water business provided 4.2% of revenue.
|End users||% of Environmental Equipment segment revenue|
|Water supply (ground water treatment)||Hospitals, welfare facilities, food processing plants, gyms, other||3.4%||3.6%||3.9%||4.7%||4.2%|
|Water purification systems||Parks, other||0.1%||0.3%||0.1%||0.8%||0.1%|
|Wastewater||Small Johkasou||Individual homes, other||10.5%||9.9%||9.3%||9.0%||8.3%|
|Wastewater treatment system||Condominiums, rural districts, food processing plants, electrical and plating plants, other||60.8%||60.8%||62.6%||59.0%||58.3%|
|Maintenance||All above excl. individual homes||25.2%||25.4%||24.1%||26.5%||29.1%|
Medium- and large-sized wastewater treatment tanks are built to order, and sales prices include construction work. Shared Research understands the company produces around 600 of these wastewater treatment tanks each year (market share of around 15%). According to the company, medium- and large-sized wastewater treatment tanks (standalone) range from JPY3mn to tens of millions of JPY. Larger community plants can cost hundreds of millions of JPY. Unit orders, including construction, are priced at JPY10mn to several hundred million JPY. The average price is around JPY20mn.
Each year, the company manufactures around 6,000 compact wastewater treatment tanks, which are manufactured through BTS production. Units are priced at approximately JPY150,000. Compact wastewater treatment tanks, a founding business for the company, accounted for more than 10% of revenue in FY12/16. By FY12/20, this figure had shrunk to 8%. The company explains this decline by saying it is working to expand business in medium- and large-sized wastewater treatment tanks, where orders include construction, rather than depending on compact wastewater treatment tanks, which are becoming a commodity.
Even though they have become a commodity, compact wastewater treatment tanks present an opportunity to conduct cross-selling with other housing equipment. Accordingly, the company explains that this business helps it retain a broad customer base.
The cost of producing wastewater treatment tanks breaks down roughly as slightly less than 50% for materials, with the remaining total going toward labor, depreciation and amortization, and sundry expenses. Tank exteriors are generally made of synthetic resin (FRP and PP), which the company outsources; its factories instead concentrate on assembly. The company does make cylindrical (medium-sized) wastewater treatment tanks in-house.
Daiki Axis says its GPM on compact wastewater treatment tanks is several percent. Shared Research understands that GPM comes to around 20% for water treatment systems that incorporate medium-sized and large wastewater treatment tanks (including construction). Breaking down the cost of construction completed (non-consolidated basis, for FY12/19, segment total), outsourcing expenses accounted for 51.3%, materials for 40.5%, and labor and expenses for 8.2%. The majority of outsourcing expenses go toward construction. Company technicians supervise the construction of wastewater treatment tanks, but construction is outsourced to firms outside the Daiki Axis group.
Capital investment in manufacturing wastewater treatment tanks was not conducted in FY12/19 or FY12/20. As wastewater treatment tanks are a mature product type, Shared Research understands the company keeps capital investment within the scope of depreciation and amortization, and investment goes mostly toward upgrades. In FY12/14 and FY12/15, the company made capital investments in this segment to strengthen overseas factories.
|Capex by business segment||FY12/14||FY12/15||FY12/16||FY12/17||FY12/18||FY12/19||FY12/20|
|Manufacturing facilities, other||319||569||29||71||43||-||-|
|Groundwater-to-drinking-water conversion systems||386||283||231||139||141||186||60|
|Renewable Energy (from FY12/18)||1,704||1,954||454|