Kanematsu Corporation is a general trading company. As such, it engages in diverse businesses, with a focus on communication technology and ICT solutions. The company was founded in 1889 as a wool importer. Diversification during the years of rapid economic growth following World War II turned Kanematsu into a top-10 general trading company in Japan. In 1999, it implemented structural reforms, including the sale of its textile business, and began expanding earnings from IT-related businesses (including IT system infrastructure construction) that other general trading companies have not entered. As of March 2021, the company had four business segments: Electronics & Devices (FY03/21 revenue of JPY226.1bn, 34.8% of total revenue, 74.3% of total operating profit), Foods, Meat & Grain (JPY244.6bn, 37.7%, 6.3%), Steel, Materials & Plant (JPY96.8bn, 14.9%, 7.8%), and Motor Vehicles & Aerospace (JPY71.1bn, 11.0%, 8.7%).
In the Electronics & Devices segment, the ICT solutions and mobile businesses account for more than 90% of operating profit. Kanematsu Electronics Ltd. (TSE1: 8096, 57.8% held by Kanematsu) handles the ICT solutions business and employs about 800 system engineers. It designs, builds, operates, and maintains corporate information system infrastructure (mainly cloud servers), and sells network devices. Some 50% of revenue is one-time revenue from system construction and other work, while the remainder is recurring revenue from maintenance and servicing. Main customers are manufacturers, financial institutions, electric and gas companies, and educational institutions. Kanematsu Electronics’ system development is often tailored to customer needs, so OPM tends to be higher than at competing system integrators (16.6% at Kanematsu Electronics in FY03/21, but averaging 8.0% at 15 competitors for the most recent fiscal year).
In the Electronics & Devices segment, wholly owned subsidiary Kanematsu Communications Ltd. handles the mobile business, operating some 420 stores nationwide (including about 150 directly managed stores), mainly in affiliation with companies such as NTT Docomo (Docomo shops). Kanematsu Communications’ revenue is calculated by subtracting labor and overhead expenses for stores from the fees it receives from NTT Docomo. In terms of revenue per employee, it is second in the mobile phone store industry at JPY75mn per employee, versus JPY97mn at the top company, T-Gaia (TSE1: 3738). Kanematsu Communications’ operating profit grew from JPY3.7bn in FY03/16 to JPY7.1bn in FY03/20 due to market expansion and the acquisition of competitors (mostly recently in April 2017). In FY03/21, operating profit declined YoY due to the COVID-19 pandemic, but Kanematsu Communications still expects the general uptrend to continue on increased demand related to 5G.
The Foods, Meat & Grain segment comprises three businesses: food (sales of imported foodstuff in the restaurant, ready-to-eat, and retail markets), meat products (import and sales of a full range of meat products, from ingredients to processed meat products), and feedstuff and grain (sales of grain, agricultural products, and processed agricultural products such as pasta, and import and sales of feedstuff and fertilizer). Kanematsu says that, in the meat products business, it has one of the largest import shares in Japan for the three major livestock animals (cows, pigs, and chickens), and a share of more than 90% of Japanese imports of Uruguayan beef (as of FY03/21), for which an import ban that had been in place for about 20 years has been lifted. OPM in this segment is 0.6% (as of FY03/21), which is lower than for the other segments. Kanematsu has invested in a processed food manufacturer (in Indonesia), established a primary beef processer and manufacturer (in China), and promotes efforts to add value through processing.
The Steel, Materials & Plant segment comprises six businesses: iron and steel, steel pipe, chemicals, energy, plants and ships, and machine tools and industrial machinery (although the company provides figures in three categories: machine tools and industrial machinery, overseas [steel pipe], and energy, chemicals, and other). In this segment, the company engages in domestic and overseas trading of iron and steel products, various overseas plant and infrastructure development projects, sales of machine tools and industrial machinery, and domestic and overseas trading of petroleum products and chemicals (including pharmaceuticals). Although it does handle products in the energy sector, including petroleum and gas, as of end-FY03/21 it owned no resource interests in any oil fields or mines. Unlike other trading companies conducting resources business, it therefore has no risk of booking any impairment loss related to resource interests.
The Motor Vehicles & Aerospace segment comprises the aerospace business and the motor vehicles and parts business. In the aerospace business, the company procures and sells aircraft, helicopters, and onboard equipment and parts. It is also investing to expand into niche businesses such rocket tracking systems. The post-delivery aircraft parts business provides a stable revenue source. In the motor vehicles and parts business, the company mainly sells OEM automotive parts such as gears and clutches for motorcycles and automobiles to overseas customers. In FY03/21, Kanematsu acquired a company that develops and manufactures drive recorders. It plans to enter a new data business using vehicle operation data recorded by onboard devices.
In FY03/21, revenue was JPY649.1bn (-10.1% YoY; 96.9% achievement versus the revised full-year forecast), operating profit was JPY23.6bn (-16.6% YoY; 98.5% versus the revised full-year forecast), pre-tax profit was JPY23.6bn (-12.5% YoY; 102.5%), and profit attributable to owners of the parent was JPY13.3bn (-7.5% YoY; 102.4%). While the meat products business saw higher revenue due to demand for at-home meals amid the COVID-19 pandemic, the mobile business saw a decrease in revenue owing to reduced footfall at mobile phone stores stemming from consumers’ reluctance to leave the home due to the state of emergency declaration and shortened business hours. Revenue in the energy business also fell due to a slump in crude oil prices. On the profit front, the feedstuff and grain business posted higher profit due to improved market conditions and demand for at-home meals. Meanwhile, profit declined in the mobile business due to a decline in revenue, the meat products business, where restaurant-related revenue fell, and the oilfield tubing business, where drilling demand was sluggish.
For FY03/22, the company forecasts revenue of JPY700bn (+7.8% YoY), operating profit of JPY28.0bn (+18.5% YoY), pre-tax profit of JPY28.0bn (+18.7% YoY), profit attributable to owners of the parent of JPY15.0bn (+12.7% YoY), EPS of JPY179.62 (JPY159.44 in FY03/21), and ROE of 10.4% (9.7% in FY03/21). Kanematsu expects the business environment in FY03/22 to remain uncertain due to the COVID-19 pandemic, but expects the global economy to recover to pre-pandemic levels as economic activity normalizes due to vaccine rollout in many countries. The company expects the normalization of economic activities In Japan to be slower than in other major countries due in part to slower progress in vaccinations.
Kanematsu has been pursuing its medium-term vision, “future135,” which covers the six years through FY03/24 (announced on May 9, 2018), which will be the company’s 135th year since its founding. At the time of its FY03/21 earnings announcement (May 7, 2021), the company reconfirmed the course of its policy based on the progress of business investment in the first three years of the plan and the impact of the COVID-19 pandemic. Kanematsu stated that it would make no major changes to its basic policy. However, the company announced a revision to the following quantitative targets (for FY03/24, the last year of the plan), taking into account progress in business investment and related revenue growth. Kanematsu lowered its projections for FY03/24 profit attributable to owners of the parent to JPY20.0bn (pre-revision: JPY25.0bn) and ROE to 10–12% (pre-revision: 13–15%), and raised its projection for total return ratio to 30–35% (pre-revision: 25–30%).
Shared Research sees Kanematsu’s strengths as the following: 1) OPM in the ICT solutions business is 16.6% (FY03/21), due to robust customer response capabilities and technological strength, 2) Strong sales expertise in the mobile business is driving productivity, and 3) Relatively low involvement in resource businesses means less exposure to impairment losses than the five largest Japanese general trading companies. We consider its weaknesses as the following: 1) Kanematsu’s scope of operations tends to be small in non-IT businesses, hampering economies of scale, 2) The company has been slow to develop business overseas, where economic growth is high, and 3) It lacks experience and expertise with large M&A deals.
|Gross profit margin||8.2%||8.0%||7.9%||7.8%||7.9%||8.2%||14.8%||14.9%||15.2%||15.4%||15.6%|
|Operating profit margin||1.9%||2.1%||1.8%||1.8%||2.1%||1.8%||3.4%||3.7%||4.2%||3.9%||3.6%||4.0%|
|Pre-tax profit (Recurring profit)||14,257||17,752||16,705||20,160||22,373||18,122||17,875||26,043||29,177||26,944||23,580||28,000|
|Recurring profit margin||1.5%||1.8%||1.6%||1.8%||2.0%||1.7%||2.6%||3.6%||4.0%||3.7%||3.6%||4.0%|
|Profit (Net income) attributable to owners of the parent||9,175||6,510||9,564||11,799||10,540||8,959||8,049||16,317||16,605||14,399||13,315||15,000|
|Per-share data (split-adjusted; JPY)|
|Shares issued (year-end; '000)||422,501||422,501||422,501||422,501||422,501||422,501||84,500||84,500||84,500||84,500||84,500|
|EPS (fully diluted; JPY)||-||-||-||-||25.1||21.3||95.6||193.8||198.2||172.3||159.3|
|Dividend per share (JPY)||-||-||-||3.0||4.0||5.0||30.0||48.0||60.0||60.0||60.0||60.0|
|Book value per share (JPY)||79||94||60||74||215||218||1,192||1,378||1,500||1,567||1,723|
|Balance sheet (JPYmn)|
|Cash and cash equivalents||69,014||70,835||60,421||73,867||66,485||87,466||77,566||77,731||88,941||91,105||81,045|
|Total current assets||299,283||318,581||316,554||345,366||367,664||346,574||371,329||414,662||444,443||426,756||420,894|
|Tangible fixed assets||27,884||27,028||26,990||24,218||28,966||26,883||26,858||21,900||22,090||40,756||42,246|
|Intangible fixed assets||1,859||1,905||7,226||11,706||8,641||8,083||20,935||20,377||23,051||23,382||24,926|
|Total current liabilities||252,120||246,837||244,776||258,635||258,255||233,034||265,455||284,313||312,443||284,503||284,909|
|Total fixed liabilities||86,978||96,522||78,496||73,620||89,043||89,851||84,398||88,525||78,317||100,994||92,093|
|Total net assets||49,576||56,392||75,912||96,204||119,015||120,706||129,863||147,050||158,698||166,174||180,492|
|Total liabilities and net assets||388,675||399,752||399,185||428,459||466,313||443,591||479,717||519,888||549,458||551,671||557,495|
|Total interest-bearing debt||173,626||160,847||146,860||141,905||139,731||136,866||133,844||137,326||139,504||143,393||122,157|
|Cash flow statement (JPYmn)|
|Cash flows from operating activities||7,827||15,822||1,355||22,384||6,758||33,024||11,852||434||24,698||24,259||36,984|
|Cash flows from investing activities||17,322||1,291||1,466||-1,111||-6,649||-4,214||-14,691||1,103||-6,575||-10,215||-9,927|
|Cash flows from financing activities||-20,664||-13,411||-15,721||-9,351||-10,046||-6,729||-6,904||-842||-7,158||-11,590||-37,497|
|Total asset turnover||238.0%||255.3%||255.1%||269.3%||247.7%||232.2%||146.3%||143.0%||135.4%||131.1%||117.1%|
|Electronics & Devices||236,774||277,348||231,230||235,028||254,280||263,310||265,530||254,516||226,109|
|% of total||23.2%||24.9%||32.8%||35.2%||37.6%||36.8%||36.7%||35.3%||34.8%|
|Foods, Meat & Grain||287,936||309,024||213,720||222,577||227,764||231,260||244,859||251,403||244,617|
|% of total||28.3%||27.7%||30.3%||33.3%||33.7%||32.4%||33.8%||34.8%||37.7%|
|Steel, Materials & Plant||434,230||468,831||201,957||135,269||131,201||153,075||139,436||129,858||96,868|
|% of total||42.6%||42.1%||28.7%||20.2%||19.4%||21.4%||19.3%||18.0%||14.9%|
|Motor Vehicles & Aerospace||50,719||54,451||52,396||63,792||50,419||54,453||62,063||74,605||71,086|
|% of total||5.0%||4.9%||7.4%||9.5%||7.5%||7.6%||8.6%||10.3%||11.0%|
|% of total||0.9%||0.4%||0.7%||1.8%||1.8%||1.8%||1.7%||1.6%||1.6%|
|Operating profit margin||1.8%||1.8%||3.3%||2.8%||3.4%||3.7%||4.2%||3.9%||3.6%||4.0%|
|Electronics & Devices||8,339||7,755||10,152||10,658||14,348||17,556||18,533||18,963||17,575||19,200|
|Operating profit margin||3.5%||2.8%||4.4%||4.5%||5.6%||6.7%||7.0%||7.5%||7.8%|
|% of total||45.7%||39.4%||43.1%||56.8%||63.4%||67.1%||61.1%||66.9%||74.3%||68.6%|
|Foods, Meat & Grain||3,165||2,099||3,365||1,427||2,489||2,149||3,951||2,381||1,498||3,500|
|Operating profit margin||1.1%||0.7%||1.6%||0.6%||1.1%||0.9%||1.6%||0.9%||0.6%|
|% of total||17.3%||10.7%||14.3%||7.6%||11.0%||8.2%||13.0%||8.4%||6.3%||12.5%|
|Steel, Materials & Plant||5,094||8,129||6,345||3,388||2,820||3,930||4,437||3,819||1,840||3,100|
|Operating profit margin||1.2%||1.7%||3.1%||2.5%||2.1%||2.6%||3.2%||2.9%||1.9%|
|% of total||27.9%||41.3%||27.0%||18.1%||12.5%||15.0%||14.6%||13.5%||7.8%||11.1%|
|Motor Vehicles & Aerospace||1,447||1,494||2,601||2,964||2,223||2,541||2,549||2,383||2,055||1,400|
|Operating profit margin||2.9%||2.7%||5.0%||4.6%||4.4%||4.7%||4.1%||3.2%||2.9%|
|% of total||7.9%||7.6%||11.1%||15.8%||9.8%||9.7%||8.4%||8.4%||8.7%||5.0%|
|Operating profit margin||2.1%||4.6%||21.8%||2.8%||6.3%||-||7.1%||7.2%||6.6%|
|% of total||1.1%||1.1%||4.5%||1.8%||3.3%||-0.1%||2.8%||2.9%||2.9%||2.9%|
|Electronics & Devices||10,152||10,658||14,348||17,556||18,533||18,963||17,575||19,200|
|Foods, Meat & Grain||3,365||1,427||2,489||2,149||3,951||2,381||1,498||3,500|
|Foods (Meat included up to FY03/19)||1,400||1,300||1,500||100||-400||200|
|Steel, Materials & Plant||6,345||3,388||2,820||3,930||4,437||3,819||1,840||3,100|
|Machining tools, industrial machinery||1,800||1,300||2,000||1,100||700||1,400|
|Motor Vehicles & Aerospace||2,601||2,964||2,223||2,541||2,549||2,383||2,055||1,400|
|Motor vehicles and parts||700||1,000||700||200||200||700|
|(YoY change; JPYmn)||Act.||Act.||Act.||Act.||Act.||Act.||Act.||Est.|
|Electronics & Devices||506||3,690||3,208||977||430||-1,388||1,625|
|Foods, Meat & Grain||-1,938||1,062||-340||1,802||-1,570||-883||2,002|
|Foods (Meat included up to FY03/19)||-100||200||-1,400||-500||600|
|Steel, Materials & Plant||-2,957||-568||1,110||507||-618||-1,979||1,260|
|Machining tools, industrial machinery||-500||700||-900||-400||700|
|Motor Vehicles & Aerospace||363||-741||318||8||-166||-328||-655|
|Motor vehicles and parts||300||-300||-500||-100||500|
|% of total||Act.||Act.||Act.||Act.||Act.||Act.||Act.||Est.|
|Electronics & Devices||43.1%||56.8%||63.4%||67.1%||61.1%||66.9%||74.3%||68.6%|
|Foods, Meat & Grain||14.3%||7.6%||11.0%||8.2%||13.0%||8.4%||6.3%||12.5%|
|Foods (Meat included up to FY03/19)||6.2%||5.0%||4.9%||0.4%||-1.7%||0.7%|
|Steel, Materials & Plant||27.0%||18.1%||12.5%||15.0%||14.6%||13.5%||7.8%||11.1%|
|Machining tools, industrial machinery||8.0%||5.0%||6.6%||3.9%||3.0%||5.0%|
|Motor Vehicles & Aerospace||11.1%||15.8%||9.8%||9.7%||8.4%||8.4%||8.7%||5.0%|
|Motor vehicles and parts||3.1%||3.8%||2.3%||0.7%||0.8%||2.5%|
Kanematsu Corporation announced earnings results for 1H FY03/22; see the results section for details.
Shared Research updated the report following interviews with Kanematsu Corporation.
|(JPYmn)||Q1||Q1–Q2||Q1–Q3||Q1–Q4||Q1||Q1–Q2||Q1–Q3||Q1–Q4||Q1||Q1–Q2||% of Est.||FY Est.|
|Gross profit margin||15.0%||15.4%||15.0%||15.4%||15.1%||15.6%||15.3%||15.6%||14.1%||14.8%|
|Operating profit margin||3.5%||4.1%||3.5%||3.9%||2.4%||3.3%||3.1%||3.6%||2.9%||3.9%||4.0%|
|Recurring profit margin||3.4%||4.0%||3.4%||3.7%||2.4%||3.1%||3.0%||3.6%||3.0%||3.7%||4.0%|
|Profit attributable to owners of the parent||3,523||7,810||9,415||14,399||2,359||5,874||8,546||13,315||3,253||7,285||48.6%||15,000|
|Gross profit margin||15.0%||15.8%||14.3%||16.3%||15.1%||16.0%||14.9%||16.4%||14.1%||15.4%|
|Operating profit margin||3.5%||4.7%||2.3%||5.0%||2.4%||4.1%||2.8%||5.0%||2.9%||4.9%|
|Recurring profit margin||3.4%||4.5%||2.1%||4.8%||2.4%||3.8%||2.8%||5.2%||3.0%||4.4%|
|Profit attributable to owners of the parent||3,523||4,287||1,605||4,984||2,359||3,515||2,672||4,769||3,253||4,032|
|By segment (cumulative)||FY03/20||FY03/21||FY03/22||FY03/22|
|(JPYmn)||Q1||Q1–Q2||Q1–Q3||Q1–Q4||Q1||Q1–Q2||Q1–Q3||Q1–Q4||Q1||Q1–Q2||% of Est.||FY Est.|
|Electronics & Devices||55,607||126,837||185,662||254,516||43,738||102,940||157,420||226,109||53,757||118,815|
|% of total||33.0%||35.5%||35.0%||35.3%||30.7%||33.8%||33.7%||34.8%||30.6%||32.6%|
|Foods, Meat & Grain||62,931||127,477||191,225||251,403||61,933||122,939||186,088||244,617||70,074||142,004|
|% of total||37.4%||35.7%||36.0%||34.8%||43.5%||40.3%||39.8%||37.7%||39.9%||39.0%|
|Steel, Materials & Plant||31,560||62,517||95,443||129,858||20,458||41,166||66,615||96,831||31,937||65,178|
|% of total||18.7%||17.5%||18.0%||18.0%||14.4%||13.5%||14.2%||14.9%||18.2%||17.9%|
|Motor Vehicles & Aerospace||15,342||33,983||49,927||74,605||13,634||32,544||49,635||71,086||16,835||32,022|
|% of total||9.1%||9.5%||9.4%||10.3%||9.6%||10.7%||10.6%||11.0%||9.6%||8.8%|
|% of total||1.8%||1.7%||1.7%||1.6%||1.8%||1.7%||1.7%||1.6%||1.7%||1.7%|
|Operating profit margin||3.5%||4.1%||3.5%||3.9%||2.4%||3.3%||3.1%||3.6%||2.9%||3.9%||4.0%|
|Electronics & Devices||2,803||9,299||12,548||18,963||1,894||7,465||9,952||17,575||2,192||8,712||45.4%||19,200|
|Operating profit margin||5.0%||7.3%||6.8%||7.5%||4.3%||7.3%||6.3%||7.8%||4.1%||7.3%|
|% of total||48.1%||63.3%||66.9%||66.9%||55.8%||74.8%||68.2%||74.3%||43.5%||61.2%||68.6%|
|Foods, Meat & Grain||1,492||1,689||1,900||2,381||361||328||1,801||1,498||1,536||2,779||79.4%||3,500|
|Operating profit margin||2.4%||1.3%||1.0%||0.9%||0.6%||0.3%||1.0%||0.6%||2.2%||2.0%|
|% of total||25.6%||11.5%||10.1%||8.4%||10.6%||3.3%||12.4%||6.3%||30.5%||19.5%||12.5%|
|Steel, Materials & Plant||410||1,844||1,764||3,819||39||471||765||1,840||556||1,262||40.7%||3,100|
|Operating profit margin||1.3%||2.9%||1.8%||2.9%||0.2%||1.1%||1.1%||1.9%||1.7%||1.9%|
|% of total||7.0%||12.6%||9.4%||13.5%||1.1%||4.7%||5.2%||7.8%||11.0%||8.9%||11.1%|
|Motor Vehicles & Aerospace||861||1,316||1,802||2,383||901||1,318||1,484||2,055||586||959||68.5%||1,400|
|Operating profit margin||5.6%||3.9%||3.6%||3.2%||6.6%||4.0%||3.0%||2.9%||3.5%||3.0%|
|% of total||14.8%||9.0%||9.6%||8.4%||26.6%||13.2%||10.2%||8.7%||11.6%||6.7%||5.0%|
|Operating profit margin||9.0%||8.8%||8.2%||7.2%||7.6%||7.6%||7.2%||6.6%||5.7%||8.4%|
|% of total||4.6%||3.7%||3.9%||2.9%||5.8%||4.0%||4.0%||2.9%||3.3%||3.6%||2.9%|
|By segment (quarterly)||FY03/20||FY03/21||FY03/22|
|Electronics & Devices||55,607||71,230||58,825||68,854||43,738||59,202||54,480||68,689||53,757||65,058|
|% of total||33.0%||37.8%||33.8%||36.1%||30.7%||36.4%||33.4%||37.9%||30.6%||34.5%|
|Foods, Meat & Grain||62,931||64,546||63,748||60,178||61,933||61,006||63,149||58,529||70,074||71,930|
|% of total||37.4%||34.2%||36.6%||31.6%||43.5%||37.5%||38.8%||32.3%||39.9%||38.1%|
|Steel, Materials & Plant||31,560||30,957||32,926||34,415||20,458||20,708||25,449||30,216||31,937||33,241|
|% of total||18.7%||16.4%||18.9%||18.0%||14.4%||12.7%||15.6%||16.7%||18.2%||17.6%|
|Motor Vehicles & Aerospace||15,342||18,641||15,944||24,678||13,634||18,910||17,091||21,451||16,835||15,187|
|% of total||9.1%||9.9%||9.2%||12.9%||9.6%||11.6%||10.5%||11.8%||9.6%||8.1%|
|% of total||1.8%||1.7%||1.6%||1.3%||1.8%||1.7%||1.7%||1.4%||1.7%||1.7%|
|Operating profit margin||3.5%||4.7%||2.3%||5.0%||2.4%||4.1%||2.8%||5.0%||2.9%||4.9%|
|Electronics & Devices||2,803||6,496||3,249||6,415||1,894||5,571||2,487||7,623||2,192||6,520|
|Operating profit margin||5.0%||9.1%||5.5%||9.3%||4.3%||9.4%||4.6%||11.1%||4.1%||10.0%|
|% of total||48.0%||73.3%||80.4%||66.7%||55.9%||84.6%||54.2%||84.0%||43.4%||70.9%|
|Foods, Meat & Grain||1,492||197||211||481||361||-33||1,473||-303||1,536||1,243|
|Operating profit margin||2.4%||0.3%||0.3%||0.8%||0.6%||-0.1%||2.3%||-0.5%||2.2%||1.7%|
|% of total||25.5%||2.2%||5.2%||5.0%||10.7%||-0.5%||32.1%||-3.3%||30.4%||13.5%|
|Steel, Materials & Plant||410||1,434||-80||2,055||39||432||294||1,075||556||706|
|Operating profit margin||1.3%||4.6%||-0.2%||6.0%||0.2%||2.1%||1.2%||3.6%||1.7%||2.1%|
|% of total||7.0%||16.2%||-2.0%||21.4%||1.2%||6.6%||6.4%||11.8%||11.0%||7.7%|
|Motor Vehicles & Aerospace||861||455||486||581||901||417||166||571||586||373|
|Operating profit margin||5.6%||2.4%||3.0%||2.4%||6.6%||2.2%||1.0%||2.7%||3.5%||2.5%|
|% of total||14.7%||5.1%||12.0%||6.0%||26.6%||6.3%||3.6%||6.3%||11.6%||4.1%|
|Operating profit margin||9.0%||8.7%||6.9%||3.5%||7.6%||7.5%||6.6%||4.7%||5.7%||10.9%|
|% of total||4.6%||3.1%||4.7%||0.9%||5.8%||3.1%||3.9%||1.3%||3.3%||3.8%|
Revenue came in at JPY364.1bn (+19.4% YoY) as nearly all businesses recorded revenue growth. This was primarily driven by higher market prices in the meat products and feedstuff and grain businesses and higher transaction volumes for petroleum and petroleum products on the back of higher crude oil prices in the energy business.
Operating profit reached JPY14.2bn (+41.5% YoY) on higher revenue in the meat products and ICT solutions businesses and a recovery in energy demand boosting the steel pipe business. These positive factors offset lower profits in the aerospace business (1H was a slow period for government contracts) and higher SG&A expenses.
Operating profit amounted to JPY8.7bn (+16.7% YoY). The ICT solutions business performed strong due to increases in network security-related and storage-related projects. The mobile business saw signs of a recovery in store footfall, but profit rose only slightly as a result of the state of emergency declaration and a decline in subsidies from telecom carriers. The semiconductor parts and manufacturing equipment business posted an increase in profit on the back of growth in shipments of semiconductor and LCD panel manufacturing equipment and consumables driven by strong demand.
Operating profit came to JPY2.8bn (+747.3% YoY). In addition to a recovery in demand, the meat products business benefited from a substantial rise in overall meat product prices, and profits rebounded YoY from the drop in 1H FY03/21 caused by lower sales to restaurants. The food business delivered solid results owing to growth in retail product sales. The feedstuff and grain business performed well on higher grain and feed prices.
Operating profit rose 167.9% YoY to JPY1.3bn. The machine tools and industrial machinery business posted solid results after recovering from the harsh business environment in 1H FY03/21 brought on by the COVID-19 pandemic. The steel pipe business showed signs of recovery as energy demand bottomed out. Meanwhile, the energy business saw a temporary drop in profits, although a recovery is expected on deliveries in the coming winter season.
Operating profit fell 27.2% YoY to JPY959mn. The aerospace business remained sluggish as 1H fell in the slow period for government contracts. In the motor vehicles and parts business, transactions for parts were steady due to a recovery in production at business partners, including those in Europe and the US.
For details on previous quarterly and annual results, please refer to the Historical financial statements section.
|(JPYmn)||1H Act.||2H Act.||FY Act.||1H Act.||2H Est.||FY Est.||1H Act.||2H Est.||FY Est.|
|Cost of revenue||257,418||290,208||547,626||310,224|
|Gross profit margin||15.6%||15.7%||15.6%||14.8%|
|Operating profit margin||3.3%||4.0%||3.6%||3.9%||4.1%||4.0%|
|Recurring profit margin||3.1%||4.1%||3.6%||3.7%||4.3%||4.0%|
|Profit attributable to owners of the parent||5,874||7,441||13,315||7,285||7,715||15,000||24.0%||3.7%||12.7%|
Kanematsu left its full-year FY03/22 forecast unchanged at the time of its 1H results announcement on November 2, 2021. However, the company revised full-year operating profit targets for some of its businesses (no change had been made to the segment operating profit forecast for each segment, though; see below).
Comments below pertain to information available as of September 6, 2021. Shared Research plans to update the section after interviews with the company.
Kanematsu expects the business environment in FY03/22 to remain uncertain due to the COVID-19 pandemic, but expects the global economy to recover to pre-pandemic levels as economic activity normalizes due to vaccine rollout in many countries. The company expects the normalization of economic activities In Japan to be slower than in other major countries due in part to slower progress in vaccinations.
In making these forecasts, the company assumes an exchange rate of JPY105/USD and a flat interest rate versus FY03/21.
The company forecasts a JPY700mn YoY increase in operating profit in the mobile business, mainly due to the disappearance of a one-time cost increase that arose in FY03/21 (which had a negative impact on operating profit of JPY1.1bn in FY03/21). However, the company has conservatively estimated the scale of agency commissions paid to stores it operates, since the impact of a discounted plan exclusively for customers conducting procedures online was not apparent when the company formulated its forecast. For this reason, it projected the mobile business will see JPY700mn YoY growth in operating profit in FY03/22.
As of Q1 FY03/22, the company says that there are no visible impacts stemming from new mobile phone plans introduced by major carriers, including one NTT Docomo launched in March 2021, which can only be applied online.
In the ICT solutions business, the company forecasts a JPY500mn YoY increase in operating profit, since it expects in-person sales activities that stalled in FY03/21 to recover in FY03/22, along with the number of system construction projects (in which the company’s engineers are stationed onsite with the customer).
The company is aware of possible delays in equipment delivery from vendors from Q2 onward. Factors include a shortage of semiconductors, especially the disruption of the supply chain (supply of various products and parts) due to the spread of the COVID-19 pandemic in Southeast Asia.
In contrast, the company says that it made about 50% progress against the full-year forecast in the semiconductor parts and manufacturing equipment business. Shared Research understands that Kanematsu’s Q1 results exceeded its initial forecast.
Kanematsu expects to see recovery in the meat products business (projected: +JPY1.7bn YoY in operating profit) and food business (projected: +JPY600mn YoY), which were both negatively affected by sluggish demand in the restaurant industry and inventory adjustments in FY03/21.
As of Q1 FY03/22, Kanematsu sees that the gain and meat products market has reached its peak. Although operating profit was exceeding the company’s full-year forecast as of Q1, the company believes that future market conditions are uncertain after Q2.
In the machine tools and industrial machinery business, Kanematsu expects operating profit to rise JPY700mn YoY on recovery in domestic and overseas capital investment-related demand. In terms of industrial machinery, entry restrictions delayed acceptance inspections in FY03/21, causing the company to postpone some revenue booking, but it expects the bottleneck to disappear in FY03/22.
In Q1 FY03/22, contracts increased YoY due to progress in sales activities. The company expects sales to be posted after Q2. Contracts for overseas projects are also recovering.
According to the company, overseas leads tend to take longer lead times from contracts to sales than in Japan. This is due to cases where revenue recording is delayed from the schedule for projects such as industrial machinery where engineers perform in-person inspections.
In the overseas (steel pipe) business, the company believed in the beginning of FY03/22 that the business environment in North America is recovering and aims to break even (after booking operating loss of JPY500mn in FY03/21). The company says that as of Q1 FY03/22, operating profit in the steel pipe business recovered at a pace that exceeded the initial forecast.
In FY03/22, it expects to see higher profit YoY due to reduced shipping costs accompanying the activation of its second plant near Houston, Texas, increased sales of oilfield tubing using a proprietary threading technique, and the posting of profit from employment subsidies carried over from FY03/21.
In the aerospace business, as the company is reaching the end of its contracts, it expects operating profit to fall JPY1.2bn YoY. Kanematsu supplies aircraft parts to government agencies, and it expects the government’s aircraft-related budget to decline YoY in FY03/22.
In the motor vehicles and parts business, the company expects a full-year increase of JPY500mn in profits due to accelerating automobile production accompanying the economic recovery in Europe and the US. As of the beginning of FY03/22, Kanematsu expected that the impact of the COVID-19 pandemic would diminish. As of Q1 FY03/22, the company is concerned that lead times may be prolonged due to supply chain disruptions in Southeast Asia.
|(JPYmn)||1H Act.||2H Act.||FY Act.||1H Act.||2H Est.||FY Est.||1H Act.||2H Est.||FY Est.||Initial Est|
|Electronics & Devices||7,465||10,110||17,575||8,712||10,488||19,200||16.7%||3.7%||9.2%||19,200|
|Foods, Meat & Grain||328||1,170||1,498||2,779||721||3,500||747.3%||-38.4%||133.6%||3,500|
|Foods (Meat included up to FY03/19)||-200||-200||-400||100||100||200||-||-||-||200|
|Steel, Materials & Plant||471||1,369||1,840||1,262||1,838||3,100||167.9%||34.3%||68.5%||3,100|
|Machining tools, industrial machinery||-100||800||700||300||700||1,000||-||-12.5%||42.9%||1,400|
|Motor Vehicles & Aerospace||1,318||737||2,055||959||441||1,400||-27.2%||-40.2%||-31.9%||1,400|
|Motor vehicles and parts||-100||300||200||500||0||500||-||-100.0%||150.0%||700|
Kanematsu has been pursuing its medium-term vision, “future135,” which covers the six years through FY03/24 (announced on May 9, 2018). At the time of its FY03/21 earnings announcement (May 7, 2021), the company reconfirmed the course of its policy based on the progress of business investment in the first three years of the plan and the impact of the COVID-19 pandemic.
Kanematsu stated that it would make no major changes to its basic policy despite unexpected changes in the business environment such as the COVID-19 pandemic. However, the company announced a revision to the following quantitative targets (for FY03/24, the last year of the plan), taking into account progress in business investment and related revenue growth. It also decided to add measures related to the sustainable development goals (SDGs) and to digital transformation (DX) to its priority initiatives.
For the final year of its medium-term plan, the company revised downward its target for profit attributable to owners of the parent from JPY25.0bn to JPY20.0bn. This was in response to sluggish growth in the three years through FY03/21, due in part to the COVID-19 pandemic. At the time the plan was formulated (May 9, 2018), profit attributable to owners of the parent was announced as having been JPY16.3bn in FY03/18, but the amount shrank to JPY13.3bn in FY03/21.
Kanematsu expects a roughly equal contribution to future growth in profit attributable to owners of the parent from organic growth of its own businesses and from the move into a profitable position for its investment projects (including M&A).
The company raised the initial 25–30% dividend payout ratio projection to 30–35%, based on the fact that the ratio exceeded 30% in FY03/19, FY03/20, and FY03/21, and the fact that retained earnings have been accumulating.
The company aims to achieve sustainable growth while maintaining a balance between capital and risk assets, backed by a stable revenue structure and financial structure.
The company plans to make business investments in its areas of strength, including Electronics & Devices; Foods, Meat & Grain; oilfield tubing, and aircraft. Kanematsu will pursue two types of investments: those aimed at expanding scale and those that ensure added value. Investments aimed at building scale include factory expansions and purchases of peer companies. Investments targeting higher added value include businesses where technical hurdles to entry are high, businesses that involve substantial intellectual property, and businesses that require the accumulation of sophisticated expertise.
Newly added item: The company will promote investment in business fields with environmental, social, and safety themes to contribute to achieving the UN’s SDGs.
The company will continue its existing SDG-related initiatives. For example, it is currently converting its US oilfield tubing business to enhanced oil recovery tubing, which is needed in underground CO2 sequestration. In addition, in the Foods, Meat & Grain segment, the company says its investment in a soy meat producer will contribute to sustainability.
Newly added item: Promote digital transformation (DX) throughout group
Promote and expand new businesses that involve leading-edge technologies (such as IoT and AI) in the data business
Promote “innovation investments” (investment in development for the future)
In regard to DX promotion, Kanematsu plans to use customer and business partner data it and its group companies are collecting to anticipate the needs of customers and society, enabling it to adjust its business model to provide the services needed. The company says it sought during the first three years (first half) of the medium-term plan to ensure that the infrastructure and resources were in place to promote DX. During the next three years (second half) of the plan, it will use this infrastructure as the basis for a groupwide DX push.
Creation of a structure that supports global strategies, such as enhancing revenue generation at overseas bases
Investment in human resources, such as for the development of management personnel
Improvement in operational efficiency and employee satisfaction through ongoing promotion of work style reform and other measures
Kanematsu newly invested some JPY23bn in the three years from FY03/19 to FY03/21, including JPY6bn in the Electronics & Devices segment, JPY1bn in the Foods, Meat & Grain segment, JPY9bn in the Steel, Materials & Plant segment, and JPY7bn in the Motor Vehicles & Aerospace segment (all figures are approximate). The company cited the following as main projects that specifically contributed to revenue.
Electronics & Devices segment: Turning a card printer business into a subsidiary (Japan)
Foods, Meat & Grain segment: Providing a capital increase to a processed food manufacturer (Indonesia)
Steel, Materials & Plant segment: Acquiring a metal sash manufacturer (Japan) and making an equity-method investment in a steel sheet processing manufacturer (South Korea)
|Electronics & Devices||Made card printer business company a wholly owned subsidiary||Japan|
|Approx. JPY6bn||Acquired semiconductor image sensor back-end process business||Japan|
|Invested in data trading market development and consulting company||Japan|
|Expanded mobile communication business||Japan|
|Made equity-method investment in photo printer business company||Germany|
|Acquired semiconductor manufacturing (marking) equipment trading company||Japan|
|Acquired semiconductor manufacturing (IC handler) equipment manufacturing business||Japan|
|Foods, Meat & Grain||Established primary beef processing and sales company||China|
|Approx. JPY1bn||Established feedstuff ingredient manufacturing plant||China|
|Increased capital to processed food manufacturing company||Indonesia|
|Invested in feedlot operations for Uruguayan beef||Uruguay|
|Invested in production company for soy-based and other plant-based meat||Japan|
|Steel, Materials & Plant||Made equity-method investment in steel sheet processing manufacturer||South Korea|
|Approx. JPY9bn||Acquired manufacturer specializing in metal sashes||Japan|
|Acquired plant engineering company||Japan|
|Made equity-method investment in steel frame and bridge girder fabricator||Vietnam|
|Established second plant for oilfield tubing processing business||US|
|Motor Vehicles & Aerospace||Participated in cybersecurity investment fund||US|
|Approx. JPY7bn||Invested in startup developing equipment for rescue helicopters||US|
|Purchased aircraft in the aircraft parts business||Ireland|
|Acquired Kaneyo Co., Ltd., through tender offer||Japan|
|Acquired company that develops and manufactures drive recorders||Japan|
Kanematsu expects its business investments in the semiconductor field to contribute to earnings, given the growing demand for semiconductors. It also expects to expand its market share of meat products and improve its profit margin by working to increase its primary processing. In the long term, it expects plant-based meat, data distribution, and drive recorders to contribute to revenue growth.
The company plans to enter and invest in new fields of business where technological innovation and market growth rates are particularly high, such as IoT and AI.
Given workstyle reforms and the expansion of teleworking, the company will work to shore up its revenue base in the ICT solutions and mobile businesses by providing solutions such as virtual desktop infrastructure (VDI)*, as well as network access points and other services.
*Virtual desktop infrastructure (VDI): Under this framework, operating systems, applications, and data that were previously handled by individual PCs are managed centrally on a server, using virtualization infrastructure. Keyboard and mouse movements on individual terminals are transmitted to a virtual desktop on a server, and output is returned to the corresponding monitor. This network-based arrangement allows individuals to access their own dedicated desktop from anywhere.
Companies throughout Japan are reinforcing and expanding their strategies targeting digital transformation (DX). Given these circumstances, Kanematsu plans to make innovation investments in solution providers, including venture companies. In addition, Kanematsu plans to acquire companies and businesses to bolster revenue via synergy with existing businesses.
Kanematsu perceives an increasing level of complexity in information security, shortage of specialized personnel, and a need to promote technological innovation. Accordingly, in the ICT solutions business the company aims to form capital alliances and partnerships with domestic and overseas companies that have sophisticated and specialized technologies, acquiring and expanding its solutions infrastructure.
In the semiconductor production equipment, electronic devices, and electronic components fields, the company intends to take a precaution against the risk that geopolitical issues will cause supply chains to be cut off by expanding functions at its overseas bases and increasing their diversity.
The company aims to expand the high-value-added printer business, centering on the card printer business, a field that requires technological expertise and has high barriers to entry.
Kanematsu plans to increase business related to high-resolution imaging, such as image analysis and diagnostic imaging.
Acquired Nippon Office Systems (November 2012): Kanematsu Electronics, a subsidiary, purchased Nippon Office Systems through a tender offer, making the company a wholly owned subsidiary. The purchase price was JPY709mn.
Purchased all shares in BD Holdings (April 2013): Kanematsu acquired all shares in BD Holdings, which directly operated four Docomo shops in Fukuoka prefecture, bringing those mobile phone sales outlets under the Kanematsu umbrella.
Purchased Kanematsu-NNK through a tender offer, made the company a subsidiary (December 2014): Kanematsu purchased shares of Kanematsu-NNK Corp. (TSE1: 7961, now Kanematsu Sustech Corporation) through a tender offer, making the company a subsidiary. The acquired company conducts ground improvement, processes lumber, and sells security equipment. The purchase price was JPY1.6bn.
Entered a capital alliance with nms Holdings (March 2015): Kanematsu formed a capital and business alliance with Nippon Manufacturing Service Corporation (now nms Holdings, TSE JASDAQ: 2162), becoming a major shareholder with a stake of approximately 10%. NMS engages in the electronics manufacturing service (EMS) business (handling everything from design and development to board mounting, module assembly, and manufacture of key devices) and the HR dispatching business (placing personnel in the manufacturing sector). Through the capital and business alliance, the Kanematsu group aims to enhance solution capabilities targeting Japanese electronic device manufacturers that are its customers.
Invested in Alpha Group (May 2015): The Kanematsu group invested JPY400mn, purchasing about a 15% (end-March 2021) stake in Alpha Group (TSE JASDAQ: 3322), which sells mobile handsets.
Acquired Diamond Telecom, made the company a subsidiary (January 2016): The Kanematsu group invested some JPY17.4bn to acquire Diamond Telecom, Inc. from Mitsubishi Electric Corporation (TSE1: 6503), making Diamond Telecom a Kanematsu subsidiary. Diamond Telecom sells mobile handsets nationwide through shops certified by telecoms carriers, mainly NTT Docomo.
Acquired G-Printec, made the company a subsidiary (December 2016): Along with corporate investment fund AZ-Star Co., Ltd., Kanematsu acquired JVC Kenwood Corporation subsidiary G-Printec, Inc., purchasing all shares and making G-Printec a Kanematsu subsidiary. G-Printec makes IC card printers.
Formed a capital and business alliance with Japan Data Exchange Inc. (J-DEX) (December 2019): Kanematsu entered a capital and business alliance with J-DEX, becoming its largest shareholder and making J-DEX an equity-method affiliate. By coordinating with J-DEX’s data exchange consulting service, Kanematsu aims to build and expand a data exchange market that achieves consistency in the use of data.
Purchased shares in di support, a German company (December 2019): Established in 2000, di support provides various services related to digital imaging. To date, di support has built relationships with large retailers in the German-speaking world, providing digital photography and instant printing services.
Kanematsu subsidiary Kanematsu PWS acquired Lumonics KK, turning the company into a wholly owned subsidiary (November 2020): Kanematsu PWS Ltd. sells semiconductor manufacturing equipment made by Suss Micro Tec (a German company) and ASM Pacific Technology (from Hong Kong). Lumonics is the sales agent in Japan for Germany’s InnoLas Semiconductor and sells its wafer marking equipment, which do not compete with those Kanematsu PWS offers. Through the acquisition, Kanematsu PWS aimed to expand its lineup of semiconductor manufacturing equipment.
Acquisition of IC test handler business (January 2021): Kanematsu took over Seiko Epson Corporation’s IC test handler business. IC test handlers are a standard part of the semiconductor testing process. On March 1, 2021 it established NS Technologies Inc., a wholly owned subsidiary for the business. The company expects the business transfer to be completed in early April 2021. The business was launched on April 1, 2021.
The Japanese market for meat products is being affected by a growing volume of imports, due to import tax reductions stemming from the Comprehensive and Progressive Agreement for Trans-Pacific Partnership Agreement (TPP11 Agreement), the Japan–EU Economic Partnership Agreement (EPA), and the Japan-U.S. Trade Agreement on goods (TAG). Meanwhile, in other Asian markets demand for meat products is rising in step with population growth and economic expansion.
In the cooked foods business, the company intends to increase the number of product development personnel and develop processed foods at optimal locations around the world.
As Asian demand for high-quality food products expands, the company will promote the development of locations that can produce safe, secure, and fresh agricultural products. Kanematsu intends to expand local production for local consumption through the overseas rollout of frameworks for supplying food safely and to Japanese quality levels.
With global warming and abnormal weather conditions damaging the cultivation of agricultural products more than in the past, the company is working to secure water resources and promote cultivation overseas. The company plans to hedge against risks by distributing its overseas production basis geographically.
In light of a global spate of incidents in which consumer health is damaged as a result of food product contamination, the company intends to reinforce food product management systems, based on the ISO 22000 and FSSC 22000 standards.
The company aims to increase sales of halal and other third-party verified agricultural and marine products.
The company aims to expand sales of environmentally friendly renewable products.
Kanematsu aims to actively enhance relationships with and make capital investments in collaborative partners in Indonesia and other parts of Southeast Asia to establish a leading position in the region.
The company will actively pursue business investments and acquisitions.
In the Asian market, the company will attempt to roll out the business model for meat products it has used in Japan.
Through capital participation and business alliances, the company aims to strengthen relationships with existing suppliers and cultivate new production regions, as well as promoting the development of safe, high-value-added products.
In response to geopolitical risk, the company aims to diversify regions of production and spread out supply sources.
The company intends to reduce the risk of market volatility by diversifying its customer base and expanding the processing business.
The company will work to reinforce sales and enhance procurement capabilities in high-growth Asian markets, helping to ensure a steady supply of food products for Japan.
To add value to products, the company plans to augment functionality in the storage (refrigerated warehousing) and processing businesses.
The company hedges its trades by using the futures market of the Chicago Mercantile Exchange (CME).
To ensure supply stability, in the grain business the company is working to source from more geographically diverse producing regions.
In the grain business, the company is augmenting its quality control capabilities through involvement in upstream production and shipping.
In the rice business, the company is expanding exports from Vietnam to other Asian countries.
The company is preparing to invest in supply bases to increase supply capabilities in the food soybean and oilseed business.
In the overseas feedstuffs business, the company is working to meet increasing demand for soybeans due to expansion of the livestock business in Northeastern China.
The company is strengthening capabilities in the domestic feedstuffs business, such as in the field of agricultural IoT.
Established a food-processing joint venture with an Indonesian company (November 2012): With Indonesia’s Cimory Group, Kanematsu established PT. Kanemory Food Service as a joint venture for food processing and operation of a central kitchen. The JV handles R&D and content provision in the food service field, for restaurants, convenience stores, and supermarkets, and provides various types of processed foods from its central kitchen. The JV has a plant capable of producing halal-certified foods.
Purchased US base for providing food soybeans (December 2012): Kanematsu purchased Harmony Agricultural Products in Ohio from Honda Trading America, established a wholly owned subsidiary (KG Agri Products), and began developing food soybean seeds and engaged in the contract farming, sorting, and sales of food soybeans. The Ohio base can sort 45,000 tons of soybeans per year.
Invested in a Vietnamese diary producer (July 2013): The Kanematsu group invested in Dalat Milk, a Vietnamese dairy producer, and entered a business alliance to provide feed for dairy cattle. Together the companies established and operate a feed-mixing facility. From there, the companies sell feed within Vietnam and export it to Japan and South Korea.
Invested in an Indonesian producer of fruit jellies (February 2015): Through a joint venture with Indonesian company Aternit, Kanematsu invested in Tarami Corporation’s (based on Nagasaki) PT. Tarami Aternit Food that produces fruit jellies in Indonesia.
Invested in Farmnote, which engages in smart agribusiness (August 2015): The Kanematsu group invested in Farmnote Inc., which has developed an eponymous cloud-based cattle management system. The system uses smart devices that operate at a touch to make ranch management visible.
Purchased additional shares in GPC Holdings (December 2015): The Kanematsu group acquired shares in GPC Holdings Ltd., a wholesaler of pet foods and products. The additional purchase brought Kanematsu’s stake in GPC Holdings to 67%, making it a consolidated subsidiary.
Invested in Be Smile Project Inc. (March 2016): The Kanematsu group invested in Be Smile Project, a Kagoshima-based company that focuses on sixth-order industrialization*. By building a value chain spanning breeding cattle production, feed supply, feedlot operation, processing and sales, restaurants, and export, the company aims to produce safe and high-value-added products such as Japanese cattle.
Built a chilled/frozen storage warehouse in Jakarta (October 2018): The Kanematsu group is an investor in Indonesia-based PT. Dunia Express Transindo (DUNEX), which built a three-temperature (chilled, refrigerated, and frozen) warehouse in northern Jakarta. With this move, DUNEX (Indonesia’s largest Japanese-affiliated logistics company) entered the cold chain business.
Entered capital and business alliance with DAIZ, Inc. (December 2020): Kanematsu agreed to a capital and business alliance including acceptance of part of a third-party allotment to increase capital at DAIZ, Inc., a startup company making plant-based meat.
*Sixth-order industrialization: This Japanese concept expresses the goal of invigorating agriculture by combining the growing of things (primary industry) with processing (secondary industry) and distribution/sales (tertiary) to produce synergies (1 + 2 + 3 = 6).
To reduce risk related to trade problems, such as US–China trade friction, the company aims to expand business in high-performance products and private brand products.
The company is strengthening relations with business partners, aiming to create new business schemes by leveraging partners’ technologies, expertise, products, and services.
The company aims to cultivate new markets, products, and business partners to mitigate the risk of commercial rights being dissipated due to falling demand.
Kanematsu intends to create new businesses that contribute to environmental preservation, including the reduction of CO₂.
To strengthen the construction materials business, the company aims to enhance product and service sales capabilities across the board.
The company intends to expand initiatives in the solar power generation and biomass fuel businesses.
Kanematsu plans to step up initiatives in the high-value-added pharmaceuticals/life science field, including the sale of pharmaceutical raw materials and intermediates.
To differentiate itself from other companies, Kanematsu plans to actively propose packaged products covering raw materials, products, and related equipment and materials.
Acquired Benoit, a US oilfield tubing company (October 2012): Along with JFE Steel Corporation, Kanematsu acquired US oilfield tubing manufacturer Benoit for approximately JPY7.3bn, making Benoit a subsidiary. At its plant in Houma, Louisiana, Benoit manufactures tubing used in oil and gas exploration, and produces and sells threaded pipe ends and various other oilfield parts. Kanematsu notes that the specialty threading products Benoit began manufacturing more than 30 years ago have gained a strong reputation among major oilfield developers around the world. Benoit’s specialty threading products have a US market share of around 30%.
Built a second factory at Benoit (October 2014): Benoit Premium Threading, a subsidiary established jointly by Kanematsu and JFE Steel, built a second plant in Waller County, Texas, on the site of the Eagle Ford shale oil and gas field. Total investment was approximately JPY3.5bn.
Made equity-method investment in South Korean steel sheet manufacturer (March 2019): Kanematsu made an equity-method investment in a steel sheet processing manufacturer with an established track record as a primary subcontractor for major South Korean home appliance manufacturers. The investee has also been expanding into the construction and automotive fields in recent years.
Acquired a plant engineering company (January 2020): Subsidiary Kanematsu KGK, a general trading company for machinery, acquired Aioi Sekkei Co., Ltd., an engineering company that serves as a one-stop source for the design, manufacture, and construction of plant facilities.
Made equity-method investment in Vietnam’s ATAD (March 2021): Kanematsu completed a capital and business alliance with Vietnam’s ATAD Steel Structure Corporation and made it an equity-method affiliate. ATAD provides products and services in the fields of pre-engineered construction and heavy steel frame construction.
The company sees opportunities in the rapid diversification of mobility business as part of a once-in-a-century period of technological innovation and rapid digitalization. In addition to long-term growth in demand for cars and motorcycles in emerging markets, the company sees new demand opportunities related to the evolution of CASE* and MaaS** technologies. In line with growing demand in the aircraft market, the company expects the part-out and maintenance, repair, and overhaul (MRO) markets to expand.
*CASE: This auto industry terms comes from the first letters of the words connected, autonomous, shared/services, and electric.
**MaaS: Rather than the general approach of looking at individual modes of travel (automobiles, bicycles, buses, trains, aircraft, and so forth), mobility as a service (MaaS) refers to the idea of seamlessly connecting them as a service. By focusing on the idea of mobility as service rather than concentrating on the mode and placing them on a single platform, MaaS might help travelers select the most efficient mode of travel and lead to integrated services that make reservations and payments more convenient. In recent years, MaaS has begun to emerge as a potential way to connect non-transport businesses (tourism, food and beverage, medical care, real estate) and offer value-added services.
The company aims to increase sales of components for EVs and other environmentally friendly vehicles.
The company intends to develop the data and software businesses.
Kanematsu plans to establish bases in and form tie-ups with local companies in the growth markets of Asia and in the US, the largest market.
Acquired Japan’s Datatec Co., Ltd. (February 2021): On February 1, 2021, Kanematsu acquired a 90% stake in Datatec Co., Ltd., and made it a subsidiary with the aim of expanding its next-generation mobility business. Datatec provides onboard products and services to support safe driving, such as digital tachographs for commercial vehicles. Kanematsu plans to expand sales of Datatec’s mainstay digital tachographs both in Japan and overseas, especially in Southeast Asia, India, and North America, and to develop new businesses using vehicle behavior analysis technology in the vehicle telematics market. The company will also promote a new data business using AI and the vast amount of vehicle operation data obtained from Datatec’s onboard devices.
Kanematsu is expanding its aftermarket business for civilian aircraft, centering on the part-out* and MRO** businesses.
*Part-out business: This refers to the disassembly, removal, and storage of parts from retired aircraft for sale to customers (maintenance service providers, leasing companies, and aircraft companies) around the world.
**MRO: Short for maintenance, repair, and operations, MRO refers to systems for more efficiently ordering and providing secondary materials including consumables and equipment parts.
The company aims to utilize data from positioning and satellite constellations alongside AI and big data technologies across its operations.
Kanematsu is proactively engaging in initiatives related to national security, gathering data about Space Situational Awareness, and implementing space debris countermeasures.
From its investment base in Silicon Valley (California), the company plans to promote collaboration with startups and create new businesses.
Participated in Cyber Innovation Partners II, a US fund (February 2019): US company Allegis manages Cyber Innovation Partners II, a fund that invests mainly in companies operating in the field of cyber security.
Acquired Kaneyo Co., Ltd. (TSE1: 3209) through a tender offer, and converted the company to a subsidiary (December 2019): Kanematsu made a tender offer for Kaneyo’s shares, acquired an 87.44% stake, and made Kaneyo a subsidiary. Kaneyo sells such items as bedding and weight-loss products, household and interior goods, rolled fabrics and other cloth materials, textiles, and lifestyle products in Japan and exports them overseas. By investing in Kaneyo, which sells materials for car seats and other automotive products, Kanematsu aimed to reinforce its offerings in the automobile-related business.
Acquired Datatec Co., Ltd. (February 2021): Kanematsu acquired a 90% stake in Datatec. Datatec provides onboard products and services to support safe driving, such as a digital tachograph for commercial vehicles. Kanematsu says the company has expertise in vehicle behavior analysis technology in particular and provides products and services to improve fuel efficiency.
|Electronics & Devices||3,612||5,032||7,913||8,100||6,920||5,394||9,488||9,026|
|Foods, Meat & Grain||1,711||705||1,806||4,328||3,923||3,622||2,835||5,186|
|Steel, Materials & Plant||6,443||7,955||7,421||7,461||6,995||1,510||4,472||5,059|
|Life Science & Energy||1,877||2,490||2,852||1,733||2,087||893||977||1,972|
|Operating cash flows||10,122||19,720||20,874||14,308||17,177||26,441||7,827||15,822|
|Investing cash flows||5,382||7,822||23,149||38,799||-370||-19,149||17,322||1,291|
|New segments from FY03/13|
|Electronics & Devices||8,339||7,755||10,152||10,658||14,348||17,556||18,533||18,963||17,575|
|Foods, Meat & Grain||3,165||2,099||3,365||1,427||2,489||2,149||3,951||2,381||1,498|
|Steel, Materials & Plant||5,094||8,129||6,345||3,388||2,820||3,930||4,437||3,819||1,840|
|Motor Vehicles & Aerospace||1,447||1,494||2,601||2,964||2,223||2,541||2,549||2,383||2,055|
|Operating cash flows||1,355||22,384||10,115||33,024||11,852||434||24,698||24,259||36,984|
|Investing cash flows||1,466||-1,111||-8,903||-4,214||-14,691||1,103||-6,575||-10,215||-9,927|
Looking historically, operating profit was in the range of JPY16–22bn between FY03/05 and FY03/17. In the Electronics & Devices segment, operating profit grew nearly 4x during this period, from JPY3.6bn to JPY14.3bn. Over the same period, operating profit from the materials and machinery segments (Steel, Materials & Plant and Motor Vehicles & Aerospace) fell by almost half, from JPY9.5bn to JPY5.0bn.
From FY03/06 to FY03/13, the company’s investment stance was conservative. Asset sales exceeded investments, and net investing cash flow was positive. During that period, the company sold off real estate holdings and collected loans receivable. Investing cash flow turned net negative from FY03/14, marking a turn to active investment. Between FY03/14 and FY03/17, net investing cash flow outflows totaled JPY28.9bn.
Advances in semiconductor and telecommunications technologies led to greater data processing volumes and the widespread adoption of networks and servers, along with growing importance of information management, stronger security systems, and the rise of the cloud computing market. The Kanematsu group took advantage of this changing business environment to develop a service structure to meet customer needs more closely and build a vendor-free procurement structure. The company provided infrastructure configuration services to optimize hardware and software, and business expanded. In October 2012, Kanematsu conducted a management integration with Nippon Office Systems, making it a wholly owned subsidiary. The company shifted its management focus to profitability and boosted labor productivity by moving to higher-value-added services and improving efficiencies. As a result, OPM at Kanematsu Electronics, a subsidiary, improved 9.6pp, from 3.5% in FY03/05 to 13.1% in FY03/17.
Kanematsu’s business benefited from the growing market for smartphones and tablets as Apple launched its iPhone and iPad. Other major changes in the operating environment also contributed to the company’s business, such accelerating advances in smartphone technology, handset model changes, and a move from 3G to 4G communication standards. The company worked to optimize its selling strategy and implement effective marketing practices that took advantage of the service/fee structures and sales incentives set by telecom carriers. Sales of mobile handsets rose. The company earned plaudits from NTT Docomo (a contract telecom carrier), and commissions and other revenues grew. In April 2013, Kanematsu acquired BD Holdings, adding four stores. In May 2015, the company invested JPY400mn in Alpha Group, acquiring a majority stake. In January 2016, Kanematsu invested approximately JPY17.6bn to acquire Diamond Telecom, adding approximately 200 stores and raising its total to around 450.
The food business has performed favorably, due to growing Asian demand. Higher prices in the meat products business have boosted gross profit. In the feedstuff business, increasing market prices and expanding sales routes in Asia have prompted stronger grain sales. Accordingly, operating profit in the Foods, Meat & Grain segment grew from JPY1.7bn in FY03/05 to JPY2.5bn in FY03/17.
Prior to the global financial crisis of 2008/2009, Chinese economic growth led to a tight demand/supply balance, and performance was robust. However, the global demand/supply balance then broke down as Chinese steelmakers increased their investments. As the international competitiveness of Japanese steelmakers waned, Kanematsu’s sales opportunities decreased. As with iron and steel products, the global financial crisis eased the supply/demand balance for petroleum products, and profitability fell. As a result of these factors, operating profit in the Steel, Materials & Plant segment approximately halved between FY03/05 and FY03/17, from JPY9.5bn to JPY5.0bn.
Incidentally, Kanematsu withdrew from the textile business in 2007 due to the growing market share of SPA companies (specialty store retailers of private label apparel) and the sluggish domestic apparel market.
Operating profit grew from JPY22.6bn in FY03/17 to JPY30.3bn in FY03/19. The main driver of growth was the Electronics & Devices segment, which added JPY4.2bn in operating profit during that period, contributing more than other segments. Amid a changing business climate, outlined below, the company invested approximately JPY23.0bn between FY03/19 and FY03/21.
Advances in semiconductor and telecommunications technologies led to greater data processing volumes and the widespread adoption of networks and servers, along with stronger security systems, the expansion of virtual desktop infrastructure, and the rise of the cloud computing market. The company benefited from these changes in the information and communication technology (ICT) industry. The Kanematsu group took advantage of this changing business environment to develop a service structure to meet customer needs more closely and build a vendor-free procurement structure, expanding business by focusing on cloud services (virtual desktop infrastructure, DaaS and IaaS). As a result, operating profit at subsidiary Kanematsu Electronics expanded from JPY8.4bn in FY03/17 to JPY10.9bn in FY03/20, and OPM rose from 13.1% in FY03/17 to 15.2% in FY03/20. In FY03/21, despite an 8.9% YoY decline in revenue to JPY65.5bn, OPM continued to improve, reaching 16.6%.
Kanematsu’s business has benefited from the major changes taking place in the industry operating environment, such as the iPhone X and other accelerations in the advancement of smartphone technologies and model changes. The company had worked to optimize its selling strategy and implement effective marketing practices that took advantage of the service/fee structures and sales incentives set by telecom carriers. Sales of mobile handsets rose. The company earned plaudits from NTT Docomo (a major contract telecom carrier), and commissions and other revenues grew. Kanematsu acquired mobile phone sales agents as subsidiaries. By acquiring franchisees and moving to direct sales, Kanematsu increased margins and boosted profit. Pre-tax profit at subsidiary Kanematsu Communications rose from JPY5.4bn in FY03/17 to JPY7.2bn in FY03/20. Over this same period, the pre-tax profit margin improved from 4.1% in FY03/17 to 6.1% in FY03/20. In FY03/21, the COVID-19 pandemic triggered a drop in the number of customers visiting stores, and pre-tax profit fell to JPY5.6bn (-21.7% YoY), while the pre-tax profit margin was 5.5%.
Revenue in the feed business has been robust, due to stable domestic feed prices. In the meat products business, prices on meat products have fluctuated, but performance was generally solid. Results have also been strong in the processed food business. Accordingly, operating profit in the Foods, Meat & Grain segment remained essentially flat, from JPY2.5bn in FY03/17 to JPY2.4bn in FY03/20. However, it declined to JPY1.5bn (-37.1% YoY) in FY03/21 as the pandemic triggered temporary closings and shortened business hours in the restaurant industry.
Revenue in the oilfield tubing business in North America benefited from higher oil prices and improvements in oil and gas field drilling. Sales of pharmaceutical raw materials and intermediates have risen as the pharmaceuticals market expanded. As a result, operating profit in the Steel, Materials & Plant segment grew from JPY2.8bn in FY03/17 to JPY3.8bn in FY03/20. However, it declined to JPY1.8bn (-51.8% YoY) in FY03/21. Although the energy business performed well due to improved profitability of domestic petroleum product transactions, the overseas and machine tools and industrial machinery businesses were affected by sluggish demand both inside and outside Japan in light of the pandemic.
In the motor vehicles and parts business, exports of car and motorcycle parts to Southeast Asia rose, while exports to the Middle East declined. In the aerospace business, the aircraft parts business grew as aircraft ownership around the world rose. Amid these factors, operating profit in the Motor Vehicles & Aerospace segment was essentially flat, rising slightly from JPY2.2bn in FY03/17 to JPY2.4bn in FY03/20. In FY03/21, it fell to JPY2.1bn (-13.8% YoY).
Kanematsu is a general trading company, formerly a “top-10 general trading company*.” It operates as a conglomerate, with widespread operations ranging across the Electronics & Devices segment; Foods, Meat & Grain segment; Steel, Materials & Plant segment; and Motor Vehicles & Aerospace segment. The Electronics & Devices segment, which includes the ICT solutions and mobile businesses, accounts for around two-thirds of overall operating profit. Accordingly, the company has become known as a “general trading company focused on the IT business.” As most general trading companies currently concentrate on resource businesses (iron ore, coal, and energy), Kanematsu’s focus on the IT business makes it unique.
*Top-10 general trading company: During its period of high economic growth, Japan had 10 large general trading companies: Mitsui & Co., Mitsubishi Corporation, Sumitomo Corporation, Itochu, Marubeni, Nissho Iwai (now Sojitz), Nichimen (now Sojitz), Tomen (now Toyota Tsusho), Kanematsu-Gosho (now Kanematsu), and Ataka & Co. (later merged with Itochu).
In the Kanematsu group, the parent company (Kanematsu) acts as the control tower, handling business planning and administration. Subsidiaries handle business operations for each segment, including on-site operations. In the Electronics & Devices segment, business is handled by Kanematsu Electronics and Kanematsu Communications; in the Foods, Meat & Grain segment, by Kanematsu Shintoa Foods and Kanematsu Agritec; in the Steel, Materials & Plant segment, by Kanematsu Trading and Benoit Premium Threading; and in the Motor Vehicles & Aerospace segment, by Kanematsu Aerospace and KG Aircraft Rotables.
|Segment||Main businesses||Main products||Main group companies|
|Electronics & Devices||ICT solutions||Information and telecom products and services, systems integration||Kanematsu Electronics|
|Mobile||Mobile communication devices, mobile internet systems and services||Kanematsu Communications|
|Semiconductor parts and manufacturing equipment||Semiconductors and electronic components, electronic modules and parts, semiconductor manufacturing equipment, LCD panel manufacturing equipment||Kanematsu Futuretech Solutions|
|Kanematsu Advanced Materials|
|Electronic components and materials||Printer and related products, lithium ion battery protection module||G-Printec|
|Security equipment||Various security products including security camera and recorder||Kanematsu Sustech|
|Data||Data consulting, distribution support, operating data trading marketplace||Japan Data Exchange Inc.|
|Foods, Meat & Grain||Foods||Fruit (canned, frozen, and dried) , coffee, sesame, wine, processed food, prepared food, seafood, other||Kanematsu Foods|
|Meat products||Meat products|
|Grain, feedstuff, processed agricultural products||Soybeans, rice, feedstuff grains, soybean meal, pasture, fertilizer, other||Kanematsu Agritec, Kanematsu Soytech|
|Steel, Materials & Plant||Steel||Special steel products, steel products, other||Kanematsu Trading|
|Oilfield tubing||Oilfield tubing, other||Benoit Premium Threading|
|Energy||Kerosene, petroleum products, other||Kanematsu Petroleum|
|Chemicals||Medical and agricultural active ingredients, food materials, fine chemicals, other||Kanematsu Chemicals, Kanematsu Wellness|
|Plant and ships||Various plants, other|
|Machine tools and industrial machinery||Industrial machinery, other||Kanematsu KGK|
|Motor Vehicles & Aerospace||Motor vehicles and parts||Motorcycle parts, other||Datatec|
|Aerospace||Aerospace parts, aircraft, helicopters, other||Kanematsu Aerospace, KG Aircraft Rotables|
The Electronics & Devices segment is Kanematsu’s main driver of business. In FY03/21, segment operating profit was JPY17.6bn, accounting for 74.3% of companywide operating profit (JPY23.6bn). Kanematsu’s business portfolio is unique; none of the other former top-10 trading houses makes Electronics & Devices their largest business. The following is a breakdown by main business.
ICT solutions business (62.5% of segment operating profit in FY03/21)
Mobile business (33.0%)
Electronic equipment, materials, components, and devices (4.5%)
This business is mainly handled by Kanematsu Electronics (TSE1: 8096)*, a system integrator in which Kanematsu holds 58.34% of voting rights. Kanematsu Electronics is the core of Kanematsu’s largest business. Kanematsu Electronics designs and configures corporate information systems, provides operating services and system consulting, and sells IT systems/equipment and software. In FY03/21, Kanematsu Electronics generated operating profit of JPY10.9bn (under Japanese accounting standards).
Kanematsu Electronics was established in 1968 as a wholly owned subsidiary. Initially, this company installed foreign-made commercial printers and provided maintenance services. In the late 1970s, Kanematsu Electronics began selling large IBM computers and established Nippon Office Systems as a joint venture. Since the mid-1990s, the company has downsized its operations, concentrating mainly on servers, storage, and the configuration of other IT infrastructure.
Kanematsu Electronics’ areas of operation comprise servers, storage, networks, service and support, and documents. In addition to configuring infrastructure for information systems, the company provides total IT services (including operation service) and cloud services.
In FY03/21, systems business accounted for 70.8% of segment revenue, and services and support for 29.2%. Some 50% of revenue was one-time revenue (calculated as average order value x customer count) from system construction and other work, while the remainder was recurring revenue from maintenance and servicing.
Fundamentally, Kanematsu Electronics sells directly to end clients (direct sales ratio is at least 90%) rather handling work on an outsourced basis for other system integrators. The company has more than 800 systems engineers, accounting for approximately 64% of its overall workforce (at end-March 2021). Working as a prime contractor affords the company a thorough understanding of clients’ needs. This awareness helps it optimize system designs and adopt strategies for adding value. According to the company, its clients give it high marks for attention to detail. In addition to system configuration, most customers ask Kanematsu Electronics to handle maintenance. The company says it has numerous client relationships that date back decades.
Different from manufacturer-affiliated systems integrators, Kanematsu Electronics uses products from multiple vendors, placing its focus on optimizing solutions to customers’ needs.
|Gross profit margin||30.6%||26.9%||27.3%||26.9%||28.7%||29.7%||28.3%||28.5%||30.4%|
|Operating profit margin||10.6%||8.5%||9.9%||10.4%||13.1%||15.3%||14.9%||15.2%||16.6%|
|Recurring profit margin||10.9%||8.6%||10.1%||10.6%||13.2%||15.5%||15.0%||15.3%||16.8%|
|Fixed asset turnover||8.12||10.77||9.03||9.75||14.63||14.80||14.11||11.89||10.60|
|Sales per employee (JPYmn)||26.7||38.6||39.2||41.0||47.3||50.4||54.2||56.5||51.2|
|OP per employee (JPYmn)||2.8||3.3||3.9||4.3||6.2||7.7||8.1||8.6||8.5|
As of FY03/21, the manufacturing industry accounted for 35.6% of revenue in this segment, the service industry for 32.8%, the financial industry for 11.7%, the logistics industry for 10.2%, and the educational/public industry for 9.3%.
Manufacturers: Sony Group Corporation (TSE1: 6758), Honda Motor Co. (TSE1: 7267) and its group, Subaru Corporation (TSE1: 7270), etc.
Financial companies: Sumitomo Mitsui Trust Bank, Ltd. (unlisted), etc.
Electricity and gas: Tokyo Gas Co. (TSE1: 9531), Tohoku Electric Power Co. (TSE1: 9506), etc.
Logistics: Yamato Holdings Co. (TSE1: 9064), etc.
Private universities and graduate schools: Keio University, Waseda University, Kwansei Gakuin University (customers include major private universities in the Kanto region)
The company says demand for VDI* and other sorts of virtual infrastructure has expanded recently, boosting demand for the deployment of vMA** and VDA licenses*³. The company has focused on virtual infrastructure configuration as a strategic business. An early adopter itself, Kanematsu has obtained virtualization technology assessments and verifications from multiple vendors in its aim to provide optimal solutions to customers. The company has taken on numerous large-scale virtual infrastructure configuration projects. Kanematsu explains that the projects have helped the company build up a strong track record and an extensive knowledge base to tap when making client proposals, making projects smooth.
* Virtual desktop infrastructure (VDI): Under this framework, operating systems, applications, and data that were previously handled by individual PCs are managed centrally on a server, using virtualization infrastructure. Keyboard and mouse movements on individual terminals are transmitted to a virtual desktop on a server, and output is returned to the corresponding monitor. This network-based arrangement allows individuals to access their own dedicated desktop from anywhere.
**vSphere management assistant (vMA): VMware provides this Linux-based virtual appliance free of charge. Its main function is to execute scripts to manage servers used as virtualization infrastructure.
*³Virtual desktop access (VDA) license: Referring to a Windows VDA license, this license permits a user to access a Windows client operating system remotely.
KEL Custom Cloud (KCC)
KEL Custom Cloud is a subscription-based cloud service. The company tailors cloud infrastructure, optimizing it to customers’ needs. With KCC, Kanematsu also meets special security requirements for individual customers—something that would be difficult to implement with a public cloud.
Kanematsu Electronics is working on large-scale projects (providing virtual desktop environments to more than 10,000 users) and rolling out DaaS*. According to Kanematsu Electronics, it can provide customers with services priced competitively with DaaS via major public clouds, while at the same time having the flexibility to meet stringent security standards for individual customers.
*Desktop as a Service (DaaS): Rather than installing specific software on client computers operating in the cloud, SaaS provides direct access via a network. On the other hand, DaaS, as the name suggests, involves the provision of a cloud-based desktop accessible over a network by a client computer. The necessary operating system, software, and data that are typically stored directly on a conventional PC reside in the cloud. The client computer accesses them via a server connected to the cloud, operations in the desktop environment are controlled via commands on a shared screen and entered through keyboard and mouse. As with SaaS, depending on the cloud environment the service is available in three types: private-cloud DaaS (desktops are allocated through a dedicated cloud to specific companies), virtual-private-cloud DaaS (allocated by the service provider’s virtual environment), and public-cloud DaaS (allocated in the cloud in a shared environment). KEL Custom Cloud is a virtual-private-cloud DaaS.
Differences between VDI and DaaS: Both are frameworks for calling up on client computers virtual desktop environments that are running on servers. Both also use VDI technology to do so via networks. They differ, however, in the locations where desktop environments called up by client computers reside. With VDI, a company’s own servers run desktop environments and operate internally. With DaaS, the desktop environment is delivered by an external provider via the cloud. DaaS is a service that uses both VDI and cloud computing technology to provide a desktop environment.
KEL Remote Service Center (KRSC) develops KEL Custom Cloud and provides comprehensive remote support services 24/7, managing and monitoring customers’ infrastructure environments. The center has a control area, which fields calls about breakdowns, receives monitoring system alerts, and handles operations management. Employees from the center can set up dedicated equipment and working booths to meet customer security requirements. In this way, they can separate remote operating areas to handle various types of maintenance and operations on customers’ systems. Accordingly, Kanematsu eliminates the need for customers to run and maintain their own computer systems, allowing them to shift personnel to business development.
In the area of security solutions, Kanematsu Electronics is collaborating with security vendors to expand its cloud-compatible network design and security-related construction services. The growing use of the cloud for corporate systems means that information assets that were previously on corporate premises now reside in the cloud. Demand for cloud-based security measures has shot up commensurately.
The company’s ICT environment construction services and solutions mainly target the manufacturing industry and educational and medical institutions.
Kanematsu Electronics has provided information system solutions to clients in the manufacturing industry for more than 30 years. Manufacturers use different software for different processes, and technical documentation, parts lists, and other data needs to be maintained and managed separately. This situation leads to a host of operational inefficiencies. Kanematsu Electronics provides infrastructure based on Dassault Systèmes’ 3DEXPERIENCE* to globally integrate all information related to product development and build centralized management platforms.
*3DEXPERIENCE: A common platform for applications, 3DEXPERIENCE requires a system (server) to configure a database in order to operate. Dassault Systèmes (the developer) offers 3DEXPERIENCE as an on-premise platform installed and managed on an in-house server and as an off-premise platform operating in a cloud server environment.
Kanematsu designs and configures ICT environments for educational institutions, centering on private universities such as Kwansei Gakuin University (Hyogo Prefecture). Kanematsu is a multivendor provider (not reliant on specific manufacturers) and has extensive experience installing PC labs at educational institutions. In the educational field, the company provides support for “sakai,” an open-source learning management system (LMI). Compatible with smartphones and other devices, this system complements coursework, freeing instructors and students from time and locational constraints. The system has video distribution functionality, so students can attend lectures at whatever times suit them. The company is making the service available via the cloud, which facilitates a start from a small base (school departments and individuals).
Even for medical institutions, the business of configuring ICT environments is expanding. In 2014, revisions to Japan’s Pharmaceutical Affairs Law made it possible for hospitals and other medical institutions to split up their procurement of infrastructure equipment. Previously, they were required to make bundled purchases of applications and infrastructure equipment. This change facilitated entry into the medical ICT market for Kanematsu Electronics, which does not manufacture infrastructure equipment. Kanematsu Electronics now provides virtualization technologies, hyper-converged infrastructure (HCI)*, and other solutions to medical institutions.
*Hyper-converged infrastructure (HCI): HCI is a virtual platform integrating computing and storage functions in a common x86 server with the same CPU architecture used in most PCs. Some HCI is available with the software needed to run the infrastructure as a package.
In FY03/21, Kanematsu Electronics had an OPM of 16.6%, generally higher than its peers. The company ascribes its high margins to the fact that all contracts are sold directly; business is weighted toward highly profitable areas (configuration of servers, storage, and other system infrastructure; a high percentage of business comes from maintenance services; and the company does not engage in fixed-asset businesses such as data centers, where return on investment takes time.
|Ticker||Fiscal year||Employees||Sales per employee||OP per employee||Sales||Operating profit||Operating profit margin||Total assets||Total asset turnover|
|Nomura Research Institute||4307||FY03/21||13,430||41.0||6.4||550,490||86,502||15.7%||630,100||0.87|
|NEC Networks & System Integration||1973||FY03/21||7,537||45.0||3.4||339,109||25,563||7.5%||250,338||1.35|
In the mobile business, Kanematsu Communications, which has been a wholly owned Kanematsu subsidiary since 1993, mainly operates NTT Docomo stores. Across Japan, it operates around 420 shops (including franchised shops, as of April 1, 2021) branded for different mobile carriers: Docomo, au, SoftBank, and Y!mobile. Kanematsu Communications operates approximately 150 shops directly. Kanematsu Communications also operates carrier shops in collaboration with regional affiliates, home electronics mass retailers, and shops dedicated to mobile phone sales.
The company and Kanematsu Communications have set up a strategy aimed at expanding their business foundation and profits through M&A and other means. Previous M&As are listed below.
April 2013: Kanematsu Communications acquires all shares of BD Holdings in Fukuoka and acquires four directly managed mobile phone stores.
April 2016: Kanematsu Telecom Investment Co., Ltd., a wholly owned subsidiary of the company, merges with Diamond Telecom, Inc., a wholly owned subsidiary of Mitsubishi Electric Corporation (TSE1: 6503), in an absorption-type merger with Kanematsu Telecom Investment as the surviving company. Changes the trade name to Diamond Telecom Inc.
April 2017: Kanematsu Communications and Diamond Telecom merge. (Both were wholly owned subsidiaries of the company. It was an absorption-type merger, with Kanematsu Communications as the surviving company.)
April 2021: Kanematsu Communications acquires all shares of NSC Co., Ltd. (Fukushima Prefecture) and makes it a subsidiary. (As of April 2021, NSC operates five Docomo shops and 11 Softbank shops.)
Kanematsu Communications provides franchisees with inventory and sales management systems, offers various types of training, and supports sales promotion. Throughout Japan, it operates customer-facing centers, distribution centers, and kitting centers. Kanematsu Communications is affiliated with the TSUTAYA brand run by Culture Convenience Club (CCC), and operates shops in collaboration with Docomo and au shops.
In categories related to mobile device sales, the company also sells preowned mobile devices and conducts repairs. Kanematsu Granks Corp., a subsidiary of Kanematsu Communications, operates smartphone apps, websites, and entertainment services, and develops services leveraging content (books, games, video) distribution engines.
In FY03/21, Kanematsu Communications had revenues of JPY173.9bn. Operating profit was JPY5.8bn, and OPM was 3.3%.
OPM of peer companies: 5.1% at Bell-Park (TSE1: 9441) in FY12/20, 5.7% at Conexio (TSE1: 9422) in FY03/21, and 3.1% at T-Gaia (TSE1: 3738) in FY03/21