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 | |  November 13, 2006 | Corporate name: Kobayashi Pharmaceutical Co., Ltd.
President & COO: Yutaka KOBAYASHI
(Code No. 4967 The First Section of TSE/OSE) | |  | |
Kobayashi Pharmaceutical Reports Financial Results for the First Half Ended Sept. 30, 2006 | |
Kobayashi Pharmaceutical, Ltd. (TSE: 4967), a leading importer and distributor of medical equipment and pharmaceutical and consumer goods wholesaler, has announced consolidated financial results for the first half ended September 30, 2006. The Group continued aggressively with its "Creation and Innovation" management concept, invigorating existing markets by offering products and services with new added value. At the same time, vigorous promotion of business partnerships and overseas development resulted in sales totaling 130,721 million yen, an increase of 5,644 million yen, or 4.5%, over the previous interim period.
The Company made significant investments in advertising to build up our brand in Japan and overseas, but also cut costs by heavily reducing the cost of production and overhauling promotional costs. As a result, operating income stood at 9,133 million yen, up 486 million yen, or 5.4%, over the previous interim period, while ordinary income amounted to 8,006 million yen, an increase of 28 million yen, or 0.4%, over the previous interim period. Net income was 4,881 million yen, 1,323 million yen, or 37.2%, higher than the previous interim period. This sharp rise can be attributed to 1,632 million yen in impairment losses posted in the previous interim period.
I. First Half Financial Summary (April 1, 2006 - Sept. 30, 2006)
(1) Consolidated Operating Results
(Millions of Yen)
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April 1 - Sept. 30, FY ended
2006 % 2005 % 3/31/06
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Net Sales 130,721 4.5 125,076 13.8 246,852
Operating Income 9,133 5.4 8,664 10.7 16,879
Ordinary Income 8,006 0.4 7,978 13.2 15,151
Net Income 4,881 37.2 3,558 (4.7) 7,474
Net Income per Share (Yen) 118.16 117.98 179.17
Net Income per Share,
diluted (Yen) 85.49 85.48 179.01
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(2) Consolidated Financial Position
(Millions of Yen)
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As of Sept. 30, As of
2006 2005 3/31/06
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Total Assets 166,269 154,453 151,945
Shareholders' Equity 73,480 63,331 66,811
Shareholders' Equity Ratio 42.4% 40.8% 44.0%
Shareholders' Equity
per Share (Yen) 1,705.79 1,521.62 1,617.10
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(3) Consolidated Cash Flows
(Millions of Yen)
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April 1 - Sept. 30, FY ended
2006 2005 3/31/06
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Cash Flows from
Operating Activities 1,723 1,127 13,159
Cash Flows from
Investing Activities 999 (4,882) (6,414)
Free Cash Flow 2,722 (3,754) 6,744
Cash Flows from
Financing Activities (3,911) 3,339 (1,419)
Cash and Cash Equivalents,
End of Term 23,235 18,645 24,436
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Please download the Financial Results for the First Half Ended Sept. 30, 2006 here, or via Bloomberg, MultexNet, Reuters Research or Thomson One Analytics.
Summary of Performance by Business Segment
Consumer Products Operations:
Kobayashi Pharmaceutical Group launched 18 new products (excluding nutritional supplement food products), its most ever, in an effort to create new markets and expand existing markets in this business segment. Of these, sales of Nicitol 85, a diet pill for reducing abdominal fat, and Cleair, an air freshener that eliminates unpleasant household odors by releasing ions, made particularly high contributions to sales growth. In addition, efforts to further promote the Shoyo brand of oral hygiene products paid off, with sales totaling 49,500 million yen, up 3,637 million yen, or 7.9%, over the previous interim period.
In addition to sales gains, cost-cutting achieved by drastic reductions in the cost of production and other measures succeeded in boosting operating income to 8,438 million yen, 340 million yen, or 4.2%, higher than the previous interim period.
Wholesale Operations:
The Wholesale Operation segment experienced a harsh business environment marked by disappointing sales of summer products in drugstores, our principal customers, due to the unseasonable weather, and a slump in the market for health foods. Nevertheless, the Company acquired all outstanding shares in KS Tohoku Co., Ltd. (the former Sowa Co., Ltd.), on April 1, 2006, and sales rose 3,533 million yen, or 4.3%, to 86,019 million yen.
With regard to profits, while the expanded business scale did allow the Company to take advantage of the economies of scale by purchasing products in bulk from manufacturers, there were delays in improving the profit ratio due to the stock take-over. As a result, operating income declined by 9 million yen, or 4.6% compared to the previous interim period, to 197 million yen.
Medical Devices Operations:
Kobayashi Medical Division concentrated sales efforts in the orthopedic field, where demand is expected to increase, and surgery room products, such as electronic scalpels. Sales of a femoral head prosthesis, developed in-house and launched in January, have been strong.
The three Shield Healthcare Centers in the US succeeded in raising their profit margin by introducing new customer management systems and reducing back-office costs.
As a result, sales totaled 8,705 million yen, an increase of 653 million yen, or 8.1%, over the previous interim period. Operating income increased 248 million yen, or 361.4%, to 317 million yen.
Equity in earnings of Medicon, Inc., an equity-method affiliate, was 115 million yen (compared to 191 million yen in the previous interim period).
Other Operations:
Other Operations (transportation, sales promotion, market research, etc.) are conducted on a financially independent basis by Kobayashi Pharmaceutical's subsidiaries in support of the Company's three principal businesses and to contribute to the profits of those businesses. The Group reviewed the transfer values of the materials and services these operations provide.
As a result, sales of Other Operations fell 0.2%, or 10 million yen, to 6,647 million yen, and operating income stood at 167 million yen, 108 million yen, or 39.4%, lower than the previous interim period. Segment sales include internal sales and transfers between segments, the value of which totaled 4,550 million yen in the previous interim period and 4,628 million yen in the current interim period.
II. Financial Position
Total assets increased 14,323 million yen compared with the end of the previous fiscal year, primarily due to an increase of 11,177 million yen in notes receivable and accounts receivable among circulating assets resulting from the formation of new parent-subsidiary consolidations, and an increase of 2,348 million yen in inventories. Under current liabilities, notes payable and accounts payable increased by 8,822 million yen. Shareholders' equity including the minority shareholders' portion increased 3,751 million yen compared to the end of the fiscal year ended March 2006. As a result, the shareholders' equity ratio fell by 1.6 points.
Cash flows from operating activities:
Net cash provided by total operating activities increased 595 million yen to 1,723 million yen compared to the previous interim period. This was primarily attributable to a 2,759 million yen increase in net income before taxes and other adjustments.
Cash flows from investing activities:
Net cash used in investing activities totaled 999 million yen, an increase of 5,882 million yen over the previous interim period. This was mainly due to 5,267 million yen in payments to acquire investments in securities and 1,100 million yen in revenue from the sale of the Tokyo branch during this interim period.
Cash flows from financing operations:
Net cash resulting from financing operations totaled 3,911 million yen, an increase of 7,251 million yen compared to the previous interim period. This was mainly because, although the Company received 2,650 million yen in revenue from payments made by minority shareholders during this interim period, repayments on short-term borrowing by subsidiaries and the payment of dividends increased.
Accordingly, the term-end balance of cash and cash equivalents increased 4,589 million yen over the previous interim period to 23,235 million yen.
Fiscal Year Forecasts for the year ending March 2007
Although the economy continues to recover, the operating environment remains severe. Accordingly, we will strive to reduce inventories and accounts receivable so as to improve the efficiency of capital into account.
Stable investments in plants and equipment are expected to average those of the previous fiscal year. Expenses other than capital spending are anticipated to increase over the previous year due to active corporate takeovers aimed at expanding business. As a result, we expect cash flows from investing activities to increase compared to the previous fiscal year.
Cash flow from financing activities is forecast to remain level with the previous fiscal year.
Cash Flow Indicator Trends
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As of March 31, Sept. 30,
2003 2004 2005 2006 2006
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Equity ratio (%) 39.2 42.4 44.7 44.0 42.4
Equity ratio at
market value basis (%) 82.9 91.8 90.5 113.9 112.1
Debt repayment period
(years) 0.7 0.8 0.3 0.1 --
Interest coverage ratio
(times) 87.9 90.5 96.7 140.6 --
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III. Consolidated Projections for the Fiscal Year Ending March 31, 2007
The Japanese economy is expected to continue to recover, supported by sustained improvements in corporate earnings and firm personal spending. To reinforce its competitiveness so that is the leader in the fields in which it operates, Kobayashi Pharmaceutical Group will need to implement a strategy aimed at further bolstering the existing business and brands that form the foundations of the group's management, and at the same time further expand the scope of business operations and carry out a strategy to promote growth.
(Millions of Yen)
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FY ending FY ended
3/31/07 % 3/31/06 % Change %
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Net Sales 268,000 100.0 246,852 100.0 21,148 8.6
Operating Income 17,800 6.6 16,879 6.8 921 5.5
Ordinary Income 16,000 6.0 15,151 6.1 849 5.6
Net Income 8,600 3.2 7,474 3.0 1,126 15.1
Net Income/Share (yen) 208.06 179.17 28.89 16.1
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In line with our basic policy to continue providing stable dividends, the dividend for this fiscal year is expected to be 38.00 yen per share as an ordinary allotment.
About Kobayashi Pharmaceutical
Kobayashi Pharmaceutical (TSE: 4967; OTC: KBYPF) first opened for business in 1919, and management policy has always been to provide people and society with wonderful comfort through "Creativity and Innovation". Over the years the Company has expanded its scope, developing into a cluster of enterprises with three principal businesses: Consumer Products Operation, Wholesale Operation and Medical Devices Operation. In the fiscal year ended March 31, 2005, Kobayashi achieved increases in sales and profits for the seventh consecutive year since the introduction of consolidated accounting.
Contact:
Kobayashi Pharmaceutical
http://www.kobayashi.co.jp/english/contact/index.html
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