May 21, 2021
Kito Corporation
FY2020 financial results briefing was held on May 18, 2021.
The below is the translated summary of the question-and-answer session.
Q1: Port congestion continues on the US west coast. Will that affect Kito earnings?
A1: Kito is working hard to prevent and mitigate negative effects, such as gathering enoughcontainers, changing routes to use east-coast ports, and using by-air options for urgent
shipping. For North America, we are making our best effort to prevent stock shortages, forinstance by shipping further in advance. We are considering worst-case scenarios forearnings should the situation drag on, but we are hopeful for a return to normal conditions by
March 2022, and we can catch up during the fiscal year. We have already forecasted in minor
additional transportation costs related to air shipments.
Q2: Tell us about your projections for materials prices, equipment investment and depreciation
cost for fiscal 2021.
A2: As for materials, prices for steel are trending upward in China and the US, but we predict
this will pass within a relatively short period, without significant effect over the year as a whole.
We presume that the higher-price trend will likely continue longer in China than in the US, but
we are confident that we can expand earnings enough to absorb that impact. Equipment
investment in this fiscal year will be about 3.5 billion yen in Japan and abroad combined. Thisis mainly for new production equipment and environmental measures in Japan, andenhancement of chain-production equipment in the US. We project nearly 3 billion yen in
depreciation, about the same as last year.
Q3: Would you give us your additional views on the Chinese market this year.
A3: At this point we are projecting about the same levels of sales and profit in China as infiscal 2020. Having received statistical information indicating brisk growth and equipment
investment in the Chinese economy, we are sensing major positive movement in theinvestment trend to meet local needs. At the same time, we should refrain to being too bullish,
because Chinese exporters have been struggling to invest in equipment for quite a while, andmaterials prices are trending high. For this fiscal year we are planning based on careful but
not too conservative projections, taking both positive and negative factors into account.
Q4: Is there a risk of delay in public investment in Japan?
A4: At the moment we do not project quick expansion of public investment or related demand,but given the aging of infrastructure there can realistically be no more waiting for investment.
Forming a clear picture of investment related to the Tokyo Olympics, or even whether theGames will happen this year, remains difficult. But we project other public investment ininfrastructure in general will be strong, and we're reflecting that in our plans for fiscal 2021.
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Q5: What is the scale of sales in the energy sectors, including wind energy, and growthpotential in China and Japan?
A5: Energy-sector trends have significant influence on Kito operations. The trends intraditional energy industries like coal, oil and natural gas in North America and the Middle
East, as well as in renewable-energy industries like wind and solar, are very important at Kito.
As the world shifts toward renewable energy, especially in the US with the new administration,
we expect that investment will be brisk in marine-based wind energy in China and Japan. We
are keeping an eye on these industries to project medium- and long-term macro trends rather
than the likely impact on our results in a given year. Kito is prepared to provide detailed
support to these industries.
Q6: What is the background of your decision against going ahead with the previous equityfinancing plan?
A6: In 2016 Kito bought back 6 million Kito shares when our business and capital partnerships
ended, and all of the required funds were covered by bank loan. The announced equity
finance was intended to replenish the costs of the acquisition of treasury stock and to fundfuture growth. Some investors were critical of this equity financing plan, and after listening tostakeholders of all sorts, and discussing the plan again internally, we decided to withdraw it
for now and return to square one. To procure funds for future growth, we will consider othermeans with a long-term view.
Q7: We understand that post-merger integration of the recently acquired firms is a challenge.
Where have you made progress so far?
A7: In Europe we made several consecutive acquisitions, including an Italian firm for chain,a Finnish firm for light cranes, and a Dutch firm for hoist customization. Those firms function
as manufacturers and marketers of peripherals for hoists, Kito's core products. The Kito
Group is marketing their products and we've made some positive results. Concerning our plan
to enhance ties among these subsidiaries to build synergy in the European market, however,
we are lagging a bit in organizational integration. Customers of these European firms, suchas petrochemical plants and natural-resource suppliers, are in industries that are vulnerable
to the worldwide economic slowdown caused by the pandemic and have been slower than wehoped to expanding synergy in earnings.
For questions and more information
Kito Corporation
Corporate Communication Department
Tel: +81-3-5908-0161
Email: ir@kito.com

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