Kaga Electronics Group

Integrated Report

2020

Contact: Investor Relations & Public Relations Office
20 Kandamatsunagacho, Chiyoda-ku, Tokyo 101-8629, Japan
Tel: +81-3-5657-0106
Fax: +81-3-3254-7133
Email: webmaster@taxan.co.jp

INDE XKaga Electronics Group Explained

Philosophy and Spirit....................................................................................................................................... 4
Business and Strengths............................................................................................................................... 6
Message from the CEO................................................................................................................................... 8
Message from the COO.............................................................................................................................. 10
Message from the CFO............................................................................................................................... 14
Value Creation Process............................................................................................................................. 16
Special FeatureSpecial Feature 1 EMS Business Q&A

KAGA ELECTRONICS’ EMS business explained..................................................... 18
Special Feature 2 INTERVIEWSecuring and developing human resourcesthat support our growth strategy.............................................................................................. 20
Special Feature 3 New Business

Expanding our business to resolve social issues............................................. 22
Overview of FY2020/3 Results...................................................................................................... 24
ESG Information

Corporate Governance• Directors and Auditors................................................................................................................................... 28• Corporate Governance................................................................................................................................... 30• Internal Control / Compliance................................................................................................................. 31• Message from Outside Director............................................................................................................. 33

Social Report• Together with Our Customers.................................................................................................................. 34

GROWINGFURTHER
Expanding trading company business to drive
further growth in EMS business
KAGA ELECTRONICS will continue to take onchallenges to ensure ongoing growth.

• Together with Our Employees................................................................................................................. 35• Together with the Community................................................................................................................ 36

Environmental Report• Together with the Earth................................................................................................................................ 38
Financial and Corporate Information

Financial Information• 10-Year Financial Summary...................................................................................................................... 40• Analysis of Financial Condition and Results of Operations............................................ 42• Consolidated Balance Sheet..................................................................................................................... 44• Consolidated Statement of Income and Comprehensive Income............................. 46• Consolidated Statement of Cash Flows.......................................................................................... 48

Corporate Information................................................................................................................................ 50

Period covered
This report covers from April 1, 2019 to March 31, 2020, except certain parts that
include information prior and subsequent to these dates, as required.
Financial figures
Figures related to financial content in this report are rounded to the nearest unit.
Ratios are rounded to one decimal place after calculation in yen.
Scope of report
Data calculation in this report covers Kaga Electronics Co., Ltd. and its 53 consolidated
subsidiaries (17 in Japan and 36 overseas), all companies included in the scope of theCompany’s consolidated accounting, except where stated.
Notation and coverage
The Company: Kaga Electronics Co., Ltd.
The Group: Kaga Electronics Co., Ltd. and its 53 consolidated subsidiaries
Domestic facilities: Kaga Electronics Co., Ltd. and its 17 domestic consolidated subsidiaries
Forward-looking statements
Certain statements in this document may constitute “forward-looking statements.”
Such statements are based on currently available information and certain premises
deemed rational at the time of writing. As such, actual results may differ from thoseprojected due to various factors. Key factors that could cause actual results to differ
from those projected include, but are not limited to, general economic conditions inJapan and overseas surrounding the Company’s business domains, as well as trends
in demand for the Company’s products and services, and trends in foreign exchange
rates and stock markets.

2

KAGA ELECTRO NICS C O .,LT D .

Integ r ated Repor t 2 0 2 03

Kaga Electronics Group Explained

Philosophy and Spirit

Corporate Philosophy

Everything we do
is for our customers
Kaga Electronics Co., Ltd. had very
humble beginnings about 50 years
ago, starting out in a very small office.
We have since grown into a generalelectronics trading company with
operations that now span the globe. Our
corporate philosophy, “Everything we
do is for our customers,” has remained
unchanged since our earliest days.
Based on this philosophy, we willkeep contributing to the creation of anaffluent society by continuing to support
the development of our customers.

Kaga Spirit (The Words of Isao Tsukamoto)1

Personal connections
are intangible assets
The Kaga Electronics Group is capableof responding quickly and accurately tochanges in the business environmentand customer needs to drive continuous
growth. This ability stems from the personalconnections, or business network, wehave built up over the years based onrelationships of trust with customers andsuppliers. These relationships form a vital
part of our management foundations in
conducting business as a trading company.
The idea that “personal connections areintangible assets” has been passed downover the years as one of the pillars of what
we call KAGAism, the essence of who we are.

2
Never say “no”
Based on the motto “Never say 'no’,”the Kaga Electronics Group has been
expanding its business domain fromparts procurement to kit-parts sales andeven contract production, planning anddevelopment, and maintenance services,while enhancing the lineup of products
to meet customer needs. The origins ofour global “one-stop service system,” anenduring strength of the Company, lies inthis customer-first approach.

3

4

An organization driven
by communication
It is important to have a corporate culturethat makes maximum use of a personalcapability in order to be quick to seize
an opportunity in a changing businessenvironment full of future uncertainty.
Based on this philosophy, the Kaga
Electronics Group is working to build anopen workplace that encourages different
ways of communication to achievecommon goals.

5

Inventory is a liability
In our earliest days, a lack of ample
working capital forced us to place orders
for products after receiving an order froma customer. This gave birth to the idea that“inventory is a liability,” which has currently
evolved into a principle for how we receiveand place orders, a critical feature of
the Company. Responding as quickly as
possible to order information has enabled
us to build win-win relationships withcustomers and suppliers.

People are a finite asset;
companies are perpetual entities
The Kaga Electronics Group continues totackle new challenges with a view that
there is no end goal to corporate activities
based on the philosophy that “people area finite asset; companies are perpetualentities.” Acquiring Fujitsu Electronics anddeveloping new products and services
that resolve social issues are some of
the initiatives we are undertaking todrive sustainable growth. We will remaincommitted to pushing the envelope as
a Group as we head toward a century
in business.

Kaga Electronics Group’s growth timeline

Since 1968

1990–

2000–

Sep.1968 KAGA ELECTRONICS CO., LTD. founded at 3-8-3 Soto-Kanda,
Chiyoda-ku, Tokyo, with a paid-in capital of ¥1 million.

June1992 KAGA (H.K.) ELECTRONICS LIMITED establishedin Hong Kong.

Aug.2000 KAGA (SHANGHAI) ELECTRONICS CO., LTD. established in China.

Jan.2017 TAXAN MEXICO, S.A. DE C.V. established in Mexico.

Mar.2001 Net sales exceed ¥100 billion.

Mar.1980 Net sales exceed ¥10 billion.

July1994 KAGA (SINGAPORE) ELECTRONICS PTE. LTD. establishedin Singapore.

July2017 KAGA ELECTRONICS (VIETNAM) CO.,LTD. establishedin Vietnam.

July1981 TSK ELECTRONICS CORPORATION established in the
United States.
Dec.1985 Stock registered on the Japan Securities Dealers Association
as an over-the-counter company.
TAXAN (UK) LTD. established in the UK.
Dec.1986 Stock listed on the Second Section of the Tokyo Stock
Exchange.

4

KAGA ELECTRO NICS C O .,LT D .

Feb.1995 KAGA (KOREA) ELECTRONICS CO., LTD. established in the
Republic of Korea.
Mar.1995 Net sales exceed ¥50 billion.
Dec.1995 KAGA (TAIWAN) ELECTRONICS CO., LTD. establishedin Taiwan.
Sep.1997 Promoted to the First Section of the Tokyo Stock Exchange.

Apr.2002 KAGA ELECTRONICS (THAILAND) COMPANY LIMITED
established in Thailand.

Sep.2018 KAGA ELECTRONICS (INDIA) PVT.LTD. established in India.

Dec.2003 KAGA ELECTRONICS (USA) INC. established in the United States.

Jan.2019 Fujitsu Electronics Inc. made into a Group company.

Aug.2006 KAGA (DALIAN) ELECTRONICS CO., LTD. established in China.

Oct.2019 Towada Pioneer Corporation (currently KAGA EMS TOWADA
CO., LTD.) made into a Group company.

Apr.2009 KAGA (EUROPE) ELECTRONICS LTD. established in the UK.
KD TEC s.r.o. established in the Czech Republic.

Apr.2020 EXCEL CO., LTD. made into a Group company.

Mar.2014 Transferred to current Head Office building (company-ownedbuilding).

Integ r ated Repor t 2 0 2 0

5

Kaga Electronics Group Explained

Business and Strengths
Electronic parts and semiconductor business

EMS businessIn this business, we provide a wide range of electronics-relatedparts and materials that include semiconductors, general electronic
components, LEDs, sensors and liquid crystal displays. We leverage
our network of more than 60 companies in the United States,
Europe, Asia and other parts of the globe to deliver world-classparts and components to customers. Our exceptional support
system enables us to meet the needs of customers globally.

The Kaga Electronics Group utilizes production facilities in China
and other parts of Asia as well as in Europe and the Americas ina production system that allows us to manufacture in regions thatbest suit our customers. In addition to the design and developmentof products, we have developed a total support system that isgeared to flexibly meet different demands from high-mix, lowvolume production and semi-finished to finished products. In
addition, our global supplier network enables us to propose optimalalternatives to parts and materials that suit each customer best.

Major Domestic Group Companies
Fujitsu Electronics Inc.
KAGA TECH CO., LTD.
KAGA DEVICES CO., LTD.
AD DEVICE CO., LTD.
EXCEL CO., LTD.
Major Overseas Group Companies
KAGA ELECTRONICS (USA) INC.
KAGA (SINGAPORE) ELECTRONICS PTE. LTD.
KAGA (KOREA) ELECTRONICS CO., LTD.
KAGA (TAIWAN) ELECTRONICS CO., LTD.
KAGA DEVICES (H.K.) LIMITEDKAGA (DALIAN) ELECTRONICS CO., LTD.

Strength

Strength

Consultation

2 Global network capability

We provide peace of mind to customers and instill
confidence through our sales and production network,
which spans 16 countries and regions worldwide,
as well as our global procurement and informationgathering competencies that we have built up overmany years, which have been reinforced by theaddition to the Group of Fujitsu Electronics.

Planning
anddevelopment

Major Domestic Group Companies
KAGA MICRO SOLUTION CO., LTD. / KAGA DEVICES CO., LTD. / KAGA EMSTOWADA CO., LTD.
Major Overseas Group Companies
KAGA (H.K.) ELECTRONICS LIMITED / KAGA (SHENZHEN) ELECTRONICS
CO., LTD. / KAGA (SHANGHAI) ELECTRONICS CO., LTD. / KAGA TAXAN(SUZHOU) ELECTRONICS CO., LTD. / KAGA ELECTRONICS (THAILAND)COMPANY LIMITED / KAGA COMPONENTS (MALAYSIA) SDN.BHD / KD TEC
s.r.o. / TAXAN MEXICO, S.A. DE C.V. / KAGA ELECTRONICS (USA) INC. / KAGA(DALIAN) ELECTRONICS CO., LTD. / KAGA ELECTRONICS INDONESIA, PT /KAGA ELECTRONICS (VIETNAM) CO., LTD. / KD TEC TURKEY ELEKTRONIKSANAYI VE TICARET LIMITED SIRKETI / KAGA DEVICES INDIA PVT. LTD.

Number of Group companies

Component
procurement

1 Comprehensive capability in the electronics field

The strength of the Kaga Electronics Group lies in the broad range of products and services it handles. We meeta wide variety of needs by providing modules and finished products in addition to electronics-related parts andmaterials as well as hardware, software and systems. Our business covers everything from large-lot consumer
goods to small-lot industrial devices. This comprehensive capability, coupled with our one-stop service capability,
allows us to meet customer needs with exceptional precision.

Information equipment business

Other business

The Kaga Electronics Group carries out the functions of a sales
agency in providing such places as domestic consumer electronics
mass retailers, camera stores, general companies and educational
institutes with PCs and PC peripherals made by major Japaneseand overseas brands. In addition, we offer a one-stop service
for network solutions from the proposal to the construction
and maintenance of local area network (LAN) systems, security
systems and eco-friendly energy systems for corporations andgovernment agencies.

In addition to the planning, manufacture and sale of amusement
related equipment such as arcade amusement machines, the Kaga
Electronics Group produces commercials, movies and animation
as well as original content using advanced computer graphics
technology. Our diverse business also includes environmentallyfriendly PC reuse and recycling, and the retail and wholesale ofgolf supplies.

Major Group Companies
KAGA SOLUTION NETWORK CO., LTD.
KAGA TECHNOSERVICE CO., LTD.

KAGA ELECTRO NICS C O .,LT D .

Major Group Companies
DIGITAL MEDIA LAB., INC.
KAGA MICRO SOLUTION CO., LTD.
KAGA SPORTS CO., LTD.
KAGA AMUSEMENT CO., LTD.

worldwide

domestic

44

overseas

Number of factories

Production

6

22

66

Strength

Sales

Repair andafter-sales
service5

19domestic

worldwide

14

overseas

Note: As of April 2020

3 One-stop service capability
The Kaga Electronics Group, as an independent
general electronics trading company, has been
expanding its business domains in accordancewith customer needs. At present, Group companies
worldwide are working together to create a “onestop service system” that transcends the boundaries
of a trading company and covers everything fromupstream processes, including planning and designin addition to parts procurement, to downstream
maintenance services. By doing so, we are providing
diverse added value to customers.

Integ r ated Repor t 2 0 2 07

Message from the CEO

To our stakeholders

Positioning of the Medium- to Long-Term Vision and the Medium-Term Management Plan 2021
Net sales

Aiming to become
a competitive“world-classcompany”

Organic Growth+
Further M&A
Challenges¥

Aim to become a competitive“world-class company”

Kaga
Electronics Group+
FujitsuElectronics

Increased
sales

Quantitative
expansion

will lead to
growth of
the EMS businessof trading company
business

Isao Tsukamoto
Founder & CEO

500 billion

Increased
profitratio

Expansion of
the trading company
business

Qualitative
improvement

Further expansionof the EMS
business
Enhancement andexpansion ofoverseas businessthrough the EMS
business

Medium-Term Management Plan 2021
(1) Enhancement of the revenue base(2) Stabilization of the management base (3) Creation of new business

Become a ¥1 trillion company witha strong presence in the global market

trillion

Net sales¥

Become “Japan’s No. 1
corporate group in the industry”

1(Net sales)

Medium- to
Long-Term Vision

ordinary dividend of ¥60 per share, which was forecast at thestart of the fiscal year.

Based on an awareness of this environment, the Kaga
Electronics Group formulated its Medium- to Long-Term
Vision covering the next 50 years of becoming a corporate

Create universal value as a company
that benefits society

group capable of generating ¥1 trillion in sales, the scale

Toward the next 50 years of growth

In addition to this growth strategy, over the long term we willseveral trillion yen level in the intensely competitive global

seek to develop new products and services that contributemarket. We have also formulated a new Medium-Termto the resolution of social issues in the realms of safety andManagement Plan with the aim of becoming Japan’s No. 1

security and environmental preservation on top of meetingcustomer needs.

“People are a finite asset; companies are perpetual entities.”

Our business environment indeed signals a turning point, a

corporate group in the industry with sales of ¥500 billion

Based on the philosophy we have upheld since our earliest

shift in the era that offers a chance for growth. Advances inover three years. The plan sets out three key challenges:

Besides strengthening products for electric vehicles, wedays that there is no end goal to corporate activities, I havethe Internet of Things (IoT) and artificial intelligence (AI) have

Enhancement of the revenue base, stabilization of thestarted handling U.S.-made helicopters as a new business

continued to take on a variety of challenges. Fortunately,

accelerated a digital transformation in which every industry

management base and creation of new business. The addition

from 2020 and deliveries are underway to local governments

we have received great support from customers and otherutilizes electronics-related products and services. In addition,of Fujitsu Electronics to the Group in January 2019 forms part

where there is increasing demand for use in disasterconcerned parties, and thanks to this, we successfully

against the backdrop of trade friction between the Unitedof this growth strategy.

prevention and other areas. In the medical field dealing withreached the milestone of 50 years in business in 2018.

States and China, the spread of COVID-19 and other such

I would like to extend my warmest appreciation to all our

factors, we are heading toward a new stage of globalization inrevenue base through mergers and acquisitions in the trading

and mammography units for breast cancer examinations.

stakeholders for your unending cooperation.

the supply chain of manufacturers both in Japan and abroad.

company business domain, and utilize our global production

While I do not expect to see results from this endeavorWith these feelings of gratitude foremost in mind, I haveOn the other hand, competition with global corporate

newly resolved to boldly tackle further challenges aimed atgroups boasting sales of ¥2–3 trillion is inevitable in the future

the next 50 years of growth.

world market.

Going forward, we will strive to quantitatively expand our

aging, we are making preparations to sell mobile CT scanners

base to significantly enhance Group management, which

overnight, I am sure that our efforts will start to bear fruit if

includes developing our customer base for EMS business.

we just persevere in a way that typifies who we are. I would

As a result of various management measures based onlike KAGA ELECTRONICS to be a leader in how to effectively

To outstrip our rivals over the next 50 years and lead thethis growth strategy, we were able to achieve record highs

raise universal corporate value by showing that the key toinvestment in a venture company, reaffirming our DNA

Group along a new path to growth, it is imperative that wein both operating income and ordinary income for the fiscal

sustainable growth is being a company that benefits society.

as an organization that perceives changes in the times as

have a vision and strategy that is global in nature.

year ended March 31, 2020. In light of these results, an

I humbly ask all of our stakeholders for your continued

extraordinary dividend of ¥10 per share was added to the

support of the Kaga Electronics Group and our initiatives.

In 2017, we established an internal fund of ¥5 billion foropportunities for growth.

8

Turning the changing times into
growth opportunities

required to compete and rank with rivals overseas at the

KAGA ELECTRO NICS C O .,LT D .

Integ r ated Repor t 2 0 2 0

9

Message from the COO

Progress in post-merger integration of Fujitsu Electronics

We will strengthen the Group’s
management base and maximize
revenue by enhancing ourability to respond to changes
in the environment.

Advancements made in enhancing profitability,
cultivating customers in the EMS business andconsolidation of sites and organizations

sales, but could be seen as a positive from the perspective

so-positive news regarding the first full-year performanceof profitability since our sales mix has actually improved. In

in real terms. On the positive side, profitability has improved.

any case, it goes without saying that we need to make up for

Although some investors pointed out that the grossthe decrease in sales as soon as possible by dealing in new

profit margin at Fujitsu Electronics was lower than KAGA

products.

ELECTRONICS, it has improved 0.5 percentage point, from

Electronics. This can be attributed to the formation of a
dedicated EMS sales team at Fujitsu Electronics in April 2019

President & COO

switching over from the low-margin products handledthat approached 90 top-level companies in collaboration with

by Fujitsu Electronics to the leading products of KAGA

our EMS Business Division. We are in ongoing talks with more

ELECTRONICS that we have brought in from all around thethan 30 of these companies and expect this to translate into aworld as an independent trading company. I can confirm thathigh number of new business deals.

Financial results(millions of yen)

Net sales

We are also consolidating the sales sites and organizations

little. For stage two, we are drawing up plans to improve theof KAGA ELECTRONICS and Fujitsu Electronics. We started

2019/32020/3

YoY change

profit ratio by also offering our EMS services, where we enjoy

with Japan, integrating the Nagoya business offices of the two

292,779

443,615

Up 51.5%

a competitive advantage, as a package together with products

companies and closing the Hiroshima and Nagaoka offices

to customers of Fujitsu Electronics.

of Fujitsu Electronics, which have been transferred to the

7,570

10,014Up 32.3%

Ordinary income

7,859

10,137

Up 29.0%

Management Plan 2021 in April 2019. Net sales in the fiscal

Profit attributable toowners of the parent

8,014

5,852

Down 27.0%

year ended March 31, 2020, the first fiscal year of the plan,

ROE

10.9%

nearest KAGA ELECTRONICS sales sites. Overseas, we aremaking changes to our sales company structure in the UnitedStates and South Korea. In these ways, we have not wasted

Net sales (millions of yen)
7.6%—

In the electronic components business, Fujitsu Electronics

Kaga Electronics Group
KAGA ELECTRONICS

any time making steady inroads in post-merger integration.

Fujitsu Electronics

468,995(Simple aggregation)

200,584

business, the core business of the Kaga Electronics Group,

Inc., which joined the Group in January 2019, contributed

performed well while corporate acquisitions also contributed

to revenue for the entire year, and sales surged in theto the increase in sales. In terms of profit, operating income

components sales business as a result. In the EMS business,was ¥10,014 million, up 32.3% year on year, and ordinary

sales in the medical equipment and automotive sectors

income was ¥10,137 million, up 29.0% year on year. Bothwere strong. Although operations were temporarily haltedof these indicators saw record highs. Profit attributable tofrom February to March 2020 at certain factories in China

owners of the parent was down 27.0% year on year to ¥5,852

and Malaysia due to the outbreak of COVID-19, the impact

million, however, due to the absence of a gain on negativeon business performance for the fiscal year was minimal.

goodwill, which was recorded in the previous fiscal year, andWe also actively implemented management measures ina loss on valuation of investment securities recorded in thethe electronics manufacturing services (EMS) business tofiscal year under review. All profit indicators exceeded thefurther bolster the competitiveness of the Group, including(Simple aggregation)

initial forecasts as well as the revised upward forecasts madethe construction of new factories in Fukushima, Japan and

14,59033,298during the period. In particular, even though it was one year

in Thailand as well as the consolidation of Towada Pioneer

13.6

13.7

behind the schedule set under our previous Medium-Term

Corporation (currently KAGA EMS TOWADA CO., LTD.) into theManagement Plan, we did manage to achieve our target ofGroup. We therefore assess that we made a good start in the¥10.0 billion for ordinary income, which enabled us to draw afirst fiscal year of the new Medium-Term Management Planline in terms of where we are placed management-wise.

both in terms of business results and measures taken.

KAGA ELECTRO NICS C O .,LT D .

On a business front, we have received new orders for
our EMS services from four existing customers of Fujitsu

two stages, broadly speaking. In stage one, we are gradually

amounted to ¥443,615 million, representing a significant

10

but this turned to zero in the second half. Losing such a large

Ryoichi Kado

Operating income

increase of 51.5% year on year. The electronic components

around ¥25.0 billion in sales in the first half of the fiscal year,
volume of business does hurt from the perspective of Group

this measure has been steadily bearing fruit, albeit little by

KAGA ELECTRONICS embarked on the Medium-Termterminated in October 2019. This agreement generated

in January 2019, we have experienced both positive and not-Efforts to enhance profitability are being implemented in

Achieved ordinary income of ¥10.0 billion in
the first fiscal year of the new Medium-Term
Management Plan

with U.S.–based Cypress Semiconductor Corporation was

Since making Fujitsu Electronics a subsidiary of the Group

6.3% to 6.8%, since the time of acquisition.

Review of the fiscal year ended March 31, 2020

On the less-than-positive side, a distribution agreement443,615233,306

Consolidation of sales sites

243,031KAGA ELECTRONICS

235,6892019/3

2019/3

Transferred Sep. 2019

Nagoya OfficeKansai Business OfficeMerged Dec. 2019

Hiroshima Business Office(closed)Niigata Business OfficeMerged Feb. 2020

Nagaoka Business Office(closed)U.S. Mid-West OfficeMerged 2020

U.S. Detroit Business Office(closed)U.S. sales company(liquidated)

Business transfer

Fujitsu Electronics

46,725

6.3
32,135

Nagoya Business Office

2020/3Gross profit (millions of yen) / Gross profit margin (%)
Kaga Electronics Group
KAGA ELECTRONICS

Fujitsu Electronics

13,70847,01610.6
6.8
2020/3

Spring 2021

U.S. sales company

Note: We are currently reviewing the situation of the South Korean sales companies of the twocompanies (with a decision to be made in spring 2021).

Integ r ated Repor t 2 0 2 0

11

Message from the COO

Response to COVID-19

The Novel Coronavirus Response Committee was set up at theand their families evacuate if needed. In addition, we sent a

due to COVID-19. Profit attributable to owners of the parent

Novel Coronavirus Response Committee
established to give full support to sites in Japanand abroad

Head Office to handle our response to the COVID-19 pandemic.

large volume of essential items such as face masks, sanitizer

is forecast to increase due to the recording of ¥8.0 billion in a

I am serving as chair of this committee and have instructed

and food from the Head Office to factories in China and othergain on negative goodwill associated with the acquisition ofthat the Groupwide policy is to prioritize the safety of allplaces overseas that have been forced into lockdown, for use

EXCEL CO., LTD.

employees in the Group and to let personnel stationed abroadwhen they reopened.

Initiatives to curb COVID-19
In December 2019, a new and at the time unidentified pneumonia

doors until the end of the spring holidays.

It is quite overwhelming being in charge of operations when

For the two or so months between the issuing and lifting

it is going to be at least a year, and maybe up to three years,of the state of emergency by the Japanese government, we

before we see an end to the pandemic. We are embarking on

instructed Group companies in Japan that employees wereplans to make improvements to the Group’s structure with ato implement teleworking or come in to the office based

view to a post-COVID world and will first prioritize employee

on a staggered commuting system in order to limit thesafety and employment.

Initiatives at KAGA ELECTRONICS were led by the Novel Coronavirus

number of people leaving home. We continue to implement

We will run our businesses in the fiscal year ending March

officially known as COVID-19, the pandemic had accounted for aroundResponse Committee and prioritized the safety and security of all Group

30 million infections worldwide and more than 900,000 deaths as of

employees. In particular, we promptly sent out supplies such as facesafety-first practices at our business offices, including a31, 2021 with this foremost in mind. I ask for your continued

September 15, 2020. And there is still no end in sight.

masks, sanitizer and food from the Head Office to EMS sites in China andbasic policy of teleworking in Japan and work-from-homesupport as we forge ahead.

reported in Wuhan, China began to spread around the world. Now

On February 27, 2020, KAGA ELECTRONICS established the Novelother countries that had been forced into lockdown and provided otheroverseas dependent on guidance from the government orCoronavirus Response Committee at Head Office. At the time, cities informs of support to personnel there as part of our business continuity

administrative body in each country. Although operations

China, where the virus was first detected, started to go into lockdown

plan (BCP). The Japanese government declared a state of emergency

after the lunar Chinese New Year, while in Japan concerns began toon April 7 that included a request to self-isolate, and in response wewere temporarily halted at certain production sites overseas

increase over community infection, particularly with the cluster that

instituted a teleworking scheme and staggered commuting for all

occurred on the Diamond Princess cruise ship that was docked inGroup companies in Japan. Overseas, we took appropriate measures to

Yokohama. An experts’ meeting was set up around this time to advise

suspend or resume operations in accordance with the guidance of thethe government, and on February 25, 2020 a set of basic policies

government or administrative body in each country.

was announced followed by a series of government requests. The

Going forward, we will continue striving to prevent the spread ofdue to COVID-19, all sites are now back up and running while

Kaga Electronics Group
KAGA ELECTRONICS

Fujitsu Electronics
EXCEL

practicing appropriate safety measures.
To date, there has been one person infected with COVID-19

443,615

from the KAGA ELECTRONICS Head Office and domestic Group

200,584

companies, one from a production site in the Czech Republic

next day on February 26, the government called for the cancellation,

COVID-19 both inside and outside the Company, giving top priority

postponement and scaling-down of sports and cultural eventsto the health and safety of our customers, suppliers, employees andand two from a production site in Mexico. As such, we feel thatnationwide, and on February 27 there was a request for elementary,

their families.

the measures we have put in place to curb the pandemic havejunior and senior high schools throughout the country to close their2021/3 forecast / Net sales (millions of yen)

been successful in keeping the number of infections within

160,000

50,000 –50,000
Risk of a decline
in net sales due
to COVID-19

240,000

243,0312020/32021/3(forecast)

our ranks to a minimum (as of September 15, 2020).
Attendance at offices and key measures

Office attendance rate

At the Head Office and certain other sites

Apr.

May

June

July

Aug.

Sep.

in Japan, we started using non-contact

No. of infected persons(date detected)

2021/3 forecast / Operating income (millions of yen)

Forecast for the fiscal year ending March 31, 2021

KAGA ELECTRONICS

29.4% 27.0% 42.4% 46.8% 37.3% 48.6%

1 (Sep. 1, 2020)

our doors. Anyone with a temperature over 37.5

Domestic Group
companies

35.4% 30.3% 51.4% 55.8% 46.9% 54.1%

1 (Aug. 24, 2020)degrees Celsius is refused entry.

Note: The result for September is only for the first half of the month, up until the 15th.

Although it is still unclear when we will see the back of

Status of production sites overseas

COVID-19, the Kaga Electronics Group’s production sites andthermometers to check the temperature of
employees as well as visitors when they enter

Status of overseas production sites andkey measures
Temperature checks are being carried out at
the entrance to our factories to confirm normal
body temperature. A sanitizing spray is used on

Location
Hubei, China
Suzhou, China

people as they enter the building and while inside

Shenzhen, China

everyone practices social distancing and uses

Thailandalcohol-based hand sanitizers that have beenplaced there. Partitions have also been put up on

Malaysia

production lines and in employee cafeterias toIndonesia

minimize interpersonal contact.

Vietnam
India
Czech Republic

Status of operations due to COVID-19
Operations halted from February 1 to March 15, 2020 at
the direction of the local government in Hubei Province
Operations halted from February 1 to February 9, 2020 at
the direction of the local government in Guangdong Province
Operations halted from February 1 to February 13, 2020 at
the direction of the local government in Guangdong Province
Operations uninterrupted
Operations halted from March 18 to April 20, 2020 at
the direction of the Malaysian government
Operations halted on October 9 to conduct polymerase chain
reaction (PCR) tests for all employees
Operations halted from April 1 to April 15, 2020 at
the direction of the Vietnamese government
Operations halted from March 25 to May 31, 2020 at
the direction of the Indian government
Operations halted from April 7 to April 9, 2020 at
the direction of the Czech government

TurkeyOperations uninterrupted

MexicoOperations halted from April 1 to May 30, 2020 at
the direction of the Mexican government

No. of infected persons(date detected)

sales sites in both Japan and abroad are currently operating
without any major issues. In terms of procurement, our supply

0

chain has recovered on the whole even though we face some0

difficulties with certain parts and products. At the same time,0

conditions on the customer front remain uncertain, in particular0with automotive-related customers worldwide planning to00
1(Apr. 5, 2020)

02(July 22, 2020)

significantly reduce production on a year-on-year basis.
At the start of the fiscal year ending March 31, 2021,

KAGA ELECTRO NICS C O .,LT D .

Fujitsu Electronics

KAGA ELECTRONICS

EXCEL

10,0142,086
7,927
2020/3

7,500

1,000

–3,5000

5,000
A decrease in gross profit of¥5,000 million due to a decline
in sales and an increase of¥1,500 million due to profit
recovery measures

2021/3(forecast)

2021/3 forecast / Profit attributable to owners of the parent(millions of yen)

Ordinary income

4,500

the full-year forecast was released in August 2020, when

Extraordinary income (gain on negative goodwill)

8,000

we announced first-quarter financial results. Net sales andExtraordinary loss (structural improvement, cost of risk, etc.)–1,000

Income taxes–1,500

Profit attributable to owners of the parent

10,000forecasts for the term still had not been formulated. However,operating income are forecast to decrease year on year afterfactoring in the risks of cancellation of large-lot commercial
rights held by Fujitsu Electronics and a decline in demand

12

Kaga Electronics Group

Medium- to long-term post-COVID measures with
forecast of bottom line profit growth00400,000

Integ r ated Repor t 2 0 2 013

Message from the CFO
Inventory (millions of yen) / Inventory turnover period (days)
Inventory (KAGA ELECTRONICS)

We will strive tofurther enhance
profitability on
the back of a stablefinancial base.

ROE and the cost of shareholders’ equity

Inventory turnover period

Inventory (Fujitsu Electronics)

35.1

Return on equity (ROE) for the fiscal year ended March 31,

30.1
40,02626.3

2020 was 7.6% due to the absence of a gain on negative
goodwill, which was posted in the previous fiscal year in line

31,90819,455

17,34810,007

with the consolidation of Fujitsu Electronics, and to a decline
in net income following a loss on valuation of investment
securities in the fiscal year under review. The cost ofshareholders’ equity is recognized at 7–8%*, which is roughly

22,67821,901

on par with the previous fiscal year. Under our Medium-Term
Management Plan, we set a target of 8.0% or higher for

2018/3

2019/32020/3

ROE, and our intention is to implement management with afocus on capital efficiency so that ROE exceeds the cost of

by operating activities totaling ¥22.4 billion. This can primarily

Eiji Kawamura
Managing Director,
Chief of Administration Headquarters

Financial position and outlook under
the Medium-Term Management Plan
In January 2019, the Kaga Electronics Group consolidated
Fujitsu Electronics as the first step toward our goal of

be attributed to the accumulation of profit, which stands at a

Financial leverage of around 2.5 times and total asset

record high, and to significant improvement in working capital,

turnover of around two times would enable us to achieve

which included a reduction in inventory of ¥8.0 billion.

double-digit ROE, depending on the net profit margin for theWe have believed since our foundation that “inventory is a

fiscal year. The key to achieve this lies in how skillfully we canliability,” a concept which forms part of what we call KAGAism,

realize post-merger integration with Fujitsu Electronics andTerm Management Plan while seeking to maintain financial

or the essence of who we are. Based on this conviction, we

EXCEL. It is important to improve the management efficiency

soundness at all times.

have positioned the reduction in days held in inventory as

and profit ratio of both companies. Alongside this, it is essential

a critical challenge in our sales organizations and Groupto reduce the risk premium, an equity cost, especially since wecompanies. At the same time, we have formulated a principle

do not know when we will see the end of COVID-19.

Enhancing operating cash flows andreducing inventory

for how KAGA ELECTRONICS receives and places orders;becoming a corporate group boasting sales of more than

To this end, we will strive to reduce costs throughout Groupsales activities in our components business apply the rulecompanies, including implementing cost controls wherever¥1 trillion. In terms of our financial position at March 31,

The Kaga Electronics Group stably generated operating cashthat we must not place an order with a manufacturer unlesspossible, and conduct strict risk management based on a2019 immediately following the acquisition, the net debt

flows of around ¥10.0 billion from the fiscal year ended March

we have first received an order from a customer. This forms

disciplined balance sheet and cash flow management toequity ratio (DER) was –0.03 times due to financing based

31, 2015 to the fiscal year ended March 31, 2018. This waspart of our strict management approach to inventory. On

secure financial soundness.

on bank borrowing, inventory had climbed to ¥40.0 billion,

underpinned by the profit-oriented approach to corporate

the other hand, the EMS business is in the same category

and cash flows from operating activities were negative due

management that has permeated the Group and thoroughas the manufacturing industry, and so it needs to holdand other stakeholders while engaging in constructive

to fluctuations in working capital such as trade notes andmanagement of working capital. In the fiscal year ended

on to inventory for a longer period than our components

dialogue, as well as work to strengthen our resistance toaccounts receivable and payable.

March 31, 2019, a year in which we brought Fujitsu Electronics

business. For this reason, the Kaga Electronics Group has set

volatility and drive revenue growth so that we can withstandWe will further enhance information disclosure to investors

into the Group, cash flows used in operating activities

a target for the inventory turnover period of 15 days for the

drastic changes in the external environment.

we posted record highs in operating income and ordinary

amounted to ¥1.5 billion, whereas in the fiscal year ended

components business and 45 days for the EMS business. We

income due in part to the full-year contribution of Fujitsu

March 31, 2020 we turned this around to cash flows provided

are implementing this approach to inventory and working* Cost of shareholders’ equity 7.5%:
Risk-free interest rate
0.1%	10-year Japanese government
bond, five-year average
Market risk premium
6.2% TOPIX yield
β (beta)
1.2% Five-year, weekly

Nevertheless, in the fiscal year ended March 31, 2020,

capital at Fujitsu Electronics as a new subsidiary as well. As

Electronics as a newly consolidated subsidiary. We have madeour financial position significantly stronger over the past
year with solid progress in reducing inventory, returning tosignificant profitability in cash flows from operating activities,

an example, although the distribution agreement with U.S.-

Cash flows (millions of yen)
Cash flows from financing activities

Cash flows from operating activities

Cash flows from investing activities

22,406the period.

is expected to shrink due to the COVID-19 pandemic andentire Company was reduced by more than 8 days, from 35.1

11,684

10,077

chief financial officer (CFO), I think it is possible to decrease

the Kaga Electronics Group remains very confident on athis even further. We will continue with investment for growthfinancial front. From the perspective of ensuring liquidity, wetoward our goal of becoming a ¥1 trillion company in sales,–4,173have cash and deposits of ¥43.4 billion, and we have secured–2,811

a commitment line of ¥15.0 billion and continued the shift to–1,547–3,651–6,860–7,544long-term borrowings with short-term borrowing limits.

KAGA ELECTRO NICS C O .,LT D .

ROENet profit margin

Financial leverage

Total asset turnover

10.9

2018/3

2019/3

9.5

days at the end of the previous fiscal year to 26.3 days. As

to temporarily decline. Even against this backdrop, however,We will keep working to achieve the goals of our Medium-

Return on equity (ROE) (%)

As a result, the average inventory turnover period for thein the fiscal year ending March 31, 2021, market demand
therefore cash flows from operating activities are expectedbased Cypress Semiconductor was terminated in October
2019, we were able to cash out inventory without delay during

and improving the net DER to –0.19 times. On the other hand,

14

shareholders’ equity on an ongoing basis.

2020/3and enhancing our ability to generate cash flows is therefore
a critical issue for management. We will carry on striving tomaintain a stable financial base without compromising efforts
in the management of inventory and working capital.

7.6

2.8

2.7

1.3
2.7

1.8

2.8

1.8

1.4

2.1

2018/3

2019/32020/3Integ r ated Repor t 2 0 2 015

Value Creation Process

We will continue to actively engage in M&As and increase our intangible
capital to realize our medium-term management plan and vision.

Medium-Term Management Plan 2021
Mega trends

TargetAdvancement in AI andthe IoT

Net sales of ¥500.0 billion

Shift to 5G communications
Recreation of the global
supply chain
Climate change andresource depletion
Declining birthrate and an
aging population, and adecrease in workers

Opportunities

Risks

Become “Japan’s No. 1
corporate group in the industry”
Basic strategy

Core markets

Expand trading company business todrive further growth in EMS business
Increased
sales

Refer to Special
Feature 1 on page 18.

Medium- tolong-term strategy

Communications
field

Further M&As andinvestment in new
businesses

Environmental
field

Increased
profitratio

Risk

Reduced significance ofexistence as a trading
company and loss ofcommercial rights

Quantitative
expansion

Qualitative
improvementof trading company
businessthrough the EMS
business

Automotive field

Further expansionof the EMS
business

Medical andhealthcare field
Factory automation(FA) field

Opportunity

Growing need for further
automation and efficiency
Risk

Shortage of human resources
and soaring labor costs
Opportunity

Growth of energy-saving
and eco markets
Risk

Increased environmental
cost

KAGA ELECTRO NICS C O .,LT D .

¥1 trillion

Enhancement
and expansionof overseas
business

Aim to become
a competitive
world-class company

Nonfinancial capitalStrengthen nonfinancial capital through M&As and others to
help realize the basic strategy

Social capital

Human capitalIntellectual capital

Customers

Group employees

Technical staff

7,500
companies

6,731

1,559

Refer to Special
Feature 2 on page 20.

16

Net sales

Refer to Special
Feature 3 on page 22.

Opportunity

Generation of new demand
and market for EMS businessMedium- to
Long-Term Vision

Conduct growthinvestment

Manufacturing
capitalOur ownmanufacturing sites

19

worldwide

Strengthen
nonfinancial
capitalFinancial
capitalInteg r ated Repor t 2 0 2 0

17

Special
Feature1

EMS Business Q&A

An increased customer base for trading
company business will drive demand in EMS
business, facilitating sustainable growth.

technology that are unique to Japanese EMS companies. We

models a month, sometimes in batches of 100 units, as well as

promote a convenience store type strategy in which we canthe ability to meet the fine-tuned needs of our customers, for

supply products from the site nearest the customer. This model

example by quickly changing equipment to meet a delivery date.

leverages a flexible production system enabling the contracted

This enables us to respond to the varied outsourcing needs ofhigh-mix, low-volume production of 3,000 different circuit board

the manufacturing industry.

Q2 What is your growth strategy for EMS business?
We will build the industry’s strongest competitive advantage by enhancing
A2 production capacity, engineering skills and manufacturing capabilities.
Revolution 1

The Kaga Electronics Group welcomed Fujitsu Electronics, Inc.
(FEI) into its fold in January 2019. As a result, semiconductors
for microcomputers and application-specific integrated
circuits (ASICs) for use in the automotive and communications
fields have been added as new products. These products are
areas of competitive advantage for FEI. In addition, throughAdding value tobusiness
Enhanceour EMSbusiness baseTowardsustainableprofit growth

EMS business

M&A we have acquired products for our trading company
business and expanded our customer base, which willtranslate into increased demand for our EMS business andlead to sustainable growth.

Trading company
business

Cultivatecustomers
M&A
Increasing
our customer
base

Increased production capacity

KAGA ELECTRONICS added Towada Pioneer Corporation, amanufacturing sites in Japan and overseas. The aim here is to

manufacturing subsidiary of Pioneer Corporation, to the Group

respond flexibly to the trend of transferring production out ofin October 2019. By doing so, we can share resources such

China as part of the China Plus One strategy to avoid investingas high-level production facilities that include outstanding

solely in that country due to prolonged trade friction with the

production-related human resources coupled with automation,

United States, and to respond to the trend of bringing production

tool design technology and a quality assurance framework,back home in the manufacturing industry to avoid exchange rate

as well as inherit manufacturing capabilities that Towada

fluctuations and soaring labor costs. The new Fukushima Factory

Pioneer has developed over many years as a dedicatedfor KAGA MICRO SOLUTION CO., LTD. started production inelectronics maker. This will help us to further raise the level

October 2019, and our second factory in Thailand got underwayof quality and strengthen cost-competitiveness in our EMS

in December 2019 to meet a wide variety of customer needs.

business. In addition, we have positioned this site as our global
mother factory and will promote overall optimization throughReinforcement of engineering capabilities

Q1
Using our advanced capabilities in production technology, we havea convenience store type of EMS that can handle high-mix,
A1 developed
low-volume production in 19 locations worldwide.

KAGA ELECTRONICS is developing the optimum production

Mega-EMS companies overseas, primarily in China, Taiwan

to acquire and utilize unmatched production know-how.

and South Korea, deal with the assembly process for finishedproducts, mainly mass-produced consumer products such as
PCs and smartphones. Since it is difficult to differentiate on atechnical front in the assembly process, they are competing by
expanding production scale through large capital investment

KAGA ELECTRONICS• Small initial investment (land, building
rental, layout standardization)• High-mix, low-volume capability

bolstering productivity and raising business efficiency.
Production equipment developed in-house (HATTEN)

type EMS business, which is perfect for high-mix, low-volume
production. This is being realized through joint ventures with
two local companies established in Suzhou, China in 2018.
We aim to enhance cost-competitiveness and productivity by
utilizing the engineering capabilities of the Group, as well as

Global EMS network

Small Selective
Wave Soldering
MachineOdd-Shaped Electronic
Components Inserting
MachineSmall AutomatedOptical Inspection
MachineSales bases
Production bases

VS

hand, Japanese EMS companies, including KAGA ELECTRONICS,
are differentiated from the competition in terms of their highMajor Japanese EMS competitors

quality and reliability. This stems from exceptional capabilities• Large investment• Mass production type
• Export-style modelof electronic components, which requires advanced precision.

facilities to build a model for the Group’s convenience store

collaboration with our overseas bases, with the aim of further• Local production for local consumption
type modeland enhancing cost-competitiveness as a result. On the otherin production technology that include the circuit board mounting

Strengthening of manufacturing capabilities

KAGA ELECTRONICS is boosting the production capacity of its

Revolution 2

What is the difference between EMS companies around the world and
KAGA ELECTRONICS’ EMS business?

Revolution 3

Thai Factory

KAGA MICRO SOLUTION

KAGA EMS TOWADA

Further, most companies have relatively large production sites
and employ a general merchandise store type model to supply

18

customers. KAGA ELECTRONICS operates its own factories

procurement network we have built up through our tradingin 19 locations worldwide, at which we leverage the global

company business, and we also have capabilities in production

KAGA ELECTRO NICS C O .,LT D .

Integ r ated Repor t 2 0 2 019

Special
Feature2

IN T E R V I E W

Securing and developing human resourcesthat support our growth strategy

The key to strengthening humanresources in order to drive sustainablegrowth and become a corporate group capableof generating ¥1 trillion in sales

Theme 2The importance of fusing OJT to pass on our DNA and systematic,
ongoing training
On the other hand, we do not want to run the risk of relying

with this philosophy, I prompted a fundamental revision of

too heavily on OJT in our human resource development.

the human resource development system around 10 years

There is a degree of variation in what can be learned fromago and moved to a two-pronged framework covering OJTsenior employees, while teaching risk management requires

and rank-based training. In addition, we will continue toan organizational approach and there are limits to taking an

conduct training and run programs befitting the times with anindividualistic approach. Also, given the rapid technologicalemphasis on compliance, resilience and logical thinking.

innovations of recent years, systematic and ongoing learningis critical to keep pace with the latest technology. In line

Theme 3

KAGA ELECTRONICS is implementing its Medium-Term

our founding business, and by leveraging our customer base

Management Plan with the aim of achieving ¥500 billion into generate growth in EMS business. In Special Feature 2, wesales over the next three years. In addition, as a medium- topresent an interview with Ken Ishizaki, General Manager of thelong-term vision for the future, we seek to become a corporate

Personnel Department, concerning the universal approach togroup boasting sales of ¥1 trillion. The key to this lies inhuman resources that support two distinct business models

On top of this, in recent years we have focused on securing

At present, we have around 50 managers among thesecuring and developing human resources that can help toand the human resource recruitment and development

and developing human resources that can support our EMS

personnel playing active roles overseas and utilizing theirpolicies of the EMS business for driving growth.

business, one of the pillars of our growth strategy. Broadly

abundant experience, but this is still not sufficient, especiallyspeaking, we need two kinds of human resources. One is theas we look to expand operations. Accordingly from 2020, we

engineer who is well versed in manufacturing, and the other ishave been soliciting motivated, capable young employees

the manager who is able to supervise a factory overseas as afrom throughout the organization, including the EMS

way to further reinforce our global EMS business.

Business Division, to take a language course and head to a

expand the revenue base of the trading company business,

We will focus on securing and developing engineers and managers foroverseas posts in support of our EMS business.

As for engineers, for many years we have been actively

Theme 1

trialed to build up practical skills. We plan to expand thisThe primary goal of human resource development is to nurture
exceptional talent that can add value for customers.

production technology. Now, with the acquisition of Towada

training to the ASEAN region and beyond and increase thePioneer Corporation (currently KAGA EMS TOWADA CO.,number of participants.

KAGA ELECTRONICS has set the expansion of EMS businessvalue to their operations by resolving issues, one by one.

resources, we decided to make this our domestic motheris still a shortage of personnel working overseas, and this is a

as one of our growth strategies. Although the functions

In trading company business, it is difficult to differentiate

factory where we train engineers from Japan and China to

Companywide issue. In light of this, we will continue to develop

required in this business are distinct from those in the trading

oneself by product alone, so we have sought other ways todisseminate the know-how to our factories abroad.

human resources who can take on active roles overseas.

company business, where things are made in accordance

add value by responding swiftly to customer needs suchLTD.) in 2019 and its exceptional production-oriented humanwith customer specifications, I believe

as delivery dates, cost and a stable supply system. For

Theme 4that the basic philosophy

purchasing, in particular, we have left it to the discretionof the individual. Such a bold approach to sales is very

remains the same. Put

appealing to customers and has been very well received.

We are working continuously to reform our work style and empower
female employees.

simply, we aim to realize

This stance is also embodied in our EMS business in terms

In addition to securing and developing human resources forindustry for electronics trading companies is lagging behindpersonnel who canof the convenience store type of EMS supporting high-mix,

our EMS business, we are tackling the challenge of reforming

other industries on the whole in this regard. Having said that,

respond with sincerity to

low-volume production in regions required by the customer.

our work style and providing greater opportunities for our

KAGA ELECTRONICS aims to lead the industry in terms ofthe needs of customers

To pass on this DNA, we have made six-month on-the-job

female workers to achieve their full potential in the future.

diversity in human resources and empowerment of women,

and propose ways to add

training (OJT) a pillar of our education program.

We are proud to have made significant progress in creating
includes introducing a teleworking system and shortened

Ken Ishizaki
General Manager, Personnel Department

KAGA ELECTRO NICS C O .,LT D .

Despite the various measures we are implementing, there

toward human resources

an environment that embraces work style reform. This

20

Chinese factory to take part in a new training program being

recruiting personnel experienced in quality control andsince we represent Japan as an electronics trading company
doing business with global companies.
We will not see the impact or effect of our personnel-related

work hour system, and embarking on the KAGA Smart Projectmeasures manifest in performance overnight. Rather, thisto entrench hourly paid leave, all of which were instituted

approach is an indispensable strategic investment to drive

prior to the outbreak of COVID-19. As for empowering women,

continuous growth over the medium and long term. While we

we have started a system for transferring from general

will focus on maintaining our competitive advantage using aemployment positions to career-track positions and asmall group with exceptional talent and amazing productivity,

course for female employees aimed at raising awarenesswe aim to establish a work environment that has thethat features outside instructors. In all honesty, however, thecapability to secure and develop the industry’s top people.

Integ r ated Repor t 2 0 2 0

21

Special
Feature3

New Business

Medical devices and QOL
The medical care and welfare sectors are becoming
increasingly overwhelmed as more and more people live to
100 within a super-aging society. In addition to treatment, evengreater emphasis needs to be placed on prevention and carewhile medical and welfare systems strain to keep up. With thisin mind, KAGA ELECTRONICS has invested in Neuroceuticals
Inc., which develops medical devices, obtains regulatory
approval for the products and handles their export and sale.
This enables us to explore needs for equipment capable ofefficient diagnosis and treatment as well as equipment thatcan enhance patients’ quality of life (QOL). As an example, weare planning to release a mobile computed tomography (CT)scanner. Because it is mobile, it can be delivered anywhere in
Japan, making it possible to provide medical services evenin the event of a disaster. Going forward, both companies

Expanding ourbusiness to resolve
social issues
The Kaga Electronics Group develops new businesses thatstart with the idea of resolving a social issue in areas such as
childcare, welfare or nursing care, thereby contributing to theattainment of the United Nations Sustainable Development
Goals (SDGs) while pursuing sustainable corporate growth.

The IoT and urban development

will make mutual use of the extensive customer network
of Neuroceuticals and the global components procurement
network of KAGA ELECTRONICS, and further advancecollaboration in such areas as device manufacture.

Effective utilization of “things”
ProviderAlongside innovation in artificial intelligence (AI), the Internetof Things (IoT) and other forms of digital technology, theworld is becoming increasingly digitalized in an effort tofurther enrich people’s lives. KAGA ELECTRONICS, throughinvestment in Secual, inc., which develops and manufactures
home security products, is promoting smarter homes andtowns based on the introduction of home security and town
security that utilizes IoT devices such as security sensors
and AI cameras. We aim to contribute to more comfortableurban settings by producing sensors and gateways, and byencouraging the use of home security systems.

IT and education
The nurturing of outstanding IT/digital human resources
has become a critical social issue the world over. In Japan,
programming is now a mandatory part of the curriculum inelementary schools, and a key challenge in the corporate
sector is the development of personnel that can lead thenext generation. KAGA ELECTRONICS has invested in Life isTech, Inc., which is engaged in education for next-generation
IT/digital human resources capable of changing the world.
We work together with Life is Tech on nurturing such humanresources, in particular through IT and programming courses
for junior and senior high school students. In addition, theKaga Electronics Group handles IT-related products forschools and other educational institutions, supporting
education for the children of tomorrow in collaboration withLife is Tech.

22

KAGA ELECTRO NICS C O .,LT D .

Toward securer and smarter homes and towns

Homesecurity

Town
security

People’s lives are overflowing with a plethora of different“things,” and a pervasive topic today is how to efficiently andeffectively use the resources the world has to offer. We haveinvested in Peace Tec Lab, Inc., which mainly provides services
based in the sharing economy. The company’s unique model
includes a luggage-free travel service in which people rent themost popular consumer electronics and travel items locally forthe duration of their stay and a subscription-type service forrent in apartment complexes. By supporting this company, we
aim to realize a less wasteful, more sustainable society.

A

Payment
RentalA
Usage fee

B Item for rent

B
B

User

Commission

Usage fee

B

Management(Peace Tec Lab)
Listing styles
A: The individual handles everythingfrom item listing to sending
B: Alice Style service (Peace Tec Lab)
responsible for item listing and sending

Business model
AB: Collect commission as platformer
B: Collect commission as proxy service
providerBiomass power generation and regional contribution
A biomass power plant project is being planned for Fukuoka
Prefecture that uses the ORC turbine system*, and KAGADEVICES CO., LTD., a Group company, is supporting the
procurement of construction materials for this project.
Since the project uses forest wood residue such as thinned
wood, branches, leaves and bark as fuel, it not only helps toregenerate mountain areas that have been devastated but also
prevents problems caused by driftwood. In addition, any waste
heat generated in the process is used to heat water for nearby
farmers and for environmentally controlled hydroponics. Theseand other measures raise expectations of more harmonious
coexistence and mutual prosperity with the local community.
The Kaga Electronics Group is dedicated to using its global
procurement capabilities and contributing to technologicaladvancement, the environment and the community in order torevitalize rural and mountain village areas.

Residual portion of felled tree

BranchRoot (stump)

Lumber, pulp material

Treetop(thinner log)

Residual wood

Usable portion

Residual wood

The root, treetop and branches that werediscarded in the past* ORC (Organic Rankine Cycle) turbine system: Unlike conventional steam turbines that use water,
this technology employs organic media such as silicon oil to generate power. As a result, steam
can be generated at a lower temperature than when using water (approximately 50 degrees
Celsius), making power generation more efficient.

Integ r ated Repor t 2 0 2 0

23

Overview of FY2020/3 Results

Financial Highlights
Net sales (millions of yen)

Operating income (millions of yen)

百万円）

5

Outline of Business Segments

（百万円）

（百万円）

292,779

300000（百万円）

10,014
8,119

7,788
292,779

245,387

Profit attributable to owners of the parent (millions of yen)（円）Electronic components

Earnings per share (yen)292,779
443,615225000

Profit attributable to owners of theparent / Earnings per share■■ 1 株当たり当期純利益■■ 1 株当たり当期純利益
（円）
（円）

6,879

6,975

7,570

85.1%

6,490

249.43

5,437

227,209 235,921

8,014
292.075,852
213.21236.582020/3

192.4315000075000

2016/3 2017/3 2018/3 2019/3 2020/3

2016/3 2017/3 2018/3 2019/3 2020/3

0
17

16

1518

1619（年度）
17

Return on equity (ROE) (%)

Cash flows from operating activities /Free cash flow

（百万円）

（%）

2016/3 2017/3 2018/3 2019/3 2020/3

2015/3 2016/3 2017/3
2015/32018/3
2016/32019/3
2017/3 2018/3 2019/3
19（年度）
2015/318

2016/3 2017/3
2015/32018/3
2016/32019/3
2017/3 2018/3 2019/3

Free cash flow (millions of yen)

22,406
12

9

10.9

10.9

9.0

10.9

10.9

9.5
7.6

6

9,546 10,746 10,077
10,487
5,904
8,283

49.7

52.4

Net sales by segment and composition

37.7

Net sales by region and composition

Electronic parts and semiconductor businessBusiness overview

OthersNorth America

Europe¥2,778 million¥19,781 million¥26,894 million¥20,019 million

4.5%

6.1%

Net sales

4.5%

Net sales

443,615443,615¥¥

million24

Opportunities

Software

Electronic
components

Asia

Japan

¥43,466 million¥377,587 million¥126,115 million¥270,585 million

2020/3

KAGA ELECTRO NICS C O .,LT D .

85.1%

28.4%

2020/3• Increasingly high performance of smartphones with the full
introduction of 5G and the expansion of the data center market• Growth of new business combining the IoT with AI• Progress in the application of electronic components
and AI in cars, as with CASE (Connected, Autonomous,
Shared & Services, Electric)
Risks

millionInformationequipment

9.8%

225,598

450000Business overview and opportunities/risks

54.8

In the electronic parts and semiconductor business, salesof LED products for automotive devices and consumer
3–1,547
electronics were strong while the acquisition of FujitsuElectronics led to the addition of a new revenue base,2015/3
2016/32017/3
2015/3
2018/3
2016/3
2019/32017/3
2018/3
2019/3–8,408
2015/3 2016/3 2017/3
2015/32018/3
2016/32019/3
2017/3 2018/3 2019/3
primarily from the automotive sector. Furthermore, the02016/3 2017/3 2018/3 2019/3 2020/3
2016/3 2017/3 2018/3 2019/3 2020/3
172016/3
15 2017/3
18 16 2018/3
19（年度）
17 2019/3182020/3 19（年度）
termination of a sales contract with U.S.-based Cypress
Semiconductor (announced on October 10, 2019), a major
supplier for Fujitsu Electronics, resulted in one-off revenue.

0.6%

Up

57.6%
7,503
4,761

10000

377,587
225,598
2019/32020/3

2019/32020/37,503
5000

2019/34,761

2020/318,754

35.8

16

67.4%
377,587

The electronic components business saw solid performance in bothcomponents sales and EMS businesses as well as an increase inrevenue with the addition of Fujitsu Electronics to the Group. As a result,net sales increased 67.4% year on year to ¥377,587 million and segment
225000income was up 57.6% to ¥7,503 million.

Cash flows from operating activities (millions of yen)

15

(millions of yen)

Development, manufacture and sale of semiconductors, generalelectronic components and other products, EMS, and other activities
Review of FY2020/3 performance

Equity ratio (%)

Segment income(millions of yen)

Up

Business description

15

Net sales

61.0%

0

0

2019/32020/3

EMS businessBusiness overview
The EMS business maintained solid performancethroughout the year, particularly in the medical devices andautomotive sectors. Operations were suspended in China
and Malaysia from February to March 2020 due to those
governments’ measures to halt the spread of COVID-19, but
the impact was limited.
Opportunities• Increase in the number of fabless companies and risingdemand for outsourcing• Growing needs for further automation and efficiency
Risks• Shortage of management human resources both in Japanand overseas• Suspension of factory operations due to earthquake orother disaster, the spread of infectious diseases, andexternal political and economic factors• Decline in demand and greater restrictions on economic
activity due to the COVID-19 pandemic• Diluted significance of trading company business under aglobal economy• Loss of commercial rights due to changes in commercial
distribution by customers and suppliers

Integ r ated Repor t 2 0 2 025

Overview of FY2020/3 Results

Outline of Business Segments
Information equipment

Software

9.8%

0.6%

2020/3

Net sales

Segment income

Net sales

Segment income(millions of yen)(millions of yen)(millions of yen)(millions of yen)

Down

Business description

Sale of PCs, PC peripherals, home electric appliances, photograph andimaging products, and finished products such as original goods
Review of FY2020/3 performance

PCs and PC peripherals sales

2.0%

44,344

Down

43,466

55000

10.4%

1,906

44,344043,466

1,707

Review of FY2020/3 performance

2019/32020/3

2019/32020/3

1,906

1200

2019/30

Business overview

Business overview
The housing-related home electric appliances sales businessremained weak due to adjustments made to delivery
dates by customers. The commercial facilities-related
LED installment business was impacted by a pause in
replacement demand by major customers.

• Increased demand for PCs and PC peripherals as thenumber of people teleworking grows• Heightened demand in the field of education due toprogress in the Global and Innovation Gateway for All(GIGA) school concept
Risks• Loss of commercial rights and product procurement
routes due to changes in the distribution policy of buyers
and suppliers• Intensifying competition due to lower price and more newentrants

2,876

0OthersKAGA ELECTRO NICS C O .,LT D .

2,778

4.3%

247

236

350

2,876

2,778

247
175

2019/32020/3

2019/32020/3

2019/3236

2020/30

2019/32020/3

4.5%
2020/3

Opportunities• Growth of energy-saving and eco markets• Increased speed of proliferation of IoT-enabled devices
Risks• Contraction of domestic home appliances and housing
equipment markets

Review of FY2020/3 performance

Net sales

Segment income(millions of yen)(millions of yen)

Down

Business description

Repair and supports for electronics equipment, manufacture and salesof amusement equipment, and sales of sports goods, and other activities

0.9%

19,95919,781

25000

In the Others segment, sales of game equipment for the amusement
industry remained strong while sales of golf supplies were sluggish.
As a result, net sales decreased 0.9% year on year to ¥19,781 million
12500
and segment income was down 7.8% to ¥452 million.

0

26

Down

3600

In the software business, orders declined in particular for productionof computer graphics animation due mainly to contracting businessfrom customers. As a result, net sales decreased 3.4% year on year to¥2,778 million and segment income was down 4.3% to ¥236 million. 1800

2020/3

3.4%

Home electric appliances sales

The PC and PC peripherals sales business captured
replacement demand prior to the consumption tax hike anddemand associated with the upgrade to Windows 10, andsales to electronics mass retailers, schools and educational
institutions were also strong.
Opportunities

1,707

2020/3

2019/3

Down

Business description

Production of computer graphics, planning and development of
amusement products, and other activities

2400

In the information equipment business, sales to electronics massretailers were solid on the back of replacement demand prior to theconsumption tax hike while sales in the housing-related sector were
weak. As a result, net sales decreased 2.0% year on year to ¥43,466 27500
million and segment income was down 10.4% to ¥1,707 million.

Business overview and opportunities/risks

2020/3

Down

7.8%

490

452

700

19,95919,781

2019/32020/3

2019/32020/3490
350

2019/30452

2020/3

2019/3Integ r ated Repor t 2 0 2 0

2020/327

ESG Information

Corporate GovernanceDirectors and Auditors As of July 1, 2020

Director

Outside Director

Mitsuhiro Nohara

Susumu Miyoshi

1982 Joined Kaga Electronics Co., Ltd.
1997 General Manager of Domestic

1963 Joined Toyota Motor Co., Ltd.

2003
2004

Directors

2011
2012

Founder & CEO

President & COO

Isao Tsukamoto

Ryoichi Kado

1968 Founded Kaga Electronics

1980 Joined Kaga Electronics(private management)
1968 Established Kaga Electronics
Co., Ltd.
President
2007 Founder & CEO

1991
1995
2002
2005
2012
2014

2015

Co., Ltd.
General Manager ofSales Department, Sales
Headquarters
Director, General Manager of
East Japan Sales Department,
High Tech Business Division
Managing Director
Senior Managing Director, Chiefof Specific Industry Sales
Headquarters
Vice President
President & COO

Sales Department No. 1, Sales
Headquarters
President of Kaga (Shanghai)Electronics Co., Ltd.
President of Kaga Electronics(USA) Inc.
Division Director of Electronics
Sales Division, Components
Business Unit
Executive Officer
Division Director of Electronics
Sales Division, and Division
Director of Special Sales
Department
Director, Division Director of
Electronics Sales Division

2001
2002
2005
2009
2015

(currently Toyota Motor
Corporation)
Executive Vice President andRepresentative Director
President of Osaka Toyopet Co.,
Ltd. (currently Osaka Toyota MotorCo., Ltd.)
Advisor to Toyota Motor Corporation
Chairman of Osaka Toyopet
Co., Ltd.
Executive Advisor to Maxell
Holdings, Ltd.
Director of the Company

Outside Director

Outside Director

Akira Tamura

Noritomo Hashimoto

1970 Joined the Bank of Japan
1978 Deputy Director of the

1977 Joined Mitsubishi Electric Corporation2009 Director, Chairman of the Nomination

1998
2008
2011
2012
2015
2019

International Finance Bureau,
Ministry of FinanceDirector of Information Systems
Department, the Bank of Japan
Representative Director andSenior Executive Officer, Sohgo
Security Services Co., Ltd. (ALSOK)
Advisor to Okigin Economic
Research Institute (present
position)
Advisor to Niigata Sohgo Security
Services Co., Ltd. (ALSOK)(present position)
Director of the Company
Outside Board Director, Solekia
Limited (present position)

2012

2012

2016
2016
2019

Committee, Chairman of theCompensation Committee,
Executive Officer, and in charge ofGeneral Affairs, Human Resources
and Public Relations
Director, Chairman of the Nomination
Committee, Chairman of theCompensation Committee, SeniorVice President, and in charge ofCorporate Strategic Planning andOperations of Associated Companies
Director, Member of the Nomination
Committee, Senior Vice President,
and in charge of Corporate Strategic
Planning and Operations of
Associated Companies
Director
AdvisorDirector of the Company

Auditors
Senior Managing Director

Senior Managing Director

Auditor (Full-time)

Auditor (Full-time)

Shinsuke Takahashi

Shintaro Kakei

Kazunori Kameda

Takahiro Ishii

1980 Joined Kaga Electronics Co., Ltd.
1991 General Manager of Specific1980 Joined ITOMAN Co., Ltd.
1993 Joined Kaga Electronics Co., Ltd.
2000 Division Director of Overseas

1985 Joined The Tokai Bank, Ltd.

1978 Joined The Fuji Bank, Limited

2005

1994 Deputy Manager of Singapore

Industry Sales Department
1995 Director
2002 Managing Director
2005 Senior Managing Director

Business Division, Electronics
Sales Headquarters
2000 Director
2005 Managing Director
2014 Senior Managing Director

2010
2012
2015
2015

Branch

2002 Manager of Senzokucho-Higashi
Branch2015 Joined Kaga Electronics Co., Ltd.
as Advisor

2015 Auditor (Full-time)

Director

Outside Auditor

Outside Auditor

Eiji Kawamura

Motonori Toshinari

Susumu Kitsunai

Yoichi Sato

1979 Joined Kaga Electronics Co., Ltd.
1985 President of Taxan (U.K.) Ltd.
1993 General Manager of Overseas

1982 Joined Kaga Electronics Co., Ltd.
1992 President of Kaga (H.K.)

1997 Joined Tokyo Office of Tohmatsu & Co.

1977 Assistant Judge at Tokyo District

1998
2004

2001

1989 Judge at Tokyo District Court
1996 Judge at Tokyo High Court
2016 Admitted to the bar

2012

2012
2015

KAGA ELECTRO NICS C O .,LT D .

(currently Mizuho Bank, Ltd.)Managing Director

2005

28

(currently MUFG Bank, Ltd.)
Temporarily transferred to
Mitsubishi UFJ Securities Co., Ltd.
(currently Mitsubishi UFJ Morgan
Stanley Securities Co., Ltd.),
Division Manager of Corporate
Sales Support Division
Manager of Tsu Branch Office, The
Bank of Tokyo-Mitsubishi UFJ, Ltd.
(currently MUFG Bank, Ltd.)Manager of Tsu Branch
Joined Kaga Electronics Co., Ltd.
as Advisor
Auditor (Full-time)

Sales Department, Sales
Headquarters No. 2
Executive Officer
General Manager of Accounting
Division and General Manager ofInformation Systems Department
Executive Officer
Chief of Administration
Headquarters and General
Manager of Accounting Division
Director, Chief of Administration
Headquarters and General
Manager of Accounting Division
Managing Director, Chief of
Administration Headquarters

2010
2012
2015

Electronics Limited
President of Taxan USA Corp.
General Manager of Overseas
Sales Division, Overseas Business
Division, Electronics Sales
Headquarters
President of Kaga (H.K.)
Electronics Limited
Executive Officer, Division Directorof EMS Business and President of
Kaga (H.K.) Electronics Limited
Director, Division Director of EMS
Business Division

2002
2004

2018

(currently Deloitte Touche
Tohmatsu LLC)
Registered as Certified Public
Accountant
Opened Kitsunai Certified
Public Accountant Office as
Representative (present position)
Established Asia Alliance Partner
Co., Ltd.
Representative Director (present
position)
Auditor of Kaga Electronics Co., Ltd.

Court

Joined Alpha Partners Law Offices(present position)2018 Auditor of Kaga Electronics Co., Ltd.

Integ r ated Repor t 2 0 2 029

ESG Information

Corporate GovernanceOutside officers

Corporate Governance

The Company has appointed three outside directors andinformation is imparted in advance. This helps support lively

two outside auditors. Based on the Tokyo Stock Exchange

debate at Board of Directors meetings. By the end of each

Basic approach and structure of corporate governancestandards on independence, we appoint outside officers who

fiscal year, the staff office sets the schedule for the regular

do not have any special interests with the Company and that

Board of Directors meetings for the following fiscal year and

KAGA ELECTRONICS recognizes that enhancing corporate

Board meets once a month and holds extraordinary meetings

they have extensive experience and broad powers of judgment

notifies all officers including outside officers, as a means togovernance is a key management issue. The Company

periodically on a flexible basis. The Board makes decisions

in corporate management. The auditors are also required to

improve attendance.

is creating a corporate governance system with theon important matters related to items stipulated by laws andhave highly specialized knowledge and maintainfundamental policies and aims of ensuring total complianceregulations and to management, and supervises the execution

independence from management executives.

with corporate ethics and laws and regulations, reinforcingof duties by directors.

internal control systems, and ensuring the soundness,

Board of Directors meetings(held 16 times)
Attendance
Attendance(times)rate (%)

The Company has established a staff office ofAuditors regularly attend Board of Directors meetings andefficiency and transparency of business operations.

Attendance at Board of Directors and Board of Auditors meetings

the Board of Directors, which distributes materials

participate in other important internal meetings as part ofrelated to matters of deliberation by the Board

KAGA ELECTRONICS is a company with a board of auditors

efforts to monitor and audit the business conditions of theto all officers including outside officers, ahead

and a corporate governance system based on collaborations

Company. KAGA ELECTRONICS has appointed three outsideof the meeting day. The staff office provides

between the Board of Directors, auditors and Board of

directors and four auditors (including two outside auditors) to

supplementary explanations to the outside

Auditors, and the accounting auditor. The Board of Directors

ensure the effectiveness of the corporate governance system.

officers when needed to ensure that adequate

Board of Auditors meetings(held 17 times)
Attendance
Attendance(times)rate (%)

Outside Director Susumu Miyoshi

16

100.0

—

—

Outside Director Akira Tamura

16

100.0

—

—

Outside Director Noritomo Hashimoto

12

100.0

—

—

Outside Auditor

Susumu Kitsunai

16

100.0

17

100.0

Outside Auditor

Yoichi Sato

16

100.0

17

100.0

Note: The attendance rate of Outside Director Noritomo Hashimoto is calculated based on Board of Directors
meetings following his appointment as a director.

comprises 10 directors and four auditors. In principle, theRemuneration system for officers

General Meeting of Shareholders

Board of Auditors

External audit
by audit company

Board of Directors

The Company’s basic policy is to structure its remuneration

roles. Remuneration of non-executive directors, including

system so as to promote its sustainable growth and enhanceoutside directors, and auditors consists solely of fixed

medium- to long-term corporate value. In terms of structure,

remuneration, which is paid at a fixed amount.

directors’ remuneration comprises fixed remuneration,

Founder & CEO

which is paid at a fixed amount, and performance-linked

Allowance(millions of yen)

Number of recipients

Directors(of which, outside directors)

558 (28)

11 (3)

Auditors(of which, outside auditors)

46 (10)4 (2)remuneration (bonus and long-term incentive in the form of

President & COO

restricted stock compensation), which is paid based on thebusiness results of the relevant fiscal year. Performance-

CSR Promotion Committee*

Remuneration of officers for the year ended March 31, 2020

Management Meeting

linked remuneration reflects annual performance evaluations
based on evaluations according to the directors’ respective

Note: The figures above include those for one director who retired at the closing of the 51stGeneral Meeting of Shareholders held on June 27, 2019.

Directors Responsible for Operations, Internal Management
Audit OfficeBusiness Administration
Department

Business Guidance
Project

Corporate GovernanceInternal Control / Compliance* The Company has established the following committees under the CSR Promotion Committee.
1. Compliance Committee 2. Risk Management Committee 3. Information Disclosure Committee 4. Personal Information Management Committee

Audit Office

The Company has established a CSR Promotion Committee

The Company has established an Audit Office to handle

The Kaga Electronics Group has established a fundamentalof Directors Rules to ensure the proper execution of duties bychaired by the President & COO, which promotes corporate

internal audits in conjunction with the auditors. The Audit

policy for the creation of internal control systems in orderdirectors and the Board of Directors. The directors monitor thesocial responsibility (CSR) alongside efforts to enhance

Office discusses audit plans with the auditors in advance andto ensure compliance with corporate ethics and laws

execution of duties of one another at regular and extraordinary

corporate value. The Compliance Committee, Risk Management

regularly reports audit findings to the auditors. The Office

and regulations as well as the soundness, efficiency andmeetings of the Board of Directors. The Company has also

Committee, Information Disclosure Committee and Personalalso cooperates with the auditors as required, such as whentransparency of management. Based on this policy, theestablished Organization Rules, Rules on the Allocation of Work

Information Management Committee have been establishedrequested for reports.

Company is working to establish internal control systems andDuties, Rules on Work Authority and Rules on Internal Approval

make sure that they are continually improved.

to clarify the scope of authority of each director. As a company

under the CSR Promotion Committee. Each of these committees
actively implements activities in their respective domains.

30

Basic approach to internal control systems

CSR Promotion Committee

KAGA ELECTRO NICS C O .,LT D .

The Company has established Rules on Officers and Board

adopting a system of corporate auditors, each auditor, including

Integ r ated Repor t 2 0 2 031

ESG Informationeach outside auditor, conducts detailed audits on the executionof duties by directors.
In addition, the Company has formulated the Basic

The Company has also established the CSR Promotion
Committee chaired by the President & COO and set up theCompliance Rules, which serve as a code of conduct to ensure

Information Disclosure Committee and Personal Information

compliance with laws and regulations and the Articles ofManagement Committee under its umbrella. Through these

Incorporation as a means to enable proper execution of duties

initiatives, the Company strives to ensure appropriateby employees of the Company and Group companies.

execution of business throughout the Group.

Risk management system
Potential risks that the Group faces include a wide range

systems to manage risk. In the event that risk materializes,of factors relating to economic conditions, exchange rates,

the division responsible for dealing with said risk willcountry risks, price competition, product procurement

immediately adopt the necessary, appropriate response

capabilities, internal brand risks, legal regulation, market

to minimize damage under the direction of the risk control

risks, major litigation, severance pay obligations, personal

officers and managers.

information, M&A, the spread of infectious diseases,
accidents, the environment, and information management.
Divisions have been set up and risk control officers andmanagers appointed to each to deal with each risk in the

In addition, with the establishment of the Risk Management
Committee under the CSR Promotion Committee, theCompany has established a system to respond promptly andappropriately to risks foreseen by the Group.

Group as part of efforts to create the necessary, appropriate

Ensuring appropriate operations of Group companies
The Company has established the Rules on Management

regarding the appropriateness of overall business activitiesof Affiliated Companies to ensure appropriate businessthroughout the Group as well as ensure compliance with

operations at Group companies and executes controls

laws and regulations and the Articles of Incorporation. The

based on these rules. In addition, it is an obligation that any

Office also provides guidance to make improvements incoordination between Group companies as well as importantbusiness activities.

matters are first discussed by the Company’s Management

Further, Group companies submit the minutes from all

Meeting and Board of Directors before decisions are made.

Board of Directors meetings to the Company and make

The Company’s Audit Office works in collaboration withmonthly reports on business activities, status of budget

the Business Administration Department, which is theimplementation, and important matters relating to ensuring

Company’s legal affairs division, to conduct audits primarily

the appropriateness of business activities.

Efforts toward the elimination of antisocial forces
The basic approach of the Kaga Electronics Group is not

CSR Promotion Committee collaborate and cooperate withto maintain any relationships whatsoever with antisocial

crisis management advisors and company attorneys toforces that threaten social order and safety and to

make the required organizational response. The Company

maintain a resolute attitude regarding the refusal of all

also holds regular discussions with the company attorneys,

improper demands from antisocial forces as set forth in its

meets with police departments and other external specialized

Fundamental Compliance Rules and Employment Rules.

organizations, and participates in training and other activities

In cases where the Company receives improper demands

Message from Outside Director

Compliance Committee, Risk Management Committee,

in an effort to gather information.

A new management perspective
accompanying expansionof EMS business andsustainable growth
Noritomo Hashimoto
Outside Director

More than 50 years have passed since KAGAELECTRONICS was founded in 1968, and over the years
the Company has grown into a corporate group withconsolidated net sales of more than ¥440.0 billion. From
this base, KAGA ELECTRONICS is now embarking on amajor challenge in EMS business. EMS, or electronics
manufacturing service, refers primarily to the businessof providing production or repair services (as after-sales
service) under contract from fabless companies that tend
to concentrate management resources into the design,development, promotion and sale of products. Sales
from the entire EMS business, which consists of the EMS
Business Division and EMS-related overseas affiliates,
have grown to more than ¥90.0 billion. This exemplifies
the Company’s corporate philosophy of “Everything we
do is for our customers,” and this particular business has
the potential to be a central pillar of KAGA ELECTRONICS’
growth going forward.
Having said that, EMS is effectively “manufacturing.”
This means being in possession of factory functions
that do not generally exist at trading companies. So
continuing to expand in the field requires a management
perspective that departs from convention.
I worked at Mitsubishi Electric Corporation after
graduating from university, and therefore have extensive
experience in business management, primarily inbusiness planning as well as personnel and labor affairs,from the manufacturer side, which includes providing
support for affiliates under the company’s umbrella.
I recognize that in addition to my core role as outside
director, I am expected to utilize my experience working
for a manufacturer to enhance the management of EMS
business and make sure that it is running soundly.

Part of my role will be to ensure that maintenance of andcompliance with the standards for agenda items brought
to Board of Directors are achieved. Besides enabling an
atmosphere conducive to frank and open debate during
meetings, I will make sure that no restrictions are placedon our actions in our capacity as outside directors in order
to augment the soundness of operation.
There is one point I would like to touch on, however. A
commonly held belief inside and outside the Company isthat on the whole KAGA ELECTRONICS has got to where
it is today on the back of the exceptional business sense
and ability to build personal connections of Founder and
CEO Isao Tsukamoto, rather than any individual business.
As such, it is of vital importance that the Company
holds discussions on its ideal organizational structure,including the governance system, when contemplating
an effective succession plan. This is in some ways morecritical than talks concerning who is to take over. I am
conscious of the fact that this is the most important issue
we as outside directors need to address.

Career Summary
1977 Joined Mitsubishi Electric Corporation2009 Director, Chairman of the Nomination Committee, Chairmanof the Compensation Committee, Executive Officer, and in
charge of General Affairs, Human Resources and Public
Relations2012 Director, Chairman of the Nomination Committee, Chairmanof the Compensation Committee, Senior Vice President, andin charge of Corporate Strategic Planning and Operations of
Associated Companies
2012 Director, Member of the Nomination Committee, Senior Vice
President, and in charge of Corporate Strategic Planning andOperations of Associated Companies
2016 Director
2016 Advisor
2019 Director of the Company (present position)from antisocial forces, the General Affairs Department and

32

KAGA ELECTRO NICS C O .,LT D .

Integ r ated Repor t 2 0 2 033

ESG Information

Social ReportSocial Report

Together with Our Customers

Together with Our Employees

The Kaga Electronics Group proposes and provides value-added products and services that swiftly meet changes inthe times based on its corporate philosophy of “Everything we do is for our customers.” By doing so, we support thetechnological innovation and production streamlining of our customers worldwide.

The most important management resource for a trading company is undoubtedly its human resources. To drive
sustainable growth, we promote the development of human resources and the creation of an environment that enables
the execution of our action guideline FYT (pronounced “fight”). This guideline expresses our commitment to always be
Flexible and to think and act Young when Trying to take on challenges.

To deliver high-quality products and services

Quality control system
The Kaga Electronics Group established the Production Centerin its EMS Business Division, thus enabling a system of quality
control that centers on KAGA (SHENZHEN) ELECTRONICS

Implementing the idea that “everyone is a corporate manager”

Human resource strategy/Diversity management
quality and customer service.
In addition, regular exchange meetings are held to reinforce
quality on a Groupwide basis.

As our business activities become more global and themarket environment undergoes abrupt change, diversity and（名）
taking on challenges are keys to driving sustainable growth.

CO., LTD., its flagship base for production activities. At theThis is because diversity enables us to look at risk as anCenter, we manage the entire Group’s resources as cross-opportunity, and when we take on challenges we can take fullfunctional capabilities in such areas as production technology

advantage of these opportunities. To make this a reality, theand quality control, and promote the optimal distribution

Kaga Electronics Group promotes diversity management inof resources and the strengthening of technologicalterms of making effective use of diversity in human resourcescompetencies on a global basis.

and in work style. At the same time, we respect our human

The Center also liaises with production sites in China as

Number of employees / Ratio of female employees(Consolidated)
Number of employees (persons)Ratio of female employees (%)

6,627
5,238

5,216

5,427

26.9

26.6

26.3

2016/32017/3

2018/3

（%）

6,731

29.9

32.6

resources who continue to take on challenges and see eachwell as countries in the ASEAN region, Europe and North

person as a corporate manager. With this in mind, we will

America to advance the standardization of production

keep protecting our corporate culture of tolerating failure as a

facilities and operations, and the sharing of information,consequence of tackling challenges.

2019/32020/3for example to prevent the recurrence of issues. Throughstandardization, the aim is to ensure identical standards,

To create a safe work environment

An information exchange session on quality at a production site

Pursuing our philosophy of “Everything we do is for our customers”

Education and welfare program

Average length of service / Job turnover rate

At the Kaga Electronics Group, we support the career

Efforts to enhance quality

（年）

12.4

recruits, annual training, rank-based training and othertechnological resources of the entire Group, from planningforms of education, as well as by providing assistance withand development to design, manufacturing and quality

correspondence courses. In addition, we grant refreshment

assurance, and works to optimize these resources,

leave every year to all employees, which is separate fromstrengthen technological capabilities and expand businessnormal paid leave. We have also established an accumulated

across the organization. The Quality Assurance Department,

leave system for the three major diseases (cancer, cerebral

one of the bodies of the Engineering Department, seeks tostroke and myocardial infarction) as compensation forenhance development quality and manages safety standards

hospitalization after contracting a serious disease and forthroughout the Group. This department works with othermissing work when recuperating, as well as an hourly paid

depending on the circumstances in order to resolve issues.

A production factory overseas（時間）that include resorts in Japan and abroad, a contract golfcourse, a company getaway house and a cruisers boat, withutilization rates at a high level. Through such initiatives as

Status of ISO 9001 certification
KAGA ELECTRONICS and the following Group companies have attained ISO
9000 series certification, an international standard for quality management.
The Company is striving to further enhance customer satisfaction throughcontinuous improvement of its quality management system.

Japan

K
 AGA ELECTRONICS CO., LTD., KAGA DEVICES CO., LTD., KAGAMICRO SOLUTION CO., LTD., KAGA TECHNOSERVICE CO., LTD.

these, we aim to strike a good work-life balance for a safer

14.7

14.7

（%）

13.1

5.8

5.1
2.8

2016/3leave system. Further, we have established welfare facilities

Job turnover rate (%)

14.9

development of employees through training to new

The Company’s Engineering Department controls thedepartments responsible for quality within the Group

Average length of service (years)

2017/3

5.1

3.4
2018/3

2019/32020/3

Annual prescribed working hours / Monthly average
overtime work per employee
Annual prescribed working hours (hours)
Monthly average overtime work per employee (hours)

1,807.5

1,815.0

1,822.5

9.3

9.2

9.7

2016/32017/3

2018/3（時間）

1,822.5 1,800.0
11.9
11.3

work environment for employees.

Overseas K
 AGA TAXAN (SUZHOU) ELECTRONICS CO., LTD., KAGA(SHENZHEN) ELECTRONICS CO., LTD., KAGA ELECTRONICS(THAILAND) COMPANY LIMITED34

KAGA ELECTRO NICS C O .,LT D .

2019/32020/3Integ r ated Repor t 2 0 2 035

ESG Information

Social Report

Contributing to the local community

Together with the Community
Cognizant of the importance of the social responsibility that ought to be addressed as a company, the Kaga Electronics
Group contributes to sports promotion and to the local community through our business sites worldwide, and actively
undertakes activities that help drive the advancement of education, art and culture.

Social contribution activities in Kanazawa,
where it all began
Kanazawa City in Ishikawa Prefecture is the place that theFounder and CEO of KAGA ELECTRONICS Isao Tsukamoto wasborn and raised. With this as the background, the Company
signed an agreement with Kanazawa City related to theSports promotion

promotion of regional revitalization and has been donating

Sponsorship of golf tournaments

to a project aimed at driving revitalization of the local area

The Kaga Electronics Group contributes to the promotion ofthrough the Tokyo 2020 Olympic and Paralympic Games.

golf, primarily through the sponsorship of golf tournaments.

We are also taking steps to contribute to the community

This includes special sponsorship of The Ladies Professional

through such means as supporting the Kanazawa Marathon,

Golfers’ Association of Japan (JLPGA)’s “JLPGA ROOKIES

which is open to the public, ever since its first event, andCHAMPIONSHIP KAGA ELECTRONICS CUP” since 1996. Many

employee participation in volunteer activities at a water station.

of this tournament’s winners have gone on to do well on the

Supporting the Kanazawa Marathon
Note: The 2020 marathon was canceled due to COVID-19.

JLPGA tour, proving that it is a great gateway to success foryoung female professional golfers.

Social contribution activities at sites in Japanand overseas
The Kaga Electronics Group, which conducts business activities
JLPGA ROOKIES CHAMPIONSHIP KAGA ELECTRONICS CUP 2018

around the world, takes on a variety of social contribution
activities at its sites in Japan and overseas as well.
To give some examples, at our production subsidiary inContributing to the development of golf

Mexico, employees donate daily necessities they have gathered

Four professional golfers, both male and female, are on theand proceeds from in-house sales to a local nursing home forbooks at KAGA ELECTRONICS. Contracted athletes take partthe elderly. Also, a production subsidiary in Japan undertakes

in tournaments around the world wearing clothing and caps

community-based programs in each region that include

adorned with the Kaga Electronics logo, which plays a part inregular cleanups around tourist areas and its factories.

Cleaning up around Oirase Stream (KAGA EMS TOWADA)

our PR strategy.
The Group company KAGA SPORTS CO., LTD. takes amultifaceted approach to business that includes the direct
sale of golf supplies at its own stores and selling wholesale toretailers, the running of golf driving ranges and golf schools,
and the introduction of body conditioning services such as

Education and welfare support activities
Eric Sugimoto

Sayaka Tsuchida

Hiroko Azuma

Professional golfers sponsored by KAGA ELECTRONICS

Fumika Kawagishi

At KAGA ELECTRONICS, the Founder & CEO Isao Tsukamoto
gives lectures to students as a specially appointed professor

yoga, which contributes to the development of the sports

for Faculty of Service Innovation, Chiba University ofindustry through golf.

Commerce (conducted remotely in 2020). In addition, ourHead Office accepts students for on-the-job training aspart of a Japanese training program run by an overseas
university affiliated with Chiba University of Commerce. We
also contribute to society in a wide range of fields related
to education and welfare support that includes cooperatingwith Japan Cancer Society and offering assistance to cancer
patients and their families.

One of the Company’s golf schools

36

KAGA ELECTRO NICS C O .,LT D .

One of our golf driving ranges

A lecture for foreign students at KAGA ELECTRONICS Head Office

Akiba Golf Studio

Integ r ated Repor t 2 0 2 037

ESG Information

Initiatives to reduce environmental burden

Environmental Report

Together with the Earth

Reduction of CO2 emissions

The Kaga Electronics Group views the 21st century as the century for protection of the global environment and with thisin mind conducts business activities based on an awareness of energy and resource conservation that include reducing
CO2 and other greenhouse gases and verifying the environmental load of the products and services it handles.

The KAGA ELECTRONICS Head Office building employs an
air supply type double-skin* curtain wall on the exterior,allowing air to flow into the office, thus reducing heat load andproviding natural ventilation. The energy efficient design also

Environmental policy
preserve and enhance the natural environment in order to protect our irreplaceable earth.

eco energy and the installation of LED lighting throughout. These(4) We shall set targets for the following requirements tothe extent possible for the products and services that theKaga Electronics Group handles and regularly review the
progress of our activities.
• Must be able to cut waste through reuse and recycling

PC product reuse and recycling business(2) In executing our business activities, we shall strictly
adhere to environmental laws, regulations andrelated requirements as well as comply with all otherrequirements agreed upon by the Kaga Electronics Group.

• Must be designed with energy and resource conservation in mind
using the latest electronics technology

The Kaga Electronics Group company KAGA MICRO SOLUTION(3) We shall strive to prevent pollution and enhance theenvironment through non-wasteful office and businessactivities based on a philosophy of conserving energy
and resources.

(6) Our Environmental Policy shall be disseminated widely
throughout society through such means as the Kaga
Electronics Group website and corporate profile.

706,423

335,618

technologies serve to save energy and reduce CO2 emissions.

(1) The Kaga Electronics Group shall establish anenvironmental management system that involves all
employees and promote ongoing improvement of thissystem to preserve the global environment and prevent
pollution in all of our business activities to provide
products and services.

* Double-skin technology refers to a method of construction in which part or all of abuilding exterior is covered in glass.

CO2 emissions (kg CO2)

887,877

In addition, the building features a variety of environmental
technologies, with the use of solar panels on the roof enabling(5) We shall provide education to all employees to increase theirawareness of the need for environmental protection and toensure their understanding of our Environmental Policy.

Power consumption (kWh)enhances sound insulation.

The Kaga Electronics Group looks to the future of electronics at all times, striving to meet customer needs as well as• Must be comprised of environmentally friendly substances

Power consumption and CO2 emissions at Head Officebuilding

2016/3764,780

267,0282017/3

744,417

289,087

2018/3677,957

281,3882019/3

256,267

2020/3

CO., LTD. has flexibly changed and expanded businessdomain to meet a wide range of customer demands, from thedevelopment, production and sale of electronic products totheir repair, maintenance, reuse and recycling.
The company leverages know-how in the production ofelectronic equipment and an extensive procurement routefor electronic parts and materials — both of which wereaccumulated in EMS business, a strength of the Group — tofocus on a reuse and recycling business for PC products in

Environmental management system

recent years.

The Kaga Electronics Group established an environmental

and its Group companies. In addition, we have attained

management system based on its Environmental Policy.

ISO 14001 certification, an international standard forand in the fiscal year ended March 31, 2020 the level

With the system, environmental officers, ISO Secretariat,

environmental management systems, at the Company and 20

remained high due in part to replacement demand for PCs

Environmental Manager Meeting and internal environmentalsites at four Group companies in Japan. We are strengthening

equipped with Windows 10.

auditors team up under the guidance of the president toour system through a PDCA cycle.

The number of reused units has been steadily increasing,
Repair work at KAGA MICRO SOLUTION

Number of PC products reused (thousands)

In addition to “reduce programs” that look especially at cutting

102.0

CO2 and rubbish, the Group will contribute to a reduction in

conduct environmental management at KAGA ELECTRONICS

109.0

environmental burden from a reuse and recycling perspective
Environmental management system

56.6

Founder & CEO
President (COO)

ISO Secretariat

Environmental
officers
Environmental Manager
Meeting
Internal environmental
auditors

38

KAGA ELECTRO NICS C O .,LT D .

76.0

and to the realization of a recycling-oriented society.

65.8• KAGA DEVICES CO., LTD. • KAGA TECH CO., LTD. • AD DEVICE CO., LTD.
• Kaga Solution Network Co., Ltd. (SOLNET Company)• EMS Business Division • Engineering Department• Specific Industry Sales Division • Electronics Sales Division• Communication Network Sales Division • Sales Promotion Division
Administration Headquarters• Business Administration Department • Information Systems Department• Personnel Department • Finance & Accounting Department• General Affairs Department • Corporate Planning Department• Audit Office • Investor Relations & Public Relations Office• Secretarial Office

2016/32017/3

2018/3

2019/32020/3

Note: Fujitsu Electronics, KAGA EMS TOWADA and EXCEL have each acquired ISO 14000 certification
for their respective environmental management systems.

Integ r ated Repor t 2 0 2 039

Financial and Corporate Information

10-Year Financial Summary
Kaga Electronics Co., Ltd. and Consolidated Subsidiaries
For the years ended March 31

2011/3

2012/3

2013/3

2014/3

2015/3

2016/32017/3

2019/3

2018/32020/3Fiscal year
Net sales (millions of yen)

237,811229,856

216,405

257,852

255,143

245,387

227,209

235,921292,779

443,615Gross profit (millions of yen)

30,51228,506

27,46232,522

32,73833,64831,22532,49835,54647,016

Operating income (millions of yen)

3,423

2,067

1,260

5,106

6,362

7,788

6,879

8,119

7,570

10,014

Ordinary income (millions of yen)

3,598

2,569

1,931

5,847

7,664

7,908

7,343

8,740

7,859

10,137

Profit attributable to owners of the parent (millions of yen)

1,768

914

444

3,877

4,416

5,437

6,975

6,490

8,014

5,852

Cash flows from operating activities (millions of yen)

6,321

958

7,041

3,334

9,127

9,546

10,746

10,077–1,54722,406

Cash flows from investing activities (millions of yen)

–6,369–2,645–4,910–3,339

–1,465–1,263–258–4,173–6,860–3,651–47–1,686

2,131

–5

7,661

8,283

10,487

5,904–8,40818,754

Free cash flow (millions of yen)

478

–242

–403

1,024

–4,431–3,067–6,118–2,811

11,684–7,544

Depreciation (millions of yen)

2,242

2,181

2,303

2,418

1,907

1,604

1,452

1,481

1,740

2,754

Capital expenditures/Investment and loans (millions of yen)

6,536

2,999

3,398

4,087

2,649

2,166

1,464

4,520

6,426

5,811

Total assets (millions of yen)

114,599

114,714

111,888

126,028

127,948

124,281

125,751

128,755

213,761

207,638

Net assets (millions of yen)

48,51247,93648,80652,82559,60361,80865,932

70,631

84,25986,250Equity (millions of yen)

46,84846,41048,65652,78659,564

61,76465,87270,55676,60478,284

Interest bearing debts (millions of yen)

13,45014,34915,08917,244

14,573

12,739

9,805

8,900

32,851

28,736

Cash and deposits (millions of yen)

11,926

9,775

12,25814,192

18,13022,516

26,42330,80335,00343,384Inventories (millions of yen)

19,51921,554

18,77921,21922,703

19,17519,325

19,45540,02631,908EPS (yen)

64.07

33.13

16.09

137.22

156.28192.43249.43236.58292.07213.21

Annual dividend (yen)

30.00

30.00

30.00

35.00

40.00

55.00

60.00

70.00

80.00

70.00

Payout ratio (%)

46.8

90.5

186.5

25.5

25.6

28.6

24.1

29.6

27.4

32.8

1,697.55

1,681.73

1,721.86

1,868.07

2,108.04

2,185.94

2,401.00

2,571.79

2,790.97

2,850.99

12.8

12.4

12.7

12.6

12.8

13.7

13.7

13.8

12.1

10.6

Operating income margin (%) *

1.4

0.9

0.6

2.0

2.5

3.2

3.0

3.4

2.6

2.3

Ordinary income margin (%) *

1.5

1.1

0.9

2.3

3.0

3.2

3.2

3.7

2.7

2.3

Profit attributable to owners of the parent margin (%)

0.7

0.4

0.2

1.5

1.7

2.2

3.1

2.8

2.7

1.3

ROE (%) *

3.8

2.0

0.9

7.6

7.8

9.0

10.9

9.5

10.9

7.6

ROIC (%)

3.1

1.1

0.2

5.0

5.2

7.5

8.1

7.2

5.8

6.3

ROA (%) *5

1.5

0.8

0.4

3.3

3.5

4.3

5.6

5.1

4.7

2.8

Equity ratio (%)

40.9

40.5

43.5

41.9

46.6

49.7

52.4

54.8

35.8

37.7

Debt equity ratio (times) *6

0.29

0.31

0.31

0.33

0.24

0.21

0.15

0.13

0.43

0.37

46.4

52.6

51.4

49.7

49.8

45.9

44.7

40.0

47.1

34.4

Receivables turnover period (days) *

82.9

88.9

92.1

85.9

83.2

81.5

83.6

77.1

77.0

75.2

9

Inventory turnover period (days) *

30.0

34.2

31.7

30.0

32.5

28.5

31.0

30.1

35.1

26.3

10

Payables turnover period (days) *

66.4

70.5

72.4

66.2

65.9

64.2

69.9

67.3

65.0

67.0

Cash flows from financing activities (millions of yen)

Fiscal year end

Per share data

BPS (yen)

Major indicators
Gross profit margin (%) *1
2

3

4

CCC (days) *

7
8

*1.
*2.
*3.
*4.
*5.

40

Gross profit margin=Gross profit/Net sales × 100 (%)
Operating income margin=Operating income/Net sales × 100 (%)
Ordinary income margin=Ordinary income/Net sales × 100 (%)
ROE=Profit attributable to owners of the parent/Average equity × 100 (%)
ROA=Profit attributable to owners of the parent/Average total assets × 100 (%)

KAGA ELECTRO NICS C O .,LT D .

*6. Debt equity ratio=Interest bearing debts/Equity (times)*7. Cash conversion cycle (CCC)=Receivables turnover period (days) + Inventory turnover period (days) – Payables turnover period (days)*8. Receivables turnover period (days)=Notes and accounts receivable-trade/Net sales x 365 (days)*9. Inventory turnover period (days)=Inventories/Net Sales x 365 (days)*10. Payables turnover period (days)=Notes and accounts payable-trade/Total purchase of goods × 365 (days)

Integ r ated Repor t 2 0 2 041

Financial and Corporate Information

Analysis of Financial Condition and Results of Operations
Fiscal year ended March 31, 2020

Analysis of financial condition

Extraordinary income and loss

Profit attributable to owners of the parent

Extraordinary income of ¥709 million was recorded reflecting

As a result, profit before income taxes decreased by ¥362 million

notably ¥135 million in Gain on sales of investment securities.

from the previous fiscal year to ¥9,286 million. After deducting

Total assets as of March 31, 2020 decreased by ¥6,122 million

Total liabilities

Extraordinary loss of ¥1,560 million was recorded, including

income taxes — current, income taxes — deferred and profit

from the previous fiscal year-end to ¥207,638 million. Main

Liabilities decreased by ¥8,113 million from March 31, 2019, to¥880 million in loss on valuation of investment securities.

attributable to non-controlling interests, profit attributable toitems are as follows.

¥121,388 million. This is primarily attributed to a ¥5,165 million

owners of the parent decreased by ¥2,161 million from thereduction in borrowings as a result of factors including theprevious fiscal year to ¥5,852 million.

Current assets

Earnings per share decreased by ¥78.86 from the previous

repayment of borrowings.

fiscal year to ¥213.21.

Current assets decreased by ¥8,064 million to ¥174,331 million.
This is primarily due to a decrease of ¥10,649 million in

Total net assets

notes and accounts receivable – trade, and a decrease of

Net assets increased by ¥1,990 million from March 31, 2019,¥8,457 million in merchandise and finished goods, althoughto ¥86,250 million. This was primarily due to a ¥3,793 million

cash and deposits increased by ¥8,381 million.

increase in retained earnings due to ¥5,852 million in profit
attributable to owners of parent, as well as a ¥1,234 million

Analysis of capital resources and cash liquidity

Non-current assets

decrease in the currency translation adjustment accountCash flows

Funding requirements

Non-current assets increased by ¥1,942 million to ¥33,306 million.

resulting from currency fluctuations.

Cash and cash equivalents as of March 31, 2020 increased

The main elements of working capital requirements areThis was primarily because the adoption of IFRS 16 and the10,461 million yen from March 31, 2019 to 42,693 million yen.

operating expenses such as purchases of raw materials

construction of a new factory in Fukushima and a second

The status and factors thereof for each cash flow category inand components, manufacturing costs, and selling, generalfactory in Thailand, among other factors, increased property,

the fiscal year ended March 31, 2020 are as follows.

and administrative expenses. Funding requirements forinvestment purposes are largely in connection with capital

plant and equipment by ¥2,963 million and investment
Cash flow from operating activities

securities decreased by ¥1,583 million.

Net cash and cash equivalents provided by operating

expenditures and costs of M&As for acquisitions of new
businesses and commercial rights.

activities totaled ¥22,406 million. This was due mainly to theAnalysis of business performancerecording of ¥9,286 million in profit before income taxes andFinancial policy

a decrease of ¥16,745 million in trade notes and accounts

With respect to procurement of short-term working capital,

receivable and inventories.

the basic stance is to work on achieving optimal capital

During the fiscal year ended March 31, 2020, in line with

¥10,014 million and ordinary income increased by 29.0%

our corporate philosophy of “everything we do is for ouryear on year to ¥10,137 million. Operating income reached its

customers,” the Group moved aggressively to reinforce its

highest level in 15 fiscal years, exceeding the previous high of

production capacity in Japan and overseas in response to¥8,474 million in the fiscal year ended March 31, 2005, while

Net cash and cash equivalents used in investing activities

funds for M&As, capital expenditures and long-term working

customer requests. We set this, together with “strengthening

ordinary income recorded a new high for the first time in two

totaled ¥3,651 million. The decrease was mainly due to cash

capital, the basic stance is to conduct optimal procurement

manufacturing skills” and “improving engineering skills,”

fiscal years, surpassing the previous high of ¥8,740 million

outflow of ¥3,276 million for purchases of property, plantfrom among the various methods available extending fromas Group’s three priority issues in order to strengthen therecorded in the fiscal year ended March 31, 2018.

and equipment.

direct to indirect financing, with due consideration given to

efficiency within the Group before resorting to borrowings
Cash flow from investing activities

from financial institutions. With respect to procurement offinancial condition at the time of procurement as well as tocompetitiveness of the EMS business.
Cash flow from financing activities

Specifically, in October 2019, a manufacturing subsidiary

Cost of sales, selling, general and administrative expenses

of Pioneer Corporation became a subsidiary of the Group and

Cost of sales increased by ¥139,365 million year on year to

Net cash and cash equivalents used in financing activities

KAGA EMS TOWADA CO., LTD. was established. In the same

¥396,598 million. Ratio of cost of sales to net sales was 89.4%.

totaled ¥7,544 million. This was due mainly to the recording

month, the new factory was completed in Sukagawa City in

Selling, general and administrative expenses increased byof ¥5,085 million in repayment of loans and ¥2,056 million in

Fukushima Prefecture, and in December operations began¥9,025 million year on year to ¥37,001 million. The main

cash dividends paid.

at a second factory in Amata Nakorn, Thailand. A marketing

reason for the increase in cost of sales and in selling, generaldivision dedicated to EMS was set up from April in Fujitsu

and administrative expenses was the full-year contribution ofElectronics Inc. , which became a Group company in January

Fujitsu Electronics following its consolidation.

term and purpose of funding requirement.

2019, and the entire Group worked together to expand the
EMS business.

Non-operating income and expenses

As a result, Net sales increased by 51.5% year on year to

Non-operating income of ¥122 million (net) was recorded,¥443,615 million. Net sales in Japan increased by 50.1% year

a decrease of ¥167 million from the previous fiscal year.

on year to ¥270,585 million, and overseas net sales increased

The decrease was mainly due to increase in loss from equity

by 53.8% to ¥173,029 million.

method investments.

Operating income increased by 32.3% year on year to42

KAGA ELECTRO NICS C O .,LT D .

Integ r ated Repor t 2 0 2 043

Financial and Corporate Information

Consolidated Balance Sheet
Kaga Electronics Co., Ltd. and Consolidated Subsidiaries
At March 31, 2020

Millions of Yen
2019
2020

Thousands of
U.S. Dollars(Note)
2020

35,00396,1455,361
261
33,734
489
5,802
5,894
(296)
182,396¥ 43,384
85,4955,876
254
25,276
567
6,063
7,601
(188)
174,331$ 398,649
785,587
53,9942,334
232,261
5,217
55,713
69,845(1,730)1,601,873

NONCURRENT ASSETS:PROPERTY, PLANT AND EQUIPMENT
Buildings and structures
Accumulated depreciation
Buildings and structures, net

9,436(4,526)
4,910

13,899(6,533)7,365

127,716(60,033)
67,682

Machinery, equipment and vehicles
Accumulated depreciation
Machinery, equipment and vehicles, net

8,266(4,760)3,506

10,163(5,685)
4,477

93,392(52,245)
41,146

Tools, furniture and fixtures
Accumulated depreciation
Tools, furniture and fixtures, net

5,119(4,015)
1,104

5,092
(4,032)
1,060

46,797(37,049)
9,747

Land
Construction in progress
Total PROPERTY, PLANT AND EQUIPMENT

4,861
628
15,011

4,924
145
17,97445,246
1,334
165,158

INTANGIBLE ASSETS
Goodwill
Software
OthersTotal INTANGIBLE ASSETS

259
1,819
126
2,206

322
1,743
190
2,256

2,965
16,023
1,746
20,734INVESTMENTS AND OTHER ASSETS:
Investment securities
Deferred tax assets
Guarantee deposits
Insurance funds
OthersAllowance for doubtful accounts
Total INVESTMENTS AND OTHER ASSETS

10,085
1,292
870
951
1,462
(515)
14,147

8,502
1,584
857
894
1,791
(552)
13,07578,122
14,557
7,875
8,216
16,457(5,078)120,150

Total NONCURRENT ASSETS

31,36433,306

306,043¥ 213,761¥ 207,638$ 1,907,917

ASSETS
CURRENT ASSETS:
Cash and bank deposits
Notes and accounts receivable-trade
Electronically recorded monetary claims
Short-term investment securities
Merchandise and finished goods
Work in process
Raw materials and supplies
OthersAllowance for doubtful accounts
Total CURRENT ASSETS

Total ASSETS

44

KAGA ELECTRO NICS C O .,LT D .

¥Thousands of
U.S. Dollars(Note)
2020

Millions of Yen
2019
2020

LIABILITIESCURRENT LIABILITIES:
Notes and accounts payable-trade
Short-term loans payable
Accrued expenses
Income taxes payable
Provision for directors' bonuses
OthersTotal CURRENT LIABILITIES¥ 77,884
30,656
5,307
1,147
105
6,239
121,340¥ 70,188
6,540
5,739
1,884
101
9,201
93,655$ 644,936
60,09452,741
17,314930
84,550860,569

1,882
1,300
94
1,997
280
2,606
8,161

20,833
1,378
95
1,969
329
3,127
27,732

191,431
12,665873
18,093
3,029
28,733
254,827

129,501

121,388

1,115,396

NET ASSETS:SHAREHOLDERS’ EQUITY
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total SHAREHOLDERS’ EQUITY

12,133
13,86551,297(2,024)75,272

12,133
13,87855,091(2,005)79,097

111,490
127,522506,212(18,427)
726,797

ACCUMULATED OTHER COMPREHENSIVE INCOME
Changes in the fair value of available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit obligations
Total ACCUMULATED OTHER COMPREHENSIVE INCOME

1,018
2
527
(215)
1,332

0
28
(707)
(133)
(812)

2
262
(6,501)(1,228)(7,464)

7,654
84,2597,965
86,25073,188792,520¥ 213,761¥ 207,638$ 1,907,917

NONCURRENT LIABILITIES:Long-term loans payable
Deferred tax liabilities
Provision for directors' retirement benefits
Net defined benefit liabilities
Asset retirement obligations
OthersTotal NONCURRENT LIABILITIES
Total LIABILITIES

Non-controlling interests
Total NET ASSETS
Total LIABILITIES AND NET ASSETS

Note ：The translations of Japanese yen amounts into U.S. dollar amounts areincluded solely for the convenience of readers outside Japan and havebeen made at the rate of ¥108.83 to $1, the rate of exchange at March
31, 2020.

Integ r ated Repor t 2 0 2 045

Financial and Corporate Information

Consolidated Statement of Income andComprehensive Income
Kaga Electronics Co., Ltd. and Consolidated Subsidiaries
For the year ended March 31, 2020

Millions of Yen
2019
2020
Net sales
Cost of sales
Gross profit

46

Thousands of
U.S. Dollars(Note)
2020¥ 292,779
257,233
35,546¥ 443,615
396,598
47,016$ 4,076,221
3,644,202
432,019

Selling, general and administrative expenses
Operating income

27,976
7,570

37,001
10,014

339,995
92,023

NON-OPERATING INCOME
Interest income
Dividend income
Commission fee
Foreign exchange gains
House rent income
OthersTotal NON-OPERATING INCOME

174
175
209
106
349
1,015

269
199
228
275
126
385
1,485

2,477
1,835
2,095
2,530
1,165
3,541
13,645

NON-OPERATING EXPENSES
Interest expenses
Share of loss of entities accounted for using equity method
Foreign exchange losses
OthersTotal NON-OPERATING EXPENSES
Ordinary income

200
194
177
153
726
7,859

308
905
149
1,362
10,137

2,830
8,318
1,374
12,523
93,146EXTRAORDINARY INCOME
Gain on sales of property, plant and equipment
Gain on sales of investment securities
Gain on negative goodwill
Gain on transfer of businessSettlement received
OthersTotal EXTRAORDINARY INCOME

17
215
2,164
7
2,403

61
135
12
498
1
709

564
1,246
115
4,580
13
6,520

EXTRAORDINARY LOSS
Loss on disposal of property, plant and equipment
Loss on sales of investment securities
Loss on valuation of investment securities
Loss on valuation of golf club membership
Special retirement expenses
Impairment loss
OthersTotal EXTRAORDINARY LOSS

16
2
550
6
31
8
¥ 614

12
57
880
199
380
30
¥ 1,560

117
525
8,086
1,833
3,495
278
$ 14,337

KAGA ELECTRO NICS C O .,LT D .

Thousands of
U.S. Dollars(Note)
2020

Millions of Yen
2019
2020
Income before income taxes
Income taxes-current
Income taxes-deferred
Total income taxes
Net income
Profit attributable to owners of the parent
Profit attributable to non-controlling interests
OTHER COMPREHENSIVE INCOME
Changes in the fair value of available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit obligations, net of tax
Share of other comprehensive income of entities accounted forusing equity method
Total OTHER COMPREHENSIVE INCOME
Comprehensive income
Comprehensive income attributable to:
Owners of the parent
Non-controlling interests¥ 9,649¥ 9,286$ 85,329

1,477
120
1,597
8,051

3,054
(61)
2,992
6,293

28,062(562)
27,49957,829

8,014
37

5,852
441

53,776
4,053

(489)
18
307
9

(1,018)26(1,260)68(9,354)239(11,578)
624

(49)

(104)

(955)

(203)

(2,288)(21,024)¥ 7,848¥ 4,005$ 36,805¥ 7,80147¥ 3,708297$ 34,071
2,733

Note ：The translations of Japanese yen amounts into U.S. dollar amounts areincluded solely for the convenience of readers outside Japan and havebeen made at the rate of ¥108.83 to $1, the rate of exchange at March
31, 2020.

Integ r ated Repor t 2 0 2 047

Financial and Corporate Information

Consolidated Statement of Cash Flows
Kaga Electronics Co., Ltd. and Consolidated Subsidiaries
For the year ended March 31, 2020

Millions of Yen
2019
2020
NET CASH PROVIDED BY OPERATING ACTIVITIESIncome before income taxes
Depreciation and amortization
Impairment loss
Amortization of goodwill(Decrease) Increase in net defined benefit liability
Decrease in provision for directors' retirement benefits(Decrease) Increase in provision for directors' bonuses
Increase in allowance for doubtful accounts
Interest and dividend income
Interest expenses
Share of profit of entities accounted for using equity method
Gain on sales of property, plant and equipment
Loss on retirement of property, plant and equipment
Gain on sales of investment securities
Loss on valuation of investment securities
Gain on negative goodwill
Settlement received(Increase) Decrease in notes and accounts receivable-trade(Increase) Decrease in inventories
Decrease in notes and accounts payable-trade
Increase in accounts receivable-other
Increase in accrued expenses
Decrease (Increase) in advance payments(Increase) Decrease in consumption taxes refund receivable(Increase) Decrease in other current assets
Increase in other current liabilities
Others, net
SubtotalInterest and dividend income received
Interest expenses paid
Income taxes paid
Settlement package received
Others, net
Net cash provided by (used in) operating activities¥ 9,649
1,740
31
85
(58)
(4)
(160)
53
(351)
200
194
(10)
16
(212)
550
(2,164)(1,152)(2,145)(6,746)
(207)
552
292
(2)
(191)
276
135
371
349
(189)
(2,078)0¥ (1,547)¥ 9,286
2,754
380
98
8
(1)
30
0
(469)
308
905
(43)
12
(78)
880
(498)
9,086
7,658
(6,667)(1,149)384(1,431)
266
93
2,106
(350)
23,571481(316)(1,829)498
0¥ 22,406

Thousands of
U.S. Dollars(Note)
2020$ 85,329
25,305
3,495
909
74
(16)
278
6
(4,312)
2,830
8,318
(397)
117
(721)
8,086
(4,580)83,49470,373(61,260)(10,560)
3,528(13,157)
2,452
859
19,358(3,219)216,593
4,427(2,904)(16,811)4,580
1$ 205,886

Thousands of
U.S. Dollars(Note)
2020

Millions of Yen
2019
2020
NET CASH USED IN INVESTING ACTIVITIESPayments for time deposits
Proceeds from withdrawal of time deposits
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of intangible assets
Purchase of investment securities
Proceeds from sales of investment securities
Purchase of shares of subsidiaries resulting in change in scope of
consolidation
Payments of short-term loans receivableCollection of short-term loans receivable
Purchase of insurance funds
Proceeds from cancellation of insurance funds
Payments for guarantee deposits
Proceeds from collection of guarantee deposits
Other payments
Other proceeds
Net cash used in investing activities

NET CASH USED IN FINANCING ACTIVITIES
Increase in short-term loans payable
Proceeds from long-term loans payable
Repayment of long-term loans payable
Purchase of treasury stock
Cash dividends paid
Others, net
Net cash (used in) provided by financing activities

Effect of exchange rate change on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents-beginning balance
Cash and cash equivalents-ending balance¥ (2,661)
1,944(3,027)111(420)(2,977)
575

¥

(893)
2,924
(3,276)271(355)(2,180)651$ (8,207)
26,874(30,104)
2,497(3,262)(20,035)
5,983

(286)

(321 )(2,953)

(2)
3
(13)
10
(29)
25
(125)
12
(6,860)

(551)
1
(2)
59
(34)
41
(96)
108
(3,651)(5,063)
18
(24)
545
(321)
382
(885)
1,000
(33,556)

15,137(1,269)(1)(2,054)(127)
11,684(24,038)
20,266(1,312)(0)(2,056)(402)(7,544)(220,884)
186,223(12,063)(7)(18,892)(3,697)(69,321)75
3,352
28,879¥ 32,231(748)
10,461
32,231¥ 42,693(6,878)96,129296,165$ 392,295

Note ：The translations of Japanese yen amounts into U.S. dollar amounts areincluded solely for the convenience of readers outside Japan and havebeen made at the rate of ¥108.83 to $1, the rate of exchange at March
31, 2020.

48

KAGA ELECTRO NICS C O .,LT D .

Integ r ated Repor t 2 0 2 049

Financial and Corporate Information

Corporate Information
As of April 1, 2020

Company overview

Major affiliates overseas
China

Name

KAGA ELECTRONICS CO., LTD.

Address

20 Kanda Metsunagacho, Chiyoda-ku, Tokyo 101-8629, JapanTEL+81-3-5657-0111

FAX+81-3-3254-7131

Business
description

Sale of electronic parts and semiconductors, EMS*, and sale of finishedproducts such as PCs and PC peripherals, etc.
*E lectronics manufacturing services: Provision of product development andmanufacturing services on a contract basis

Founded

September 12, 1968

Capital¥12,133 million

Number ofGroup companies

66 (20 in Japan, 43 overseas and three accounted for by the equity method)

Board members

Executive Officers

Founder & CEO

Isao Tsukamoto

Senior Executive Officer Mitsuhito Ikeda

President & COO

Ryoichi Kado

Executive Officer
Executive Officer

Senior Managing Director Shinsuke Takahashi
Senior Managing Director Shintaro Kakei
Managing Director

Outside Director

Eiji Kawamura
Chief of Administration
Headquarters
Motonori Toshinari
Division Director of EMS
Business Division
Mitsuhiro Nohara
Division Director of
Electronics Sales Division
Susumu Miyoshi

Outside Director

Akira Tamura

Outside Director

Noritomo Hashimoto

Auditor (Full-time)

Kazunori Kameda

Auditor (Full-time)

Takahiro Ishii

Outside Auditor

Susumu Kitsunai

Outside Auditor

Yoichi Sato

Director
Director

Executive Officer
Executive Officer
Executive Officer

Executive Officer
Executive Officer
Executive Officer
Executive Officer
Executive Officer
Executive Officer
Executive Officer
Executive Officer

President of KAGA SOLUTION NETWORK
CO., LTD.
Shoji Seki
President of KAGA SPORTS CO., LTD.
Hiroki Suzuki
Division Director of Specific Industry
Sales Division
Takeshi Tsukamoto Director and Senior Executive Officer of
Fujitsu Electronics Inc.
Takao Okabe
Supervisor of China Headquarters
Hiroaki Maruyama Deputy Division Director of
Administration Headquarters andGeneral Manager of Finance &Accounting Department
Kazuhira Watanabe Division Director of Communication
Network Sales Division
Takahiro Urazawa President of DIGITAL MEDIA LAB., INC.
Hironaga Nagasaka Supervisor of ASEAN Headquarters
Yasuhiro Ishihara Director and Managing Executive Officer
of Fujitsu Electronics Inc.
Katsutoshi Suzuki Division Director of Sales Promotion
Division and President of KAGA (KOREA)
ELECTRONICS CO., LTD.
Satoshi Eguchi
President of KAGA MICRO SOLUTION
CO., LTD.
Mitsuhiro Kumabe Chairman & Representative Director of
KAGA SOLUTION NETWORK CO., LTD.
Hitoshi Koujitani
General Manager of Corporate Strategy
OfficeAsia

KAGA TAXAN (SUZHOU)ELECTRONICS CO., LTD.

KAGA COMPONENTS(MALAYSIA) SDN.BHD.

KAGA ELECTRONICS (USA)INC.

KD TEC s.r.o.

KAGA (SHANGHAI)
ELECTRONICS CO., LTD.

KAGA (H.K.) ELECTRONICS
LIMITEDKAGA ELECTRONICS(THAILAND) COMPANY
LIMITEDTAXAN MEXICO, S.A. DE C.V.

Fujitsu Electronics Europe
GmbH

Stock information As of March 31, 2020
Total number of shares authorized
Total number of shares outstanding
Number of shares constituting one unit

50

KAGA TECHNO SERVICE CO., LTD.
Electrical and communication facilities
installation, interior work, etc.

KAGA DEVICES CO., LTD.
Sale of electronic parts and electronicequipment, etc.

Digital Media Lab., Inc.
Planning, development and sale of computer
graphics

Fujitsu Electronics Inc.
Sale of electronic parts and electronicequipment, etc.

KAGA SOLUTION NETWORK CO., LTD.
Development, design, construction andmaintenance of computer network systems, etc.

KAGA SPORTS CO., LTD.
Manufacture, wholesale and sale of sporting
goods, etc.

KAGA EMS TOWADA CO., LTD.
Manufacture and sale of electronic parts andelectronic equipment, etc.

AD DEVICE CO., LTD.
Sale of electronic parts and electronicequipment, etc.

KAGA AMUSEMENT CO., LTD.
Sale of electronic parts and electronicequipment, etc.

EXCEL CO., LTD.
Sale of electronic parts and electronicequipment, etc.

KAGA ELECTRO NICS C O .,LT D .

100 shares
6,315

As of March 31, 2020
Financial Instruments
Business Operators

Individuals

25.84%

1.07%

19.09%
5,480,778
shares(160)

Number ofshares held
(thousandshares)Percentage of
total sharesissuedSANKYO CO., LTD.

3,824

13.93

OKOZE CO., LTD.

1,840

6.70

Japan Trustee Services Bank, Ltd.
(Trust Account)

1,385

5.04

MUFG Bank, Ltd.

1,212

4.42

Kaga Electronics Employee Shareowners
Association

1,160

4.23

The Master Trust Bank of Japan, Ltd.
(Trust Account)

1,096

3.99

Mizuho Bank, Ltd.

950

3.46

Isao Tsukamoto

732

2.67

Mitsubishi Electric Corporation

500

1.82

Nippon Life Insurance Company

459

1.67

Name

28,702,118 shares

Breakdown by type of shareholder

Foreign
Corporations

KAGA MICRO SOLUTION CO., LTD.
Development, manufacture and sale of PCs
and PC peripherals, etc.

Principal shareholders As of March 31, 2020

80,000,000 shares

Number of shareholders

7,416,076 shares(5,962)306,986 shares

KAGA TECH CO., LTD.
Sale of electronic parts and electronicequipment, etc.

EuropeKAGA (SHENZHEN)ELECTRONICS CO., LTD.

(38)

Major affiliates in Japan

North America

Total number ofshareholders

6,315
28,702,118
sharesFinancial
Institutions

Other JapaneseCorporations

26.62%

27.38%

7,639,779 shares(34)

7,858,499 shares(121)

Notes: 1. The number of shares held have been rounded down to the nearest
thousand shares.
2. In addition to the above, there are 1,241 thousand shares of treasury stock.
3. Percentage of total shares issued is calculated after excluding treasury stock.
4. The number of shares held by Japan Trustee Services Bank, Ltd. and The
Master Trust Bank of Japan, Ltd. are the sums of the number of shares heldby the trust business of each bank.
5. The trade name of Japan Trustee Services Bank, Ltd. was changed to
Custody Bank of Japan, Ltd. following the merger on July 27, 2020.

Integ r ated Repor t 2 0 2 051