KONDOTEC INC
Annual Report 2017
(Year Ended March 31, 2017)

Aiming for Further Growth
We at KONDOTEC remain committed to providing
our products and services through our Group's
domestic and international networks. We do so byproperly identifying daily changing needs ofcustomers and offering proposals, etc., to assist
customers and increase efficiency as we aim to carryout our corporate philosophy of "contributing tocreating an affluent society".

We will strive to continue being a company that isneeded by customers and aim to achieve further
growth.
I thank you for your continued understanding andsupport.

President and Representative Director

Katsuhiko Kondo

1

KONDOTEC INC. ANNUAL REPORT 2017

Table of Contents
P. 1 Message from Top Management

P. 3 Consolidated Financial Highlights
P. 5 Consolidated Financial Performance
P. 7 The KONDOTEC Group Digest
P. 11 Growth Strategy
P. 13 Aiming for Further GrowthP. 15 Business Segments

KONDOTEC INC. ANNUAL REPORT 2017２

Consolidated Financial Highlights
2006

2007

2008

2009

¥30,237¥31,442¥33,258¥27,347

Operating profit

1,980

1,786

1,911

933

Profit attributable to owners of parent

1,119

1,114

1,095

664

Capital investment

1,423

906

132

632

281

411

430

380

Total assets¥23,122¥23,608¥24,667¥23,616

Net assets

12,11012,733

13,991

14,317----

Results of Operations
Net sales

Depreciation
Financial Position

Interest-bearing debt
Cash Flows
Cash flows from operating activities¥693¥1,405¥2,196¥1,109Cash flows from investing activities(1,328)

(642)

(391)

(1,437)

Cash flows from financing activities

(457)

(326)

(115)

(336)

Cash and cash equivalents, end of year

1,775

2,208

3,898

3,234

Profit attributable to owners of parent per share¥44.41¥44.36¥42.88¥25.62

Net assets per share

482.06506.86539.73552.30

Dividend per share

13.00

13.00

13.00

13.00

Operating profit margin (%)

6.5

5.7

5.7

3.4

ROE (%) *3

9.6

9.0

8.2

4.7

Equity ratio (%) *4

52.4

53.9

56.7

60.6

DOE (%)

2.8

2.6

2.5

2.4

Stock closing price (Yen)

¥500

¥306

¥285

¥308

Price earnings ratio (Times)

11.3

6.9

6.6

12.0

Per Share Information (Yen and U.S. dollars) *2

Financial Indicators

Stock Price Index*1 U.S. dollar amounts have been converted at the rate on March 31, 2017.
*2 Figures are presented on assumption that the 2-for-1 share split conducted effective January 1, 2012, took place at the beginning of FY2006.
*3 ROE = Operating profit / (Net assets - Subscription rights to shares - Non-controlling interest)*4 Equity ratio = (Net assets - Subscription rights to shares - Non-controlling interest) / Total assets

３

KONDOTEC INC. ANNUAL REPORT 2017

Million yen

Thousand
U.S. dollars *1

2010

2011

2012

2013

2014

2015

FY2016FY2016¥35,548¥38,745¥41,153¥47,991¥49,168¥50,211¥50,410$449,334

1,275

1,926

2,664

3,271

3,303

3,441

3,516

31,340

834

1,046

1,605

1,992

2,098

2,239

2,497

22,261

240

180

566

679

403

842

695

6,199

457

428

390

418

449

405

438

3,908

¥26,194¥28,403¥31,192¥34,481¥35,186¥34,645¥36,524$325,562

14,381

15,097

16,99018,783

20,231

21,102

22,719202,511

900

705

808

806

636

508

501

4,472

¥1,219¥1,454¥2,077¥1,887¥1,818¥1,945¥2,737$24,401(320)(1,511)

(494)

(660)

828

(829)

(646)

(5,761)

(736)

(550)

426

(389)

(699)

(1,092)(1,032)(9,199)

3,396

2,790

4,798

5,636

7,626

7,594

8,660

77,193¥32.19¥40.36¥60.77¥72.13¥75.91¥81.01¥93.29$0.83

554.79582.41615.12679.27730.49774.18846.59

7.54

13.00

13.50

14.00

15.50

20.00

22.00

23.00

0.20

3.6

5.0

6.5

6.8

6.7

6.9

7.0

5.8

7.1

10.0

11.1

10.8

10.9

11.4

54.9

53.2

54.5

54.4

57.4

60.8

62.1

2.3

2.4

2.3

2.4

2.8

2.9

2.8

¥353

¥625

¥606

¥718

¥786

¥834

¥933

11.0

15.5

10.0

10.0

10.4

10.3

10.0

KONDOTEC INC. ANNUAL REPORT 2017４

Consolidated Financial Performance
Net sales

Operating profit

50,410

3,516

million yen

UP 2.2 %UP 0.4 %47,991 49,168

30,23735,54831,442 33,258

million yen

38,74550,211 50,410

3,271 3,303

3,441 3,516

41,153

2,664
1,980

27,347

1,926

1,786 1,911
1,275
933

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 20162006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Profit attributable to owners of parent

Return on Equity (ROE)

2,11.5497

110.5.4

UP

million yen

UP

％

％

point
11.1

2,497
1,992 2,098

2,239

9.6

10.0
9.0

10.8

10.9

11.4

8.2
7.1
5.8

1,605
4.7

1,119 1,114 1,095
664

834

1,046

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 20162006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

During the fiscal year ended March 2017, the Japanese economy showed a moderate recovery on the backdropof improvements in income and employment conditions and upturns in exports and production, althoughconsumer spending did not recover very strongly. The outlook for the future continues to have uncertain
elements, such as the feasibility of the new U.S. administration's policies, withdrawal of the United Kingdom fromthe EU, and the downward risk of emerging economies with China being the first on the list.
In industries related to the KONDOTEC Group, investment in the public sector continued to be strong while
housing investment, which was generally flat, turned slightly weak and construction demand remained relatively
slow.
Amidst such circumstances, the Company implemented sales and marketing activities, including expanding salesof proprietary products, acquiring new customers and re-attracting dormant customers. Furthermore, we properly
identified the needs of users of industrial materials, structural steel materials and electrical equipment, as well as
stepped up our efforts in developing products with high added value and reinforcing product procurement
functions. Through these initiatives, we aimed at expanding our businesses with consolidated subsidiaries.
As a result, we achieved higher performance than in the previous year and posted net sales of 50,410 million yen
for the year ended March 2017, up 0.4% year on year. In terms of profit, although there was an increase in selling,
general and administrative expenses, we made efforts to reduce production costs and the cost of goods
purchased. Consequently, operating profit margin increased 1.0 basis point from the previous year’s 21.2%, andoperating profit rose 2.2% year on year to 3,516 million yen. Ordinary profit was 3,614 million yen, up 2% year on
year, and profit attributable to owners of parent came to 2,497 million yen, an increase of 11.5% from a year
earlier.
５

KONDOTEC INC. ANNUAL REPORT 2017

Net assets

Total assets

36,524

22
,719
7.7

million yen

UP 5.4 ％UP

34,481 35,186 34,645

million yen％

36,524

31,192
23,122

23,608 24,667 23,616

26,19428,403

16,99012,110 12,733

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

13,991 14,317 14,381

18,783

20,231 21,102

22,71915,097

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Total assets at the end of the fiscal year was 36,524 million yen, up 1,879 million yen year on year. This was due
to a rise in current assets of 1,651 million yen, caused mainly by increases in cash and deposits, accounts
receivable, and a rise in non-current assets of 227 million yen mainly from an increase in property, plant andequipment as a result of establishing operating sites, etc.
Net assets increased 1,617 million yen from a year earlier to 22,719 million yen. This was due to a rise in profit
attributable to owners of the parent of 2,497 million yen, despite decreases caused by payment of dividends ofsurplus of 608 million yen, and purchase of 393 million yen in treasury shares.

Dividend per share

Dividend on equity ratio (DOE)

23.0

2.8

yen

DOWN 0.1 point

UP 1 yen

22.00

23.00

20.00
13.00 13.00 13.00 13.00 13.00 13.50

％

14.00

15.50

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

2.8

2.6

2.8
2.5

2.4

2.3

2.4

2.3

2.9

2.8

2.4

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

The KONDOTEC Group recognizes that returning profit to shareholders is an important part of its management
policy. We will continue to make efforts toward strengthening our financial position and increasing profitability
while pursuing strategic investments, including M&A, and active business investments toward growth with a view
to improving capital efficiency.
With respect to dividends, our basic policy is to distribute dividends continuously and stably to shareholders
with a target of achieving DOE of 2.5% or more while adequately taking into account our consolidated operating
results and dividend payout ratio. DOE is composed of two elements – dividend payout ratio, which signifies
distribution of profits to shareholders, and ROE, which represents capital efficiency. It is an indicator that
contributes to driving the creation of shareholder value, which is a parameter of our management vision for thecreation of shareholder value.
Based on this policy, the dividend for the fiscal year ended March 2017 was 23 yen per share, and DOE came to
2.8%.
KONDOTEC INC. ANNUAL REPORT 2017

６

The KONDOTEC Group Digest
We provide our targets for the next fiscal year along with our past operating results.

Information on Operating Results

7 periods

Net sales increased
in a row
Operating profit and profit attributable to owners of the parent
increasedin a row

5 periods(Trillion yen)

90
Construction investment nominal value
Net sales (left axis)
Operating profit (right axis)
Profit attributable to owners of

60

52,550(Million yen)

(Million yen)

50,41050,00030

5,000

40,000

0

4,000
3,516

3,611

30,0003,000
2,497 2,524

20,0002,000

10,000

1,000

0
97

７

98

99

KONDOTEC INC. ANNUAL REPORT 2017

00

01

02

03

04

05

06

07

08

09

10

11

12

13

14

15

16

0
17 (FY)(Target)Dividend Information

2.5

Target DOE:
% or above
Dividends increased
in a row since its listing on TSE

6 periods

Total return ratio:

(Yen)

(%)
2.9

3.0

2.8
24

2.5

23

30
25

2.0

20

1.5

15

1.0

10

0.5

5

(FY3/2016: 44.2%, FY3/2017: 41.4%)

Plan for 2018(FY): 24 yen per share(Dividend increase of 1 yen)

DOE (left axis)
Regular dividend (right axis)
Increase in regular dividend (right axis)

0.0
06

07

08

09

10

11

12

13

14

15

16

Commemorative dividend (right axis)0
17 (FY)(Target)Capital Efficiency

10% or above
5 periods

ROE target:
Achieved target
in a row

(%)

12.5

11.4 11.0

10.0
7.5
5.0
2.5
0.0
06

07

08

09

10

11

12

13

14

15

16

17 (FY)(Target)The KONDOTEC Group posted record-high results in the fiscal year ended March2017 for the second consecutive year.
Looking ahead to the next fiscal year, given concerns over the downward risk
associated with economic slowdowns in the U.S. and emerging countries, including
China, and the political situation in Europe, we project that uncertain elements willremain.
In the industries related to the Group, we expect that redevelopment
work in city areas and construction related to the Tokyo Olympic andParalympic Games will proceed in earnest. Meanwhile, we anticipate
challenges in the operating environment, including a hike in steel
material prices and an increase in the cost of purchasing imported
products.
Under these circumstances, we will work to increase costcompetitiveness to maintain a strong presence in the competition forreceiving orders and pricing, expand sales of proprietary products,
imported materials and new materials, and cultivate new buyers while
reinforcing the strengths of the Group, including our consolidated
subsidiaries, as we strive to enhance the corporate value of the entire
KONDOTEC Group.
KONDOTEC INC. ANNUAL REPORT 2017８

The KONDOTEC Group Digest
The Group values locally-oriented sales andmarketing approaches and has always promoted theopening of new sites.
Here are our operating site activities in the year
ended March 2017.

April 2016 Opening of

Kumamoto Sales Office

OEM Plant
Distribution
warehouse

KONDOTEC
International(Thailand)

Opened the Kumamoto Sales Office to reinforce our sales
and marketing capability in the Kumamoto region, and toestablish a structure for promptly accommodating userneeds.

KyushuFactory

９

KONDOTEC INC. ANNUAL REPORT 2017

<Sales Offices>*As of March 31, 2017

Industrial Materials
Structural Steel Materials
Attached store (Industrial materials and structural steel materials)
Electrical Equipment

SapporoFactory

Shiga Factory

Kanto Factory

March 2017: Transferred

Shizuoka/ Tokai Sales Office
We transferred the sales office to our own property to reduce
expenses and for BCP purposes.
With the transfer, we enlarged our warehousing spaceand expanded our inventory size in an aim to further strengthen
our business operations.

October 2016: Newly established

Business Strategy Department
We launched a specialized department for the purpose of constructing
a stable earnings base that is not impacted by economic trends in an
aim to achieve sustainable growth and increase corporate value
through further expanding existing businesses, advancing businessdeployment in peripheral fields other than the construction materials
segment, and strengthening the Group's competitiveness and culture
as a corporate entity.
KONDOTEC INC. ANNUAL REPORT 201710

Growth Strategy
Ever since its founding in 1953, the KONDOTEC Group has continued to grow while actively
contributing to society through reinforcing its management platform and pursuing business activities
based on its corporate philosophy. Amid changes in conditions of the external environment from year toyear, we pursue active sales & marketing activities in accordance with our growth strategy to improve
operating performance stably each period and focus on creating added value so as to contribute to thecreation of an increasingly affluent social environment.
Here is a description of our key sales & marketing activities, which are sales promotion activities anddevelopment & cultivation of products.

Increasing
corporate value

Creating an affluent
social environment

Growth strategy

Sales promotion
Development/
cultivation of
products

Expanding earnings
Increasing cash flows

Corporate Philosophy"We strive to contribute to the creation of an affluent society by nurturing our
employees who would shape the future, and by conducting corporate
activities with innovative and pioneering mentality."

11

KONDOTEC INC. ANNUAL REPORT 2017

Sales promotion activities
The KONDOTEC Group continues to mainly pursue the following sales promotion activities as part of its
sales and marketing approach, with a view to widening the scope of sales activities and building aframework for further opening up opportunities to receive orders, not only in the current fiscal year
under review but also in the coming years.
Cultivation of new customers

Sales staff targets to capture one new customer every month in an effort to increase thenumber of buyers.

Sales & marketing in Tokyo Metropolis(Industrial Materials business)

Specialized sales staff are assigned to respond to concentrated purchasing in an effort toobtain orders.

Anchor construction

Cultivate new sales areas by taking orders not only for delivering products but also foranchor construction.

Changes in New Customers and Net Sales (Million yen)
3,000

2,627
2,367

2,280
2,000

1,300
1,000

917 914

887

2015

2016

1,002

924

0
2017(FY)(Target)Development & Cultivation of Products
Our sales and manufacturing divisions jointly hold new product committee meetings on a periodicalbasis to brainstorm and promote development of new products. We hold discussions regarding requests
from customers and proposals for improvement as part of our initiatives to develop, cultivate and deliverproducts offering greater added value.
Recent examples of our development efforts include the development of Konbase-Eco, an anchor
frame that offers features to improve working efficiency, enhance foundation strength, and reduce costs
more than conventional frames. We also succeeded in the development of Kondo bolts for furring strips.
These bolts come in a set of two parts instead of conventional five parts to reinforce the fastening
strength but reduce encroaching on the mating material. In addition, we entered into an exclusive
agency agreement in Japan with a Taiwanese lifting equipment manufacturer, YOKE INDUSTRIAL CORP.,
for their Yellow Point series, which has allowed us to distribute swivel eye bolts that enable safe laterallifting or lifting from unequal points for which the conventional JIS eye bolts cannot be used.
<Konbase-Eco>(Anchor frame)<Kondo bolts for furring strips>(Bolt & nut)

<Yellow Point series>(Lifting instrument)[Conventional product][Newly developed product]

KONDOTEC INC. ANNUAL REPORT 201712

Aiming for Further Growth
Our sales promotion activities described have comprehensively served as the platform for the
KONDOTEC Group to stably strengthen operating performance. These sales promotion activities are notcomposed of independent activities, rather they are mutually related activities that bring about
synergistic effects. Given that promoting these activities leads to achieving further growth, we willcontinue to recognize them as important initiatives to pursue.
Our targets going forward based on the current sales structure were released in our Medium-termManagement Plan (FY2017 to FY2019) in May 2017. This plan was formulated using the rolling method to
respond to changes in the operating environment, while verifying the results and issues each year.
With respect to our Long-term Vision that looks ahead to FY2020 and beyond, we will target net salesof 1000 million yen in an aim to further leap forward after having managed to post net sales of 500
million yen for the entire Group. We have announced our Basic Strategy & Capital Policy to pursue as we
strive toward meeting our target.
The Basic Strategy & Capital Policy serves as the guideline for the entire Group to manage businessactivities with the aim of realizing the Medium-term Management Plan and the Long-term Vision.

(million yen)

Net sales
1000

Net sales Net sales
Net sales
504
502
491

2014

2015

2016

Net sales
525

2017

Net sales
549

2018

Net sales
575

2019(FY)

Medium-term Management Plan

13

KONDOTEC INC. ANNUAL REPORT 2017

Long-term Vision 2020 and beyond

Basic Strategy

1

Expanding orders in existing businesses
We will work to increase orders from customers by properly identifying their needs in existing businesssegments, developing products that offer high added value, further strengthening our product procurement
functions, and effectively allocating employees to reinforce our sales capability.

2

Increasing presence in foreign markets
Recognizing that pursuing business activities in overseas markets where growth is expected will lead toenhancing our profitability, we turned a local affiliate in Thailand into a subsidiary in August 2014, and sincehave been taking steps to expand our business coverage in ASEAN countries by leveraging our operating site in
Thailand. Going forward, we will further strengthen our sales & marketing capabilities by widening our sales
network and reinforcing manpower with a view to increasing the ratio of net sales from our overseas business.

3

Corporate acquisitions and capital/business tie-ups
We view that pursuing corporate acquisitions and capital/business tie-ups is an important strategy tostrengthen our business platform. We actively review potential acquisition and tie-up cases by analyzing anddiscussing the growth potential of the relevant business, while taking capital cost into consideration whenever
the opportunity arises.

4

Reinforcement of product technologies
In areas of development, manufacturing and quality, we will work to provide products offering high added
value by leveraging our original know-how nurtured through years of experience and combining technologies
in the entire Group. At the same time, we will enhance production efficiency in a high-mix, low-volume
production structure so that we may accommodate even special needs of our customers while continuing to
improve our overall productivity.

5

Effective Use of Human Resources
It is our recognition that human resources build the key foundation of our business. Accordingly, we willcontinue to focus on development of human resources, allocating manpower to overseas businesses, etc., andfostering and reinforcing employees who can perform in global businesses.

Capital Policy
Our capital policy stands on two key components; capital efficiency target and shareholder return target.
We set the capital efficiency target by using ROE, an index that reflects the efficiency of capital investment
in pursuit of business expansion, in an aim to promote creation of corporate value. Meanwhile, theshareholder return target is set to determine dividends by means of DOE, an index that takes into accountboth consolidated operating results and the dividend payout ratio, with the aim of distributing dividends toshareholders continuously and stably.

1

Capital efficiency target: ROE of 10% or above

2

Shareholder return target: DOE of 2.5% or above

KONDOTEC INC. ANNUAL REPORT 201714

<Major Products>

Industrial Materials
With the retail hardware business at the core, wemanufacture, procure, and sell civil engineering andconstruction materials, machinery and equipment.
Subsidiaries KONDOTEC INTERNATIONAL (THAILAND) Co.,
Ltd. and CHUOGIKEN INC. are included.

Customers• Construction- andcivil engineeringrelated manufacturers,
etc.
• KONDOTEC's own
factories• Overseas suppliers[Japan] [Overseas]• Hardware stores• Wholesalers• DIY storesIndustrial
materials

Suppliers

Sandbags

Ropes

Hauling equipment

Turn buckle

Frame materials

Construction siteequipment

KON brace(JIS brace)

Self-standing
KON-piece

Konbase-Eco

Anchor bolt

Ceramic tab

Welding materials

Solar power
generation system

Lighting instruments

Wires and cables

Sanitary earthen-ware

air-conditioning
systems

Wiring devices

Endusers<Major Products>

Structural Steel Materials
We manufacture, procure, and sell construction-relatedmaterials for steel fabricators nationwide.

Customers• Construction- andcivil engineeringrelated manufacturers,
etc.
• KONDOTEC's own
factories• Overseas suppliers

Structural steel
materials

Suppliers

End-users[Japan]Steel fabricators<Major Products>

Electrical Equipment
This business is handled by a consolidated subsidiary,
Sanwa Denzai Co., Ltd. We procure and distributeelectrical equipment to electrical work operators engaged
in construction of houses, buildings, facilities, factories,
and to retail household appliance stores.

Customers

Household appliancemanufacturers

15

KONDOTEC INC. ANNUAL REPORT 2017

Electricalequipment

Suppliers[Japan]• Electrical work
operators• Retail electricalappliance stores

Endusers

KONDOTEC INC. 29 sales locations(Subsidiaries)
KONDOTEC INTERNATIONAL (THAILAND)
Co., Ltd. and CHUOGIKEN INC.

KONDOTEC INC. 16 sales locations(Subsidiary)
Sanwa Denzai Co., Ltd. 11 sales locations

Percentage ofTotal Sales

Percentage ofTotal Operating Profit

59.2％

64.3％

Percentage ofTotal Sales

Percentage ofTotal Operating Profit

24.7％

29.9％

Percentage ofTotal Sales

Percentage ofTotal Operating Profit

16.2％

5.8％

* Percentage of total sales and percentage of total operating profit are based on resultsof the year ended March 31, 2017.
KONDOTEC INC. ANNUAL REPORT 201716

Industrial Materials
Net sales (Million yen)

Operating profit (Million yen)

40,0003,000

30,00028,84429,97430,13829,83331,227
2,150

2,200

2,128

13

14

15

2,261

2,377

2,000
20,0001,000
10,000

0

0
13

14

15

16

17 (FY)16

17 (FY)(Target)(Target)

Structural Steel Materials
Net sales (Million yen)

Operating profit (Million yen)

16,0001,500

12,00010,682

11,344

11,866

12,432

12,873
1,000

968

1,018

1,052

15

16

1,066

869

8,000
500
4,000

0

0
13

14

15

16

17 (FY)

13

14

17 (FY)(Target)(Target)Electrical Equipment
Operating profit (Million yen)

Net sales (Million yen)
10,000

400
8,463

7,848

8,206

8,144

8,450
312

7,500

294

300
218

5,000

200

2,500

100

0

198

16

17 (FY)

0
13

14

15

16

17 (FY)(Target)17

202

KONDOTEC INC. ANNUAL REPORT 2017

13

14

15

(Target)Overview of Year Ended March 2017

Initiatives Going Forward

Public investments moved at a moderate pace and we wereactively involved in construction projects in regional areas. Salesof construction site equipment and hauling equipment werestrong thanks to strong corporate capital investments. Meanwhile,
demand for products used in temporary yards associated with thedecontamination work, and for frames for solar power generation,
were not as high as the year before when such demand
contributed to incremental revenues. As a result, net sales cameto 29,833 million yen, down 1% from a year earlier.
In terms of profit, gross margin on imported products improved
and operating profit increased 6.3% year on year to 2,261 million
yen.

Construction work for the 2020 Tokyo Olympic and Paralympic
Games have started and the demand associated with the event is
expected to spread from the Tokyo Metropolitan area to all overthe country, boosting demand for construction of infrastructureand facilities. To capture the growing demand, we will take steps
to attract new and dormant customers, and build up our productlineups with competitive items to increase sales.
In order to achieve further growth going forward, we will
increase orders from customers by strengthening our direct sales
and marketing activities to users, and expand our distribution
network also to other business fields such as agriculture, forestry,and e-commerce.
Through these initiatives, we will aim to achieve our targets forthe fiscal year ending March 31, 2018, which are net sales of
31,227 million yen and an operating profit of 2,377 million yen.

Overview of Year Ended March 2017

Initiatives Going Forward

Demand for steel frames, although appearing somewhat weak in
the first quarter, turned out to be favorably stable for private
construction projects driven by construction of hotels in
anticipation for growth in inbound demand, and by constructionof logistics facilities due to the rise in e-commerce. In addition,orders for structural steel materials remained comparatively
strong. As a result, net sales increased 4.8% year on year to
12,432 million yen.
In terms of profit, as a result of efforts to reduce manufacturingcosts, operating profit increased 3.4% from the year before to
1,052 million yen.

In expectation that the demand for structural steel frames will
increase year on year due to growing capital investments, such as
construction relating to the 2020 Tokyo Olympic and Paralympic
Games, large-scale distribution warehouses and hotels fortourists, the KONDOTEC Group will attract new customers whileworking to regain dormant customers and boost sales of products
in an aim to expand net sales.
Key initiatives to take toward achieving further growth are toincrease orders related to construction projects by strengthening
sales and marketing activities to large fabricators and steel trading
companies, and to widen our distribution network by emphasizing
the attractive features of anchor bolts to assist with the shortageof manpower in the construction industry.
Through these initiatives, we will aim to achieve our targets forthe fiscal year ending March 31, 2018, which are net sales of
12,873 million yen and an operating profit of 1,066 million yen.

Overview of Year Ended March 2017

Initiatives Going Forward

Demand for our products was strong in connection withrenovations and new construction of commercial facilities andcondominiums. In addition, thanks to the favorable demand for
LED lighting replacement in factories and commercial facilities,
sales rose year on year in the latter half of the fiscal year. As aresult, net sales were 8,144 million yen, down 0.8% year on year.
In terms of profit, operating profit came to 202 million yen,down 31.1% from a year earlier. This was attributable in part tocontinuing competition with other firms in the same business overacquiring orders, causing the gross margin ratio to decline 0.1
percentage point. In addition, there was a rise in personnel
expenses under selling, general and administrative expenses as aresult of enhancing our manpower to reinforcing businessactivities relating to direct distribution, control devices, andhousing facilities.

Given the projection that housing construction will decline in thelong term due to a decreasing birth rate and population, we will
make efforts to expand the range of products handled, including
products for housing-related facilities and systems, and broaden
the area for conducting sales activities in an aim to make sure to
bring in orders and increase net sales.
To achieve incremental growth going forward, we will further
strengthen our construction operation, which was newly
organized in the fiscal year ended March 2017, and expand orders
by directly selling to housing manufacturers and end-users.
Through pursuing these initiatives, we will aim to achieve ourtargets for the fiscal year ending March 2018, which are net salesof 8,450 million yen and an operating profit of 198 million yen.

KONDOTEC INC. ANNUAL REPORT 201718

Detailed information on financial results
For details of financial results for the year ended March 31, 2017,
please refer to the Securities Report.
URL : http://www.kondotec.co.jp/ir/library/asset_securities.html

Reporting coverage period Reporting period
April 1, 2016 through March 31, 2017
(Activities in April 2017 and thereafter are included in part.)
 Entities covered
KONDOTEC INC. and its group companies Accounting standard
Japanese GAAPKONDOTEC INC.
2-2-90 Sakaigawa, Nishi-ku, Osaka
550-0024 Japan
Telephone : 06-6582-8441
Website : http://www.kondotec.co.jp/index.html