KONDOTEC
Annual Report 2015
（Year ended March 31, 2016）

We will advance tomaking the next leap
forward.
Since KONDOTEC was established in
1953, we have provided products
toward several different fields over half
century in order to contribute toenhancement of infrastructure based oncompany's philosophy: “We strive tocreate an affluent society by cultivating
our employees who would shape thefuture, and by conducting corporate
activity with innovative and pioneeringmind”.
We will continue sparing no efforts
to contribute society and work together
to achieve the medium-term
management plan.
We would greatly appreciate it if you
could give us further guidance andsupport in the future.

Katsuhiko Kondo
President and Representative Director

1

KONDOTEC INC. ANNUAL REPORT 2016

Contents
P. 1 A Message From The Management
P. 3 Consolidated Financial Hightlights
P. 4 Consolidated Financial Preformance
P. 5

KONDOTEC's Progress

P. 7

To Our Shareholders, Investers, andOther Stakeholders
P. 7 Review of Fiscal 2015, Outlook for Fiscal 2015
P. 8 KONDOTEC's strengths
P. 10 For Further Growing

P. 13 Business Segments
P. 13 KONDOTEC Group Business SummaryP. 14 KONDOTEC Group Business Location
P. 15 Industrial Materials
P. 16 Structural Steel Materials
P. 17 Electrical Equipment

Detailed Financial Information
For detailed financial information for fiscal year 2015, please see the Summary of Financial Report.
URL : http://www.kondotec.co.jp/en/ir/library/summary.html

Reporting Scope and Other Items←◆Reporting Period
April 1, 2015 to March 31, 2016
（Certaion sections include activities occurring in or after April 2016.）◆Reporting Scope
KONDOTEC INC. and the KONDOTEC Groupe◆Accounting Standards
This report is prepared in accordance with JP GAAP.

KONDOTEC INC. ANNUAL REPORT 20162

Consolidated Financial Highlights
Millions of yen

Thousands of
U.S.dollars *1

2011

2012

2013

2014

2015(FY)

2015(FY)¥38,745¥41,153¥47,991¥49,168¥50,211$445,612

Operating income

1,926

2,664

3,271

3,303

3,441

30,546

Net income attributable to shareholders

1,046

1,605

1,992

2,098

2,239

19,877

Capital investment

180

566

679

403

842

7,477

Depreciation

428

390

418

449

405

3,595

Total assets¥28,403¥31,192¥34,481¥35,186¥34,645$307,468

Net assets

15,097

16,99018,783

20,231

21,102

187,275

705

808

806

636

508

4,513

Cash flows from operating activities¥1,454¥2,077¥1,887¥1,818¥1,945$17,264

Cash flows from investing activities(1,511)

(494)

(660)

828

(829)

(7,364)

Cash flows from financing activities

(550)

426

(389)

(699)

(1,092)(9,697)

Cash and cash equivalents, end of year

2,790

4,798

5,636

7,626

7,594

67,400Results of Operations
Net sales

Financial Position

Interest-bearing debt

Cash flows

Per share information of common stock (yen and U.S. dollars)
Net income attributable to shareholders¥40.36¥60.77¥72.13¥75.91¥81.01$0.71

Net assets

582.41615.12679.27730.49774.18

6.87

Cash dividends

13.50

14.00

15.50

20.00

22.00

0.19

Operating income ratio (％)

5.0

6.5

6.8

6.7

6.9

Return on equity (％) ＊3

7.1

10.0

11.1

10.8

10.9

Equity ratio (％) ＊4

53.2

54.5

54.4

57.4

60.8

Dividend on equity ratio (％)

2.4

2.3

2.4

2.8

2.9

Stock closing price, end of the year (yen)

¥625

¥606

¥718

¥786

¥834

Price earnings ratio (times)

15.5

10.0

10.0

10.4

10.3

RatiosStock Indicators

*1
*2
*3
*4

U.S. dollar amounts have been converted at the rate on March 31, 2016.
2011's Dividends per share show assumptive numbers that the share splitting 2 for 1 in Jul, 1, 2012 had done beginning of 2011's period.
Return on equity = net income / (net assets - share subscription - minority interests)
Equity ratio = (net assets - share subscription - minority interests) / total assets

3 KONDOTEC INC. ANNUAL REPORT 2016

Consolidated Financial Performance
Net income attributable to shareholders

Net sales

Operating income（Millions of yen）

（Millions of yen）

（Millions of yen）

60,000

4,000

2,500

50,000

2,000

3,000
40,0001,500
30,000

2,000
1,000

20,0001,000
500

10,000
0

0
11

12

13

14

0

15(FY)

11

12

13

14

15(FY)

11

12

13

Total assets

Net assets

Interest-bearing debt

（Millions of yen）

（Millions of yen）

（Millions of yen）

40,00025,0001,000

20,00030,0001415(FY)

750

15,00020,000500
10,00010,000

250

5,000

0

0
11

12

13

14

0

15(FY)Per share information ofcommon stock （yen）

11

12

13

14

15(FY)

11

RatiosDividend（％）（yen ・ %）

100

1000

12.5

75.0

80

800

10.0

60.0

60

600

7.5

45.0

40

400

5.0

30.0

200

2.5

15.0

0

0.0

20
0
11

12

13

14 15(FY)

0.0
11

12

13

14 15(FY)131415(FY)Cash dividends per share （left scale）
Devidend on equity ratio （right scale）

Return on equity （left scale）
Equity ratio （right scale）

Net income
attributable to shareholders （left scale）
Net assets （right scale）

12

30

3.0

20

2.0

10

1.0

0

0.0
11

12

13

14

15(FY)

KONDOTEC INC. ANNUAL REPORT 2016

4

KONDOTEC's Progress
Since our company was established in 1953, our company has been continuously growing by reinforcing the management baseand making the social contribution through business activities, under the corporate philosophy of “We strive to create anaffluent society by cultivating our employees who would shape the future, and by conducting corporate activity with innovativeand pioneering mind.”
As of the end of March 2016, Kondotec has 44 sales offices, 4 plants and 3 consolidated subsidiaries.

1973
▲

1953
▲
▲

Changed the firm name to "Kondo Iron Works Co.,Inc."

1956▲

Began production of Shackles

Moved central office to Nishi-ku, Osaka city

1985
▲

1955

1974
▲

Established in Taishou-ku, Osaka city,
began production and sales of marine hardware

Began production and sales of construction
hardware and screw

Opened a new business department (currently
Business segment of Structural Steel Materials) andbegan selling directly to steel fabricator

1989▲

Changed the firm name to "KONDOTEC INC."

1962▲

Began production of TurnbBuckles

1965▲

Began sales of Wire Ropes

1991
▲

1966

Opened the Kanto plant in Yuki city, Ibaragi▲

Opened the Kyushu plant in Nogata city, Fukuoka

1992
▲

1967
▲

Began production of Scaffolding Chains

1953(FY)

5

KONDOTEC INC. ANNUAL REPORT 2016

Opened the Sapporo plant in Ishikari city, Hokkaido

2014
▲

Consolidated KONDOTEC INTERNATIONAL(THAILAND) Co.,Ltd.

▲

Purchased all of the voting stock of CHUOH GIKEN
Co.,Ltd. a manufacturer of machine equipment▲

Offered a shareholder special benefit (Rice exchange
ticket) once a year

1995▲

Listed on the Second Section of the Osaka Securities
exchange

1999▲

Listed on the Second Section of Tokyo Stock Exchange

2004▲

Began the use of distribution warehouse for OEM
products in Yantai, China

2005▲

Concluded an agency contract with Pewag International
GmbH of Austria

2015(July)
▲

2007
▲

Opened the Shiga plant in Gamo-gun, Shiga

2010
▲

2011

Opened the Nagano sales office in Nagano city, Nagano(business segment of Structural Steel Materials)

2016(Feb.)▲▲

Listed on the First Section of Tokyo Stock Exchange
and the Osaka Securities Exchange

2016(Jan.)▲

Purchased all of the voting stocks of SANWA DENZAI
Co.,Ltd. a wholesaler of electric equipment

Opened the Morioka sales office in Shiwa-gun, Iwate(business segment of Industrial Materials)

Determinated acquisition of own shares
up to 800 million yen and 1 million shares2015(FY)

KONDOTEC INC. ANNUAL REPORT 2016

6

To Our Shareholders, Investers,
and Other Stakeholders
Review of Fiscal 2015
Operating Results for Current Term in Japanese economy of this consolidated fiscal year, although there were
growths in business earnings and employment conditions, which leaded to recovery in wages, facility
investments and consumer spending remained broadly flat. In addition, the instability of currency exchange
rates and stock market and the specter of recession abroad, due to the economic slowdown in China anddeveloping countries keep the economic situation unclear.
In related industries to our field, the housebuilding industry is pretty much recovering. On the other hand,the public works cost have been reduced, which became a factor for the worsened local business confidence.

Under these circumstances, we have vigorously expanded our business (e.g. expanding our own products,
gaining new customers and regaining dormant customers) and accomplished development of the value-added
products of the procurement system.
In consequence, we have achieved better performance than last year; net sales resulted in 50,211 million
yen (increase 2.1% over last year) and net income attributable to shareholders resulted in 2,239 million yen(increase 6.7% over last year).

Outlook for Fiscal 2016
We have set net sales target 51,650 million yen (increase 2.9% compared to this term), attributable toshareholders net income target 2,317 million yen (increase 3.5% compared to this term). We also aim to
improve ROE to more than 10% and DOE to more than 2.5%. We will make concerted efforts to reach thegoal.

President and Representative Director

Katsuhiko Kondo
7

KONDOTEC INC. ANNUAL REPORT 2016

KONDOTEC's Strengths
KONDOTEC's strength is that we stably increase achievement every term even the surrounding situation
changes continuously. It is considered that our long-running promotion activities have helped the stable
growth.
We will describe our strength, "variety of customer's industry sectors," "development of new sales fields,""diversity of sales products," and "invention and development of our own products" below.

Net sales / Net income attributable to shareholders (Millions of yen)
Net sales (left scale)
Net income attributable to shareholdres (rightt scale)
60,00047,99150,00040,00051,65050,211

49,1682,500

41,15338,74530,000

2,317

2,239

2,098

1,992

2,000
1,500

1,605
1,046

20,000

3,000

1,000

10,000

500

0

0
11

12

13

14

15

16(FY)(Target)Variety of Customer’s Industry Sectors
Since our group is engaged in the wholesale industry, mainly in the field of construction business, our products
are in demand for different kinds of industry such as building construction, civil engineering, roads, railroads,
bridge construction, forestry, marine, environment improvement, etc.
Therefore, even if there is a reduction demand caused by some external reason in a certain industry sector,
we have a stable basement of sales in other demanded industry sectors.
The Customer's Industry Sectors

Electric Facility
Logging Load

Farm

Rail / Bridge-rail
Prefabricated
Building

Road
Construction
Logistics

Cargo handing
Operation

Building
Construction

WoodenBuilding

Slope
Protection

Park Equipment
Tree-planting

Factory

Aquaculture
Industry

Ship
Port and Harbor

High-PlaceWork

Shipping
Steel Frame Building

Shore
Protection

Civil
Engineering

Disaster Prevention

KONDOTEC INC. ANNUAL REPORT 20168

Development of New Sales Fields
We have built a system to open up sales opportunities into the future, by expanding the commercial territory.
Increasing new sale

Sales person aims for acquiring one or more new clients in a month.
We set a specialized sales team to receive orders of integrated purchase

Tokyo area
（Industrial Materials）
Constructing anchor（Structural Steel Materials）

in Tokyo seles office.
We promote arrangements for constructing anchor in addition to supplying products.

New sales （Millions of yen）
3,500

2,956

3,000
2,500

2,627

2,349

2,000

1,200

1,500
1,000

784 857

917 914

875

14

15

16(FY)

500
0（Target）

Diversity of Sales Products
We deal about 50,000 kinds of products in whole KONDOTEC group. The number of products we deal has
been increasing by trying to meet our client's demand, inventing self-developed products, and dealing moreproducts in expectation for future demands. Since we have own factory, we can correspond a niche demandwith the custom-made products.

Invention and Development of Our Own Products
We regularly hold meetings to invent and develop of our own products together with the sales department andthe manufacturing department. We discuss about needs from customers and improvement of our products forfurther value.
"Konbase-eco" is one of our unique products, which helps to enhance operation efficiency and strength ofgroundwork, and to reduce construction cost. Recently we concluded the agreement with a Taiwanese lifting
equipment maker, YOKE INDUSTRIAL CORP., to be an exclusive dealership of "Yellow Point series". Thanks
to its wider range of products, we can provide swivel eye bolts which allow us safe lifting in any direction andsafe lifting from unequal points, where existing of JIS eye bolts may cause a danger of bending over andloosening of bolt due to the gravity and lifting loads.

＜Konbase-eco＞（Anchor Frame）

9

KONDOTEC INC. ANNUAL REPORT 2016

＜Yellow Point series＞

For Further Growing
We have described above the basic activities to expand our business stably. These activities are notindependent but are related, creating synergy on expanding our business. We will keep these activities forfurther growing of our company.
Speaking of our future plan based on the present sales system, we have announced “mid-term
management plan (fiscal 2016-2018)” in May 2016. We have formulated the plan by examining the result andthe issue every year, following the PDCA cycle to meet changes of business environment.
Since our sales goal of 50 billion yen in the whole group has been accomplished, we set the goal of sales
amount 100 billion yen for further development as a “long-term management plan (after fiscal 2020).” To

execute the plan, we have announced “basic strategy” and “capital policy.”
We are going to realize both “mid-term management plan” and “long-term management plan” under the policyof “basic strategy” and “capital strategy” in the whole group.
Hundredmillion of yen

Net Sales
1,000

Net Sales
502

2015

Net Sales
516

2016

Net Sales
543

2017

Net Sales
569

2018

Long-term management plan
after 2020(FY)Mid-term management plan

KONDOTEC INC. ANNUAL REPORT 201610

Basic Strategy

1

Expanding order chance in present business sector
We will take more orders by satisfying customer’s needs, by producing better products and purchasing moreproducts, and by increasing sales force with efficiency of staff assignment.
<Typical examples: business conference for sales expanding, approach to potential customers, specialized sales
teams for Tokyo area / for constructing anchor, committee for developing new products>

2Entering into foreign market
We believe that expanding our business to overseas will bring more revenue, where we estimate high market growthwould be. In August 2014, we have acquired the ownership of a local corporation in Thailand and started to expand
our business area to ASEAN countries. We will rise the proportion of overseas sales by extending market andassigning more personnel overseas.

［Overseas sales］
0.9%
448

0.7%
329

14

15

1.0%
519

Overseas sales rate (%)
Overseas sales (Million of yen)

16(FY)(Target)3

Acquisition and Capital tie-up
We define that acquisition and capital tie-up are important strategy to reinforce the business foundation. We
consistently analyze and discuss the growth potential with the awareness of capital cost.

［Our target field for M&A］
Field of BusinessSuppliers
Overseas Bases
Selling Style

11

KONDOTEC INC. ANNUAL REPORT 2016

target field : expansion of our business field except for construction

target field : deepening and widening our purchase channel

target field : expanding our branch overseas
target field : establishing new selling style such as retailing, catalog shipper
and Internet retailer

4

Developing product technology
We provide worthwhile products by taking advantage of creative technical know-how in the field of development,
manufacturing and quality management, cultivated over the years, and technology fusion of the whole group. In
order to deal with customers’ particular needs, we also enhance production efficiency in small but various lots.
<Typical examples: committee for developing new products, competition of new idea for efficient production>

5

Effective use of human resources
We have a philosophy that human resources are the important foundation of our business. According to thephilosophy, we develop the human resources to work globally to expand our business overseas.
<Typical examples: training course for managers, technical training, hiring foreign students>

Capital Policy
We set “Target of capital efficiency” and “Target of shareholder returns” as capital policies. “Target of capitalefficiency” aims for creating the corporate value in a process of the business expansion by using ROE index to show
investment efficiency. “Target of shareholder returns” aims for providing consistent shareholder returns by using
DOE index to consider both consolidated results and consolidated dividend payout ratio.

1

Target of capital efficiency ： ROE 10% or more

2

Target of shareholder returns : DOE 2.5% or more

ROE target
10%

11.1

10.0

10.8

10.9

10.6

12

2.9

2.8

15

16(FY)

2.8

7.1

11

DOE target
2.5%

13

14

15

16(FY)(Target)

2.4

2.3

11

12

2.4

13

14

(Target)KONDOTEC INC. ANNUAL REPORT 2016

12

KONDOTEC Group Business Summary
We have three segments: Industrial Materials, Structural Steel Materials, and Electrical Equipment.
Our group provides various items both as a manufacturer and as a business firm.

Industrial Materials
We provide civil engineering and construction materials, and machine
equipment for hardware stores. Our subsidiary companies, KONDOTEC
INTERNATIONAL (THAILAND) Co., Ltd and CHUOH GIKEN Co., Ltd
are involved in this field.
Customer

Supplier・building andengineering works（maker etc）
・plant・overseas（including OEM factory）

Industrial
Materials[Japan][Oversea]
・hardware store
・wholesale dealer
・home center

We provide structural steel materials for steel fabricators directly.

・building andengineering works（maker etc）
・plant・overseas（including OEM factory）

end user

Structual
Steel
Materials[Japan]steel fabricators

Electrical Equipment
Our subsidiary company SANWA DENZAI Co., Ltd is mainly engaged inthis field. We provide electrical equipment for electrical engineering firms
and electronics retail stores.
Customer

Supplier

Electrical
Equipment[Japan]・electric
construction・electric retail

end
user

※ "Percentage of Total Net Sales" and "Percentage of Total Operating Income" are based on FY2015

13

60.0％

61.8％

Percentage ofTotal Net Sales

Percentage of Total
Operating Income

23.6％

29.6％

Percentage ofTotal Net Sales

Percentage of Total
Operating Income

16.3％

8.6％

Customer

Supplier

maker

Percentage of Total
Operating Income

end
user

Structural Steel Materials

・electronics

Percentage ofTotal Net Sales

KONDOTEC INC. ANNUAL REPORT 2016

KO

KONDOTEC INC.
Industrial Materials

Japan

China
OEM
factory

KONDOTEC INC.
Structural Steel Materials

Distribution
warehouse

Thailand
KONDOTEC
International（Thailand）

plant
in Hokkaido

KONDOTEC Group Business Location
Kondo Group have many sales offices and provide our pruducts all over Japan.
We also export to foreign countries and import from the foreign countries.

plantin Shigaplant
in Ibaragi

plantin Fukuoka<Sales office> ※As of March 31,2016
Industrial Materials
Structural Steel Materials"Industrial Materials" and "Structural Steel Materials"
share the officeElectrical Equipment
KONDOTEC INC. ANNUAL REPORT 201614

Industrial Materials
Products

Environment
conservation material

Rope

Liftingequipment

ShackleTurnBuckle

Bolt and Nut

Hauling equipment

Chain

Frame material

Scaffolding
material

Construction
material

Ship's equipment

Fiscal 2015 Review
There were steady demands for decontamination works,
warehouse constructions, redevelopment projects in urban areaand express highway improvements. Regarding engineering
works, there was a decrease in the number of the public works. In
local regions which are heavily dependent on public works, thedecrease affected the failure of public works tenderly. Besides
small-sized and medium-sized construction works remained
stagnant longer than we anticipated.
In these situations, net sales achieved 30,138 million yen(increase 0.5% over last year) and operating income reported
2,128 million yen (decrease 3.3% over last year).

Future Initiatives
As construction demands for Tokyo 2020 Olympic andParalympic Games are growing, it is expected that private
investing for construction equipment and facilities are going toincrease consistently. By developing new customers andapproaching dormant customers through our community-based
sales activities with larger selection of competitive products, wewill work on growing the sales.
What we are going to deal with for our further growth is tostrengthen the relationships with our suppliers through exhibitions
and workshops and to widen our sales channel by increasing the
proportion of direct selling to users.
Dealing with these issues, we pursue to accomplish net sales
to 31,031 million yen and operating income to 2,150 million yen in
fiscal 2016.
15

KONDOTEC INC. ANNUAL REPORT 2016

Net sales(Millions of yen)

40,00029,97430,13831,03114

1516(FY)

30,00020,00010,0000(Target)Operating Income(Millions of yen)

3,000
2,200

2,128

2,150

14

15

16(FY)

2,000

1,000

0
(Target)Structural Steel Materials
Prducts

Self-standing
Kon-piece

Konbase-eco

Backing metal
for column

Welding material

Ceramic tab

CAD

Brace
(Kon-brace)

Anchor bolt

Fiscal 2015 Review
Large-scale constructions of low-rise buildings, such as
distribution warehouse and commercial complex, were seen on anationwide basis in 2015. Corresponding to demand of steelbuildings, factory utilization of steel-frame processors wasboosted to higher level.
As a result of the increasing sales of steel-frame components,
anchor bolts and high strength bolts, net sales were 11,866
million yen (increase 4.6% over last year) and the operating
income achieved 1,018 million yen (increase 5.1% over last year).

Deck bar

Ladder scaffold

Sputter adhesion
prevention agent

Machining tool

Net sales(Million of yen)

16,00012,00011,344

11,866

12,4691516(FY)

8,000
4,000
0
14

Future Initiatives
It is anticipated that there would be high demand for constructions
aimed at Tokyo 2020 Olympic and Paralympic Games and new or
repair constructions of logistics centers as the previous year. By
meeting the current demands, we will acquire more customers
and re-approach to dormant customers, expand our products andsecure construction orders of anchor bolts.
One of the agendas to work on is to strengthen our sales
activities towards steel trading firms which accept huge projectorders of higher demand. Another is to promote our construction
service of anchor bolts, not only to fabricators but also to generalcontractors and trading companies in order to solve a labor
shortage.
With these strategies, net sales target for 2016 is 12,469
million yen and operating income target is 1,057 million yen.

(Target)Operating Income(Millions of yen)

1,200
968

1,018

1,057

14

15

16(FY)

800

400

0(Target)KONDOTEC INC. ANNUAL REPORT 201616

Electrical Equipment
Products

Solar power
generation system

Lighting tool

Wire・Cable

Piping material

Airconditioning
facility

Heavy electricalmachinery

Distribution board

Control device

Telecommunication
deviceWiring device

Electric drill

Fire alarm
equipment

Fiscal 2015 Review
Private construction works and facility investments seemed tocome out of a slump in fiscal 2015. Solar power related products,
LED lights and energy-saving air conditioners were sold well. The
result was net sales 8,206 million yen (increase 4.6% over lastyear).
Although there were some competitions with rival companies
for accepting orders, the margin percentage was raised by 0.5
points, and operating income achieved 294 million yen (increased
35.2% over last year).

Net sales(Millions of yen)

10,00017

KONDOTEC INC. ANNUAL REPORT 2016

8,206

8,150

14

15

16(FY)

7,500
5,000
2,500
0

Future Initiatives
It is anticipated that the number of housing constructions is goingto recline for a while, due to the falling birth rate and population.
Investing in solar power felicities is also decreasing. In order toovercome the challenging situation, we will expand our line ofmajor products, strengthen ties with our suppliers and cultivate
new customers.
Foremost tasks are to reinforce the direct sales to users bysystematizing our constructional function and to explore new
business opportunities by developing new products selection in
housing equipment such as sanitary materials and plumbing
products.
With these efforts, we set net sales target 8,150 million yen
and operating income target 275 million yen in fiscal 2016.

7,848(Target)Operating Income(Millions of yen)

400
294

300

275

218
200
100
0
14

15

16(FY)(Target)KONDOTEC INC.
〒550-0024
2-90, Sakaigawa 2-chome,
Nishi-ku, Osaka-shi, Osaka 550-0024, Japan
Telephone : 81（6）6582-8441
Website : http://www.kondotec.co.jp/index.html