COMPANY RESEARCH AND ANALYSIS REPORT

Sanyei Corporation
8119
TSE JASDAQ

20-Jul.-2017
FISCO Ltd. Analyst

Hideo Kakuta

FISCO Ltd.
http://www.fisco.co.jp

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Sanyei Corporation
8119 TSE JASDAQ

20-Jul.-2017
http://www.sanyeicorp.com/eng/ir/■ Index■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01
1. Business descriptions............................ ......................................................................................................

01

2. Result trends. . ........................................ ......................................................................................................

01

3. Growth strategy...........................................................................................................................................

02■Company profile---------------------------------------------------------------------------------------------------------------------------------------------------------- 03
1. Company profile and history........................................................................................................................

03

2. Business composition..................................................................................................................................

03■Business overview---------------------------------------------------------------------------------------------------------------------------------------------------- 04
1. Trends in the Furniture and Houseware Business. .......................................................................................

04

2. Trends in the Fashion Accessories Business.. ..............................................................................................

05■Results trends--------------------------------------------------------------------------------------------------------------------------------------------------------------- 06
1. FY3/17 full year results.. ......................... ......................................................................................................

06

2. Financial position and management indicators. ...........................................................................................

06■Forecasts--------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 07■Medium- to long-term growth strategy------------------------------------------------------------------------------------------------ 08
1. Presented a three-year medium-term business plan....................................................................................

08

2. Starting overseas sales of brand products...................................................................................................

09■Shareholder return policy---------------------------------------------------------------------------------------------------------------------------------- 10

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
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Sanyei Corporation
8119 TSE JASDAQ

20-Jul.-2017
http://www.sanyeicorp.com/eng/ir/██Summary
Posted the highest-ever level ordinary profit in FY3/17, aims
to sustain at least ¥2,000mn in ordinary profit in the three-year
medium-term management plan
Sanyei Corporation <8119> is a longstanding trading company with a 70-year history. It currently handles thefull range of living-related products and broadly covers a supply chain of manufacturing, imports and exports,
wholesale, and retail. It has grown into a multi-functional trading firm with 20 overseas locations and 84 domestic
directly managed retail stores. Sanyei stands out in its coverage of products with high added value, including the
introduction of differentiated European brands and OEM supply of unique products to customers, such as Ryohin
Keikaku Co., Ltd. <7453>. It has three main business segments – Furniture and Houseware Business (55.1% of
overall sales), Fashion Accessories Business (27.3%), and Home Appliance Business (12.2%).
1. Business descriptions
Furniture and Houseware Business has been driving growth in recent years with OEM supply as a large shareof this business. This growth has been driven by expansion of business with major customers, such as Ryohin
Keikaku. Main drivers in FY3/17 were a large spot order from a European customer, growth in energy-saving producttransaction value, and gains in furniture direct-sale EC business.
Brand business has a substantial presence in Fashion Accessories Business. While sales and profits dropped in
FY3/17, this segment exhibits high profitability. The largest brand is Birkenstock, which makes sandals and comfort
shoes with excellent functional beauty and has a tradition of more than 240 years in Germany. It is supported by anenthusiastic fan base even with a price range of about ¥10,000. Retail sales expanded on growth in store numbers
and upbeat EC in FY3/17. However, segment sales still dropped because this was not enough to offset decline fromthe contract loss in wholesale business.
2. Result trends
Sanyei reported consolidated FY3/17 results of ¥49,785mn in net sales (+0.7% YoY), ¥2,704mn in operating profit(+14.6%), ¥2,436mn in ordinary profit (+0.5%), and ¥1,428mn in profit attributable to owners of parent (-0.5%). Sales
remained on the verge of ¥50,000mn, just as in the previous year, and operating and ordinary profits attained thehighest-ever level. Factors supporting upbeat results were a large order from a European customer in the Furnitureand Houseware Business, yen appreciation, and continuing efforts to lower costs.
The FY3/18 consolidated guidance calls for lower profits on a rise in sales with ¥50,000mn in net sales (+0.4% YoY),¥2,100mn in operating profit (-22.4%), ¥2,100mn in ordinary profit (-13.8%), and ¥1,300mn in profit attributableto owners of parent (-9.0%). Sanyei seeks to break through the ¥50,000mn sales threshold that it missed in thepast two years. In earnings, it anticipates a weaker outcome because of the impact of lower sales at the overseas
subsidiary. The projected ¥2,100mn in ordinary profit, meanwhile, represents the third-highest level after last year
and the previous year.

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01 10

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
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Sanyei Corporation
8119 TSE JASDAQ

20-Jul.-2017
http://www.sanyeicorp.com/eng/ir/

Summary

3. Growth strategy
Sanyei disclosed three-year numerical goals with FY3/18 as the starting year and hopes to deliver steady ordinary
profit of at least ¥2,000mn. The FY3/20 final-year goal is ¥2,600mn in ordinary profit. Priority themes are 1) new
challenges, 2) rigorous low-cost operations, 3) further creation of group synergies, 4) promotion of human resources
strategy (aimed at cultivating an optimal human resources system), and 5) offensive governance (improving thebusiness infrastructure system). Sanyei intends to invest proactively in system upgrades and program formation on
the basis that developing lean operations is vital to stable realization of at least ¥2,000mn in earnings.
Key Points
OEM expansion driving Furniture and Houseware Business, strong brand presence in Fashion Accessories
Business• Just under ¥50,000mn in net sales and set the highest-ever level ordinary profit in FY3/17• Presented a three-year medium-term management plan with a goal of at least ¥2,000mn in stable ordinary profit•㻲㼡㼘㼘㻌㼥㼑㼍㼞㻌㼞㼑㼟㼡㼘㼠㼟㻌㼠㼞㼑㼚㼐㼟㻔¥㼙㼚㻕㻺㼑㼠㻌㼟㼍㼘㼑㼟㻌㻔㼘㼑㼒㼠㻌㼟㼏㼍㼘㼑㻕㻻㼜㼑㼞㼍㼠㼕㼚㼓㻌㼜㼞㼛㼒㼕㼠㻌㻔㼞㼕㼓㼔㼠㻌㼟㼏㼍㼘㼑㻕㻢㻜㻘㻜㻜㻜

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Source: Prepared by FISCO from the Company's financial results

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02 10

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Sanyei Corporation
8119 TSE JASDAQ

20-Jul.-2017
http://www.sanyeicorp.com/eng/ir/██Company profile
Multi-functional trading company specializing in high value-added
products with a history of over 70 years
1. Company profile and history
The Company was established in Osaka in 1946 as an exporter of accessories. Today, it handles lifestyle-related
goods in general and is widely involved in operations in the supply chain, from manufacturing and importingand exporting, through to wholesale and retail sales. It has grown to be a multi-functional trading company with
20 overseas bases and 84 domestic, directly managed retail stores. Its individuality is clear on the point of its
handling of high value-added products, such as its import into Japan of differentiated European brands and its OEM
procurement for customers that are very selective about the products they want, as typified by Ryohin Keikaku.
2. Business composition
Sanyei operates under the following business segments – Furniture and Houseware Business, Fashion Accessories
Business, Home Appliance Business, and Others. Furniture and Houseware Business mainly procures OEM products for major Japanese and foreign companies and provided 55.1% of overall sales and 84.1% of operating
profit in FY3/17. Fashion Accessories Business covers import sales of brand products with sales rights, such as
BIRKENSTOCK (sandals) and Kipling (bags), and domestic and overseas OEM business. It contributed 27.3% ofsales and 26.7% of operating profit. Home Appliance Business handles OEM product procurement and brandbusiness. Major brands are Vitantonio (cooking appliances) and mod’s hair (beauty appliances). This segment
generated 12.2% of sales and 8.5% of operating profit. The Others segment handles pet goods and other items
and was at 5.4% of sales and had a segment loss.
Business descriptions and percentages
Business segment

Descriptions of the main businesses

Percentages ofnet sales

Percentagesof operating
profitFurniture andHouseware BusinessOEM for Ryohin Keikaku and WMF (kitchen goods manufacturer)

55.1%

84.1%

Fashion Accessories
Business

BIRKENSTOCK (sandals) and Kipling (bags) and OEM for domestic and overseas retailstores, etc.

27.3%

26.7%

Home ApplianceBusiness

Vitantonio (cooking appliances) and Mod’s Hair (beauty appliances), and OEM fordomestic and overseas manufacturers and retail stores

12.2%

8.5%

Other

Pet merchandise, pets, etc.

5.4%

-0.7%
-18.5%*Adjusted amount
Source: Prepared by FISCO from the Company's financial results

The business model consists of Brand business and OEM business. Brand business mainly promotes wholesale
and retail activity in Japan for overseas brands and Sanyei’s own brands. It obtains generally high profitability due tohandling excellent brands with a strong history not introduced in Japan yet. Sanyei hopes to expand Brand businessfrom 25.5% of total sales in FY3/17 to about 40% in future years. OEM business implements various procurementtasks, such as review of product specifications for products that meet the needs of customer companies, plantselection, price negotiations, production management, and export/import and logistics. Sanyei has strengths inthe manufacturing network in Asia built through overseas initiatives from many years and production managementby its own staff.

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03 10

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Sanyei Corporation

20-Jul.-2017

8119 TSE JASDAQ

http://www.sanyeicorp.com/eng/ir/

Company profile

Business model content and composition
Percentages ofnet sales

Descriptions of the main businesses
Brand business

Wholesale and retail activity for overseas brands and proprietary brands

25.5%

OEM business

Review product specifications for products that meet the needs of customer companies, select plants,
negotiate prices, manage production, handle export/import, and engage in other procurement tasks

74.5%

Source: Prepared by FISCO from the Company's results briefing materials██Business overview
OEM expansion driving Furniture and Houseware Business, strong
brand presence in Fashion Accessories Business1. Trends in the Furniture and Houseware Business
Furniture and Houseware Business has been driving growth in recent years with OEM supply as a large share of thisbusiness. This growth has been driven by expansion of business with major customers, such as Ryohin Keikaku.
Main drivers of strong sales expansion to ¥27,431mn (+¥2,333mn YoY) in FY3/17 were a large spot order froma European customer, growth in energy-saving product transaction value, and gains in furniture direct-sale EC
business (tripling YoY). Earnings boosts came from higher sales as well as improved gross margin ratio at overseas
subsidiaries and reduction of the SG&A expenses ratio.
Exclusive agent contracts expire in October 2017 for WMF (kitchen items) and Silit (kitchen items) brands in theFurniture and Houseware Business, but this change should only have a minor impact on FY3/18 results.

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Source: Prepared by FISCO from the Company's results briefing materials

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04 10

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Sanyei Corporation
8119 TSE JASDAQ

20-Jul.-2017
http://www.sanyeicorp.com/eng/ir/

Business overview

2. Trends in the Fashion Accessories Business
Brand business has a substantial presence in Fashion Accessories Business. While sales and profits dropped in
FY3/17, this segment exhibits high profitability.
The largest brand is BIRKENSTOCK, which is managed by the subsidiary Benexy Corporation. BIRKENSTOCK
makes sandals and comfort shoes with excellent functional beauty and has a tradition of more than 240 years inGermany. It is supported by an enthusiastic fan base even with a price range of about ¥10,000. The products are
sold via the 62 directly managed stores and e-commerce. Sanyei offers robust after-sales services because manycustomer use the products for lengthy periods. Retail sales expanded on growth in store numbers and upbeat EC
in FY3/17. However, segment sales still dropped because this was not enough to offset decline from the contract
loss in wholesale business.
Kipling is a brand of nylon bags that was created in Belgium in 1987, and together with the Kipling monkey (itsmascot), it is famous throughout the world as a playful, casual brand. Sanyei runs this business via 11 directly
managed stores (including the Ginza store and outlet stores). While business was sluggish at directly managed
stores, overall sales rose slightly in FY3/17 thanks to upbeat sales at outlets and other locations.
BIRKENSTOCK

Kipling

Source: The Company's results briefing materials

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05 10

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Sanyei Corporation
8119 TSE JASDAQ

20-Jul.-2017
http://www.sanyeicorp.com/eng/ir/██Results trends
Just under ¥50,000mn in net sales and set the highest-ever level
ordinary profit in FY3/17
1. FY3/17 full year results
Sanyei reported consolidated FY3/17 results of ¥49,785mn in net sales (+0.7% YoY), ¥2,704mn in operating profit(+14.6%), ¥2,436mn in ordinary profit (+0.5%), and ¥1,428mn in profit attributable to owners of parent (-0.5%).
Sales remained on the verge of ¥50,000mn, just as in the previous year, and operating and ordinary profits attained
all-time highs.
In net sales, Furniture and Houseware Business sales grew substantially, including support from a large spot order by
a European customer, and offset sales decline in other businesses. In ordinary profit, while sales decline at domestic
subsidiaries (mainly in brand business) and investment costs were negative impacts, yen appreciation and continuing
efforts to lower costs fueled a 1.8pp rise in gross margin ratio and higher profit.
FY3/17 full fiscal year results (consolidated)(¥mn)
FY3/16

FY3/17

Result% of sales

Period-start
forecast

Result% of sales

Net sales

49,415100.0%

49,00049,785100.0%

0.7%

1.6%

Cost of sales

36,48573.8%‐

35,826

72.0%

-1.8%

‐

Gross profit

12,92926.2%‐

13,959

28.0%

8.0%

‐

SG&A expenses

10,56821.4%‐

11,254

22.6%

6.5%

‐

Operating profit

2,361

4.8%

1,800

2,704

5.4%

14.6%

50.3%

Ordinary profit

2,423

4.9%

1,800

2,436

4.9%

0.5%

35.3%

Profit attributable to owners of parent

1,435

2.9%

1,300

1,428

2.9%

-0.5%

9.8%

YoY

vs. forecast

Source: Prepared by FISCO from the Company's financial results

Progress in repaying loans, financial soundness improved
2. Financial position and management indicators
Sanyei is maintaining sound financial conditions. Total assets climbed by ¥10mn versus end-FY3/16 to ¥23,057mn.
Main increases were fixed assets by ¥181mn and investments and other assets, and main decreases were current
assets by ¥172mn, cash and deposits, and notes and accounts receivable.
Liabilities dropped by ¥1,744mn from the end of the previous fiscal year to ¥10,249mn. Main declines were current
liabilities by ¥1,952mn and short-term debt.
In management indicators, Sanyei realized hefty improvements in the current ratio at 204.5% (up from 167.0% at theend of the previous fiscal year) and the equity ratio to 55.1% (up from 47.5%). Short-term and long-term soundness
strengthened further on loan repayment.

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06 10

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Sanyei Corporation
8119 TSE JASDAQ

20-Jul.-2017
http://www.sanyeicorp.com/eng/ir/

Results trends

Consolidated balance sheet, management indicators(¥mn)
End-FY3/16

End-FY3/17

Change17,007

16,835-172

Cash and deposits

3,466

2,859

-607

Notes and accounts receivable

6,565

6,024

-540

Merchandise and finished products

6,017

6,381

364

Fixed assets

6,040

6,221

181

Total assets

23,047

23,057

10

Current liabilities

10,186

8,233-1,953-1,100Current assets

3,600

2,500

Fixed liabilities

1,807

2,015

208

Total liabilities

11,993

10,249-1,744

Net assets

11,054

12,807

1,753

Total liabilities and net assets

23,047

23,057

10

Current ratio (current assets ÷ current liabilities)

167.0%

204.5%-

Equity ratio (shareholders’ equity ÷ total assets)

47.5%

55.1%

-

Short-term debt

Stability

Source: Prepared by FISCO from the Company's financial results and results briefing materials██Forecasts
Targeting ¥50,000mn in net sales again in FY3/18, expects lower
ordinary profit but still the third highest on record
The FY3/18 consolidated guidance calls for lower profits on a rise in sales with ¥50,000mn in net sales (+0.4% YoY),¥2,100mn in operating profit (-22.4%), ¥2,100mn in ordinary profit (-13.8%), and ¥1,300mn in profit attributable toowners of parent (-9.0%). Sanyei seeks to break through the ¥50,000mn sales threshold that it missed in the past
two years. However, the Company anticipates a substantial decline in earnings because of the impact of lower
sales at the overseas subsidiary, despite improved profitability at subsidiaries handling brand business in Japan.
The projected ¥2,100mn in ordinary profit, meanwhile, represents the third-highest level after last year and theprevious year.

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Sanyei Corporation
8119 TSE JASDAQ

20-Jul.-2017
http://www.sanyeicorp.com/eng/ir/██Medium- to long-term growth strategy
Presented a three-year medium-term management plan for the firsttime with a goal of at least ¥2,000mn in stable ordinary profit
1. Presented a three-year medium-term business plan
Sanyei disclosed three-year numerical goals with FY3/18 as the starting year. It previously set a goal for net sales,
but this time it aims to deliver stable ordinary profit of at least ¥2,000mn. We think this change reflects growing
confidence in profitability in recent years. The FY3/20 final-year goal is ¥2,600mn in ordinary profit.
There are five priority themes.
(1) New challenges
Sanyei is proactively recruiting new domestic and overseas customers in the OEM business. It aims to strengthenbrands, including by M&A, and build a multilayer business model in the brand business.
(2) Rigorous low-cost operations
Sanyei is continuously reducing SG&A expenses in order to succeed in price competition in the OEM business.
(3) Further creation of group synergies
Sanyei is bolstering joint operations with nine domestic affiliates.
(4) Promotion of human resources strategy
Sanyei is cultivating an optimal human resources system, including use of external consultants.
(5) Offensive governanceSanyei has started a project to unify mission-critical systems on SAP and will introduce this system at domestic
and overseas group firms during the next few years in order to bolster efficiency and risk management.
Sanyei intends to invest proactively in system upgrades and program formation on the basis that developing lean
operations is vital to stable realization of at least ¥2,000mn in earnings.

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Source: Prepared by FISCO from the Company's results briefing materials

We encourage readers to review our complete legal statement on “Disclaimer” page.

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COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Sanyei Corporation
8119 TSE JASDAQ

20-Jul.-2017
http://www.sanyeicorp.com/eng/ir/

Medium- to long-term growth strategy

2. Starting overseas sales of brand products
Sanyei is a rare presence among Japanese trading firms with its transaction pattern of exporting products manufactured at overseas sites to overseas customers in the US, Europe, China, and other locations. While this mainly
occurred in the OEM business, Sanyei has started developing overseas markets in the brand business too. In 2016,
it began sales of Vitantonio products (cooking appliances) in Hong Kong and Taiwan. In April 2017, it initiated salesof five hair irons from the mod’s hair brand for beauty appliances in Taiwan. It has already secured about 500 storesas sales channels, including specialty stores, home appliance retailers, drugstores, mail-order services, and major
EC sites (Taiwan’s three leading sites), and intends to double this presence to at least 1,000 stores in the next three
years. Sanyei hopes to raise overseas brand awareness and bolster development of overseas markets to securebalance in its overall business.
Start of overseas sales for mod’s hair beauty appliances

Source: The Company's results briefing materials

We encourage readers to review our complete legal statement on “Disclaimer” page.

09 10

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

Sanyei Corporation
8119 TSE JASDAQ

20-Jul.-2017
http://www.sanyeicorp.com/eng/ir/██Shareholder return policy¥160 dividend in FY3/17 (¥120 ordinary dividend), raised or sustained
the dividend for 20 straight years
Sanyei employs a policy that targets a roughly 30% dividend payout ratio to support stable, continuous dividends
and also retain profits to fund corporate reinforcement. The FY3/17 dividend totaled ¥160 (¥120 ordinary dividend)with ¥60 in 1H and ¥100 in 2H (¥60 ordinary dividend plus a ¥40 commemorative dividend). It expects to pay ¥120
in FY3/18 with ¥60 in 1H and ¥60 in 2H. Sanyei has raised or sustained the dividend in 20 straight years, making
the stable dividend one of its appeals.

㻰㼕㼢㼕㼐㼑㼚㼐㻌㼜㼑㼞㻌㼟㼔㼍㼞㼑㻌㼍㼚㼐㻌㼐㼕㼢㼕㼐㼑㼚㼐㻌㼜㼍㼥㼛㼡㼠㻌㼞㼍㼠㼕㼛㻔¥㻕㻰㼕㼢㼕㼐㼑㼚㼐㻌㼜㼑㼞㻌㼟㼔㼍㼞㼑㻌㻔㼘㼑㼒㼠㻌㼟㼏㼍㼘㼑㻕㻰㼕㼢㼕㼐㼑㼚㼐㻌㼜㼍㼥㼛㼡㼠㻌㼞㼍㼠㼕㼛㻌㻔㼞㼕㼓㼔㼠㻌㼟㼏㼍㼘㼑㻕

㻝㻤㻜

㻢㻜㻚㻜
㻝㻢㻜㻌

㻝㻡㻜

㻝㻢㻜㻌
㻡㻜㻚㻜

㻠㻢㻚㻜
㻝㻞㻜㻌

㻟㻢㻚㻠

㻝㻞㻜
㻥㻜

（㻑）

㻞㻢㻚㻠

㻞㻡㻚㻢

㻞㻢㻚㻣
㻞㻞㻚㻜

㻢㻜

㻠㻜㻚㻜
㻟㻜㻚㻜
㻞㻜㻚㻜

㻥㻜㻌

㻥㻜㻌

㻥㻜㻌

㻟㻜

㻝㻜㻚㻜

㻜

㻜㻚㻜

㻲㼅㻟㻛㻝㻟

㻲㼅㻟㻛㻝㻠

㻲㼅㻟㻛㻝㻡

㻲㼅㻟㻛㻝㻢

㻲㼅㻟㻛㻝㻣

㻲㼅㻟㻛㻝㻤㻌㻱

Note: The FY3/16 dividend included a ¥60 special dividend. The FY3/17 dividend contained a ¥40 dividend commemorating
the 70th anniversary.
Source: Prepared by FISCO from the Company's financial results

We encourage readers to review our complete legal statement on “Disclaimer” page.

10 10

Disclaimer
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