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Message from the CEO

President & CEO
Morifumi Wada

During our 78th business year (ended March 31, 2016), amid the Government's ongoing measures to hold down medical costs, the EIKEN Group (the "Group") has been striving to expand sales of its mainstay products within the domestic market, and to promote development of new products. At the same time, EIKEN has been driving forward the globalization of the Group as a whole, which globalization includes to accelerate overseas market development of fecal occult blood diagnostic reagents and to develop the global market for genetic screening (LAMP method) products. All these endeavors were based on our new management framework, "EIKEN ROAD MAP 2009."
Concretely, the Group has been addressing the following issues.
1) Promotion of business globalization
The colorectal cancer screening tests that were introduced in the previous fiscal year in France and the Spanish cities of Madrid and Barcelona, have so far contributed significantly to sales. In addition, the Group focused on development of fecal occult blood diagnostic reagents and analyzers in North America and Asia, as well as on sales expansion of reagents and analyzers for urine tests in Italy. Furthermore, EIKEN has entered a business alliance with Sysmex Corporation in the field of urine chemistry testing to seek greater share in the overseas markets.
We also furthered preparations for global deployment of our tuberculosis complex detecting reagent using the LAMP method, which has been jointly developed with FIND (Foundation for Innovative New Diagnostics).
2) Strengthening of our proprietary technologies and R&D capabilities
EIKEN pushed forward the development of reagents for quick testing and for genetic screening, as well as of screening devices, which were planned for release in this consolidated fiscal year. As a result, EIKEN released two new quick testing kits in the Immuno Catch line-up that uses the immunochromatography method: Immuno Catch-RSV, in August 2015, and Immuno Catch-Pneumococcal, in January 2016. In addition, in December 2015, EIKEN released Bordetella Pertussis Detection Reagent Kit D, which was the first in vitro diagnostic product in Japan. Also, in February 2016, EIKEN released the immunological and serological reagent LZ Test 'Eiken' KL-6, which is used to aid the diagnosis of interstitial pneumonia.
3) Improvement of productivity
EIKEN continued to strive to reduce production costs, thus managing to increase the cost of sales ratio by 0.2 percentage points year-on-year.
The Group is constructing new factories and renewing manufacturing facilities in an earnest effort to improve productivity. In June 2015, a new energy generating building was constructed at the Nogi Plant. In addition, new manufacturing facilities were installed and constructions of new buildings set off in order to reinforce productive capacity for urine test reagents and other products.
4) Development and effective use of human resources
In line with the key personnel training program formulated in the previous fiscal year, EIKEN provided training for global human resource development.
5) Fulfillment of our social responsibilities and harmonization with society
In response to the "My Number" (social security and tax number) system, EIKEN established an information internal control system. As for the Corporate Governance Code, EIKEN has disclosed and explained the execution of all code principles in the Corporate Governance Report filed with Tokyo Stock Exchange, and also disclosed on its website for public consultation. Moreover, EIKEN adheres to the policy regarding transparency of the relation with medical institutions, which is founded upon JACRI's "Transparency Guideline for the Relation between Corporate Activities and Medical Institutions." Therefore, information regarding payments to medical institutions and professionals during FY2014 (April 1, 2014 to March 31, 2015) is provided on EIKEN's website.
With regard to our environment management system, EIKEN created an environmental program and continued to promote energy and resource saving activities, as well as activities meant to provide environmentally friendly products.
With regard to our risk management, EIKEN enhanced the surveillance system to prevent information leaks, at the same time as it instructed and thoroughly trained employees on these issues.
As a result of these efforts, the net sales for the consolidated fiscal year ended March 31, 2016 went up to 32,163 million yen (increase of 3.7% year-on-year basis), as overseas net sales of both fecal occult blood diagnostic reagents and analyzers strongly increased.
Regarding profit, the Group's efforts to reduce production costs of our in-house products and to make more efficient use of expenses resulted in operating income of 3,536 million yen (increase of 25.1% year-on-year basis) and ordinary income of 3,570 million yen (increase of 18.5% year-on-year basis). Furthermore, net income attributable to parent company shareholders amounted 2,429 million yen (increase of 15.7% year-on-year basis), resulting from a 183 million yen-worth extraordinary loss due to the dismantling cost for the construction of a new manufacturing building at the Nogi Plant.

[Forecast for the next fiscal year]
It is expected that companies will remain cautious in light of the slowdown in the Chinese economy and the rapid progress of the yen from the beginning of the year. In the clinical diagnostics industry, fees for performing laboratory tests fell slightly by 0.4% group-wide following the revision of health care fees for FY2016, as part of the health care reform. Especially, measures are been taken to promote implementation of regional comprehensive care systems and health care functional differentiation, and further progress is expected in functional differentiation of hospitals. The overseas market is expected to continue growing. Developed countries hold out the prospect of further accommodating the needs to efficiently reduce health care expenditures, as well as of an expansion of preventive medicine. At the same time, emerging countries should be working on developing their medical infrastructure in tandem with population growth and economic development.
Within this business environment, and in support of global business expansion, the Group will be steadily pursuing its medium-term management plan (for the period between April 1, 2016 and March 31, 2019) based on basic policies defined in its most recent management framework, "EIKEN ROAD MAP 2009", formulated in March 2009.
For the next fiscal year, we forecast net sales to increase by 5.2% to 33,830 million yen. However, a temporary increase in costs resulting from investments focused on research and development activities might cause profit to decrease. Accordingly, we expect operating income of 2,710 million yen (decrease of 23.4% year-on-year basis), ordinary income of 2,710 million yen (decrease of 24.1% year-on-year basis), and net income attributable to parent company shareholders of 1,820 million yen (decrease of 25.1% year-on-year basis).
Still, we forecast net sales to overseas of 4,760 million yen (increase of 36.0% year-on-year basis), and a share of 14.1% from total sales.


EIKEN ROAD MAP 2009

Grand Vision
"We will transform EIKEN into a global organization by 2018 that can leverage expertise as a medical testing pioneer to protect the health of the public."

Fundamental Policy

(1) Increase the market share of EIKEN products in Japan
Adopt the customers' perspective to improve products and services in every possible way. Achieve consistent growth by enlarging the lineup of core products and becoming more competitive.

(2) Expand global operations
To firmly establish the EIKEN brand outside Japan, rebuild the overseas sales infrastructure and network and steadily expand geographic coverage, extending from the U.S. and Europe to emerging markets.

(3) Further upgrade core technologies
Create and expand new sources of demand by leveraging innovative ideas, advanced technologies and other core EIKEN strengths. Accept the challenge of supplying products that exceed customers' expectations through the relentless pursuit of advances in performance and quality.

(4) Improve productivity
As a manufacturer, aim for constant improvements in productivity in all work processes, extending from R&D to manufacturing and sales.

(5) Establish superior competitive positions in markets
Channel resources to market sectors where EIKEN is most competitive and the development of strategic value-added products. The goals are to earn the highest possible returns on capital and achieve market superiority.

(6) Launch new businesses and create new markets
As a pioneer in medical testing, create new businesses and markets by drawing on new and highly specialized technologies. Seek business opportunities of all kinds in order to quickly launch new businesses that can drive the next phase of growth.

(7) Forge strategic alliances
Forge strategic alliances with partners that can produce synergies, such as by reinforcing existing strengths, providing complementary functions and acquiring new technologies.

(8) Make the corporate brand more powerful
Improve the quality of human resources and the company in order to build a base of operations for transforming EIKEN into a global organization.

Policy regarding profit sharing

Regarding the redistribution of profits to shareholders as one of the issues of the utmost importance for the management, EIKEN CHEMICAL shall operate on the fundament of the basic policy of implementing stable dividend payout policy that fully takes into consideration reinforcement of the financial standing, reserving sufficient retained profit necessary for active enterprise expansion, and performing distribution of dividends from surplus twice a year as interim dividend and year end dividend. Specifically, this distribution shall be based on the aforementioned policy and we shall aim at the consolidated dividend payout ratio of 30% or more. The organ that has the authority to determine the details of dividends from surpluses as is stated in the articles of association is as follows: "Decisions on dividends from surplus, etc. can be made by the resolution of the board of directors based on the provisions of Company Law, Section (459) (1)".
The usage of the internal reserve shall be determined from a medium- and long-term viewpoint and used effectively for investments in research and development, capital investment, and improvement in operating efficiency aiming at further reinforcement of the management base.

  March 31, 2012 March 31, 2013 March 31, 2014 March 31, 2015 March 31, 2016
Dividend amount per share (yen) 30 35 35 35 40
Dividend payout ratio (%) 37.3 25.9 32.1 30.4 30.1