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Message from the CEO

President & CEO
Morifumi Wada

【A Retrospective Look at EIKEN's 79th Business Year】
Please allow me to begin by extending my heartfelt gratitude to all our shareholders for your continued support of EIKEN Group.
Under the situation where the Government continued to implement the measures to hold down medical costs, the EIKEN Group (the “Group”), on the basis of the policies defined in "EIKEN ROAD MAP 2009," its most recent management framework, has developed the medium-term management plan to be concluded in the fiscal year ending March 31, 2009, the final year of the ROAD MAP, and strived to expand the shares of its products in the domestic market and to drive forward the globalization of the Group as a whole by placing particular emphasis on the following four fields: fecal occult blood tests, immunological and serological tests, urine tests and genetic tests (LAMP method). In its research and development activities, the Group has also made full efforts to develop new products, and in its manufacturing activities, the globalization of the Group as a whole is being accelerated through the construction of a new manufacturing building at the Nogi Plant and the extension and reconstruction of the Nasu Plant.
As a result of these efforts, the net sales for the consolidated fiscal year ended March 31, 2017 went up to 33,274 million yen (increase by 3.5% year-on-year basis), thanks to an expansion in overseas net sales, significant sales increase in quick testing kits (Immuno Catch series), and strong demand for fecal occult blood diagnostic reagents, urine test paper and genetic screening (LAMP method) products in the domestic market. Regarding profit, the Group made efforts to reduce production costs of our in-house products and to make more efficient use of expenses. Also, the research and development costs, which we expected to be incurred in this consolidated fiscal year, were carried over to the next fiscal year. As a result, operating income was 3,976 million yen (increase of 12.4% on a year-on-year basis) and ordinary income was 4,112 million yen (increase of 15.2% on a year-on-year basis). Furthermore, net income attributable to parent company shareholders amounted 2,918 million yen (increase of 20.1% on a year-on-year basis), resulting from a 134 million yen-worth extraordinary loss due to the termination of the retirement benefit plans.
The year-end dividend for the current term will increase by 10 yen to 30 yen per share, because Group’s business results exceeded the initial forecast.

During the 79th Business Year (fiscal year ending March 31, 2017), the Group, as part of its sales activities, has entered a business alliance with Sysmex Corporation to start the urine test business in overseas market. In August 2016, the World Health Organization (WHO) recommended to use the pulmonary tuberculosis detection method using the LAMP technology (TB-LAMP). In addition, the Group signed a distribution agreement with HUMAN, a German corporation, for distribution of TB- LAMP and malaria molecular diagnosis systems in the global market (except China, Korea, Taiwan and Thailand), in order to start the world-wide sales of the products. In the field of fecal occult blood tests, Group’s core products, the U.S. Government issued the new guideline for colorectal cancer screening tests in June 2016, and performance of EIKEN’s products was highly regarded for their sensitivity and singularity. EIKEN’s products were also used in the national colorectal cancer screening tests in Qatar. In Germany, the immunization method in fecal occult blood tests was covered by insurance, and EIKEN’s products were selected by the leading test centers.
In its research activities, the Group developed a light and small-sized portable automatic urine analyzer called “US-1200” and released the product in August 2016. In addition, the Group has endeavored to develop a next-generation, small-sized fully-automatic genetic screening device using the LAMP method, as well as multi-item screening chip called “Simprova,” planning to launch these products in the fiscal year ending March 31, 2019.
In its manufacturing activities, the Group, with an aim to enhance its production capacity and efficiency, constructed a new manufacturing building at its urine test paper plant, and also reconstructed its plant to increase production capacity of the fecal occult blood diagnostic reagents, and immunological and serological reagent.

【Outlook for the EIKEN's 80th Business Year】
It is expected that companies would remain cautious due to the expected slowdown of the Chinese economy and a package of new policies to be adopted by the new U.S. administration. In Japan, the government has implemented the measures to promote establishment of regional comprehensive care systems and to facilitate differentiation of health care functions, and, as the result, differentiation of hospital functions will be accelerated further. It is forecasted that in the overseas market, growth would continue; while developed countries will continue to have needs for efficient reduction of health care expenditures as well as expansion of preventive medicine, emerging countries will further develop their medical infrastructures to meet population growth and economic development.
Under such business environment and with an aim for its global business expansion, the Group will steadily pursue its medium-term management plan (from the fiscal year ending March 2017 through the fiscal year ending March 2019) based on the basic policies defined in its most recent management framework, "EIKEN ROAD MAP 2009", formulated in March 2009.
For the fiscal year ending March 31, 2018, the Group forecasts net sales to increase by 7.7% to 35,840 million yen. On the other hand, it is forecasted that operating income decrease to 3,070 million yen (decrease by 22.8% on a year-on-year basis) and ordinary income decrease to 3,070 million yen (decrease by 25.3% on a year-on-year basis), mainly because research and development costs, which had been expected to be incurred in the consolidated fiscal year ended March 31, 2017, were carried over. As a result, net income attributable to parent company shareholders is expected to decrease to 2,180 million yen (decrease by 25.3% on a year-on-year basis).
The Group also forecasts that net sales to overseas increase to 6,520 million yen (increase by 59.6% on a year-on-year basis), accounting an 18.2% share of its 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