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Message from the CEO

President & CEO
Morifumi Wada

【A Retrospective Look at EIKEN's 80th Business Year】
Please allow me to begin by extending my heartfelt gratitude to all our shareholders for your continued support of EIKEN Group (the “Group”).
In the clinical diagnostics industry, restricted medical expenses are causing continued severity in the business environment, leading various companies to seek further cost competitiveness and proactive overseas expansion in order. Overseas, developed countries have an increasing need for efficiency to keep medical costs under control, and preventive care is expanding as well. Developing countries are building medical infrastructure in keeping with their increasing populations and economic development. As a result, continuing growth is anticipated in both types of countries.
Due to these conditions, the Group has been carrying out the following initiatives as our top priority issues. 1) Increasing our proprietary product share in the domestic market, 2) Accelerating global expansion, 3) Improving our research and development ability, and 4) Developing foundations to increase management efficiency.
The results of these efforts are reflected in the net sales for the consolidated fiscal year ended March 31, 2018. In addition to major growth in foreign-marketed product sales, our domestic sales also increased, especially among our flagship fecal occult blood diagnostic reagents product line, for total net sales of 34,991 million yen (an increase of 5.2% on a year-on-year basis).
In terms of profits, in addition to our efforts to improve the efficiency of expense usage, the development of a small-sized fully automatic genetic screening device was mostly completed, and the total research and development costs for this project were approximately 700 million yen. From these results, operating income was 3,478 million yen (a decrease of 12.5% on a year-on-year basis), ordinary income was 3,549 million yen (a decrease of 13.7% on a year-on-year basis), and net income attributable to parent company shareholders was 2,608 million yen (a decrease of 10.6% on a year-on-year basis).
In addition, the year-end dividend for the current term was 25 yen per share.

On the business side, the national colorectal cancer screening tests program instituted by the Australian government started in January 2018, and our fecal occult blood diagnostic products are being used. Also, in our urine test business cooperation with Sysmex Corporation, the dried product plant (DPP) facility launched in the previous fiscal year has started manufacturing and shipping out urine testing drugs, and these products are being steadily adopted by foreign countries. In our overseas genetic testing business, the adoption of pulmonary tuberculosis detection method (TB-LAMP) and malaria molecular diagnosis systems by Cameroon was confirmed, and testing will soon start. We will use this success to set a precedent and promote expansion into other countries.
On the research front, the development of our "Simprova" product, a small-sized fully automatic genetic screening device which uses the LAMP method, is nearly complete, and we are continuing to work toward early market entry.

【Outlook for the EIKEN's 81th Business Year】
Regarding the economic outlook for Japan in this fiscal year (ending March 2019), improvement is anticipated in employment and earnings conditions, as well as corporate profits, with the economy continuing a gradual recovery. In the medical field, policies such as specialization of sickbed functionality and improvement of family doctor capability are expected to transition to the next stage in preparation for the promotion of regional comprehensive care systems. Overseas, developed countries need both increased efficiency to control medical costs and expanded preventive care, and developing countries are building medical infrastructure to keep up with the demands of their increasing populations and growing economies. For these reasons, continuous growth in both types of countries is anticipated.
In light of these conditions, for the final fiscal year of our group's medium-term management plan (March 2017 - March 2019), the Group will continue carrying out initiatives for critical policies such as accelerating our global expansion projects.
Regarding our business performance, anticipated figures are as follows. Net sales: 36,760 million yen (an increase of 5.1% on a year-on-year basis), operating income: 4,200 million yen (an increase of 20.7% on a year-on-year basis), ordinary income: 4,230 million yen (an increase of 19.2% on a year-on-year basis), and net income attributable to parent company shareholders: 3,040 million yen (an increase of 16.5% on a year-on-year basis).
In addition, we anticipate 6,870 million yen in net sales to overseas (an increase of 27.1% on a year-on-year basis), comprising 18.7% of total sales.
We hope for the continuing support and enthusiasm of all our shareholders in the future.

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, 2014 March 31, 2015 March 31, 2016 March 31, 2017 March 31, 2018
Dividend amount per share (yen) 35 35 40 50 50
Dividend payout ratio (%) 32.1 30.4 30.1 31.4 35.1