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6 SEP 2016

Company Analysis

IB9FB0

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Date/Year of Module: 2015-2016

Submission Deadline: 7 SEP

Word Count:

3898

Number of Pages:

17

Question: [Individual Reflective Journal]



This is to certify that the work I am submitting is my own. All external references
and sources are clearly acknowledged and identified within the contents. I am aware
of the University of Warwick regulation concerning plagiarism and collusion.

No substantial part(s) of the work submitted here has also been submitted by me in
other assessments for accredited courses of study, and I acknowledge that if this has
been done an appropriate reduction in the mark I might otherwise have received will
be made.

Introduction

Despite the growing presence of Asian apparel labels such as Uniqlo, Muji, Giordano
and Bossini (Lopez & Fan, 2009), the studies of Asian apparel labels have been
emphasizing on its role as manufacturer rather than their internationalization. The
extensive research on Western apparel labels internationalization was driven by their
stable market positions with superior brand equity worldwide. With the flagship opening
in Boston and Chicago in last October, Uniqlo once again proves that its becoming
global as a label from Japan.

The study is conducted in two functional approaches: Internationalization strategy
analysis and Financial analysis of Uniqlo. In the first approach, the review of two
internationalization theoretical frameworks and previous studies on apparel labels
global expansion explains the purpose of this study. The expansion pattern and
strategies of Uniqlo will be analyzed based on these frameworks and compared with
some of its competitors. After that, challenges of these strategies in different markets
will be discussed. The second approach aims at revealing the reasons behind these
challenges through financial analysis. Data used is from secondary sources such as
annual reports, media announcements and business journals. Lastly, managerial
implication and recommendations will be given for the company.
Internationalization Strategy Analysis

Literature Review

When I was doing my BSc in International Business, it was noticed that most existing
internationalization theoretical frameworks have been based on Western case studies,
let alone the internationalization studies in apparel labels. For instance, there has been
research on labels like Marks & Spencer by Jackson & Sparks(2005) and Zara by
Lopez & Fan(2009) Bhardwaj et al. (2011) with the exception of a study on two Asian
labels, Muji and Giordano by Woo & Jin(2014). Jin & Cedrola(2016) discussed this
issue briefly in their recent book. The reasons behind the lack of presence among
academia is that Asia has been serving as a starter stage of the apparel supply chain
since WW II because of their low labor costs. With the required level of marketing and

knowhow, the internationalization of an apparel label only happens when the economic
developed to a certain extent(Jin & Cedrola,2016).
This analysis aims to fill in the gap of Asian apparel labels internationalization in
existing literature.

One of the most established internationalization theories is the Stage model which
views internationalization as an incremental process by reducing market
uncertainty(Forsgren,2002). In other words, a company starts to enter neighboring
countries with lower uncertainty to gain experiential knowledge, followed by further
markets with greater uncertainty which will be reduced by their previous entry
experience.

Stage model was challenged by another influential theory, the OLI framework of
Dunning (1977). Dunning argues that companies decisions of entering foreign market
depend on their competitive advantages known as Ownership(O), Location(L) and
Internalization(I). Ownership advantages refers to the knowledge or resources of the
company; location advantages refer to the target market's attractiveness;
Internalization refers the required system and structure to transfer tangible and
intangible assets within the international organization(Decker&Zhao,2014).


Overview of overseas expansion

The retail giant established its first store in 1984 in Japan; its internationalization began
with its first venture overseas in the UK in 2001. Today, Uniqlo is operating in 17
countries with more than 1700 stores. By the end of 2015, the number of stores
overseas surpassed that of Japan as recorded in its Annual Report 2015. The label
reported 164 billion yen of operating profit in FY2015. The growth rate of its sales
outside of Japan has been almost two times higher than that of its sales in Japan since
2013. The number of overseas store exploded to almost 800 in 2015, up from 136 in
2010. Now overseas growth become its key to the goal of becoming the top apparel
retailer worldwide and tripling its current sales by 2020.

Pattern of Internationalization

With the exception of Uniqlos failed attempt to enter the UK market in 2001, it focused
on the nearby Asian countries including China, Korea and Hong Kong in the first few
years of its global expansion. This pattern, together with the depth of penetration as
seen by the number of stores, supported the Stage model which suggested that
companies enter to the nearby countries first and after the uncertainty in these markets
reduced, the company increase its scale of business there.

Next, Uniqlo targeted at further countries like the U.S, France and Russia from 2005
to 2009 after it gained stable position in some Asian markets. The major strategy in
these distant market was to launch flagship store at the most central and high-end area
so that it could raise the brand awareness quickly. The locational(L) advantage can
explain this move because conquering these major fashion cities are essential for
raising global reputation and brand recognition. This move didnt fit into Stage model
as Uniqlo returned to Asia later.

In the next few years, ignoring Australia and Germany which both only have one store,
Uniqlo has entered Taiwan, Malaysia, Thailand and Philippines from 2010 to 2011 and
later on Indonesia in 2013. The focus of Uniqlo came back to Asia because the
emerging Asian markets has high potential which can be viewed as the location(L)
advantage of OLI model. On the other hand, the fact that Uniqlo can better understand

and penetrate the Asian market due to their cultural and geographical proximity also
supports the Stage model.


Internationalization key strategies comparison with competitors

Global Design

Tadashi Yanai, founder of Uniqlo, made the decision that has been very uncommon in
Japan: all business of the company would be conducted in English as a part of his plan
to develop a global company. The founder had used Gap and other Western
companies as reference for its own business model. He advocated a flat organizational
structure where employees are encouraged to contribute ideas and innovative
changes are embraced. International executives and staff are also hired to speed
decision-making in the overseas business. Yanai also proposed a global pay system
where managers receive same salary from New York to Kuala Lumpur in the belief
that a same workload deserves same wages.


Integrated Supply Chain

Uniqlo carries an integrated supply chain system planning and controlling all stages of
its value chain from manufacturing to sale. Their exclusive partnership with
manufacturers allows them to secure a stable supply of high-quality materials including
denim and fiber (Jin & Cedrola, 2016). The system has been proved to contribute to
fast internationalization as seen in the case of Zara where turnaround became faster
as the result (Lopez&Fan,2009; Woo & Jin,2014). It is also an example of
internalization(I) advantage of OLI model where the system enables rapid transfer of
assets within the international operation when all the stages are under control(Zhao &
Deck,2004).

Brand Positioning Concept

Firstly, Uniqlo has a consistent and clear vision of providing high-quality and well-
designed basics at a price. The idea of made for all clothing was embedded in their
advertising campaign in different countries where the models range from 6 - 60 years
old, from gardeners to athletes - real people from all walks of life, instead of the high-
fashion model. It does not take in all the fashion trends, unlike some competitors who
sell copies off the runway. However, it isnt trying to stop people wearing trendy clothes
from other labels, mix-and-match is the way to enjoy clothing; you can wear a biker
coat of Diesel and a pair of jeans from Uniqlo which is not out of surprise on any day.

Secondly, Uniqlo incorporate innovation into their strategic products, further
emphasizing on its quality and performance aspects and differentiate themselves from
the fast fashion labels. During product development, the R&D team and designers
develop and choose the fabrics before talking about fashion trends. The design is to
serve the innovative and high-quality fabric such as HeatTech, AIRism and Lifewear
which are their most signature branded innovations.

Their approach to positioning concept favors their internationalization in three ways:
The focus on basic clothing prevent much modifications for different countries to meet
their different fashion preference (Woo & Jin, 2014). Internationalization becomes
cheaper and faster. Secondly, Uniqlo catches the niche market where they can avoid
too much competition with the fast fashion label which already have superior market
positions in the Western countries. This approach enables a more efficient inventory
management system that will facilitate its integrated supply chain system and foster
the internal logistics needed for internationalization (Kim,2010).


Similarities and differences with competitors

While Uniqlo is expanding overseas, the brand that draws most comparison was
another Japanese label, Muji and both of them use the no logo strategy. However,
Mujis overseas business focus more heavily on homeware instead of apparel. Uniqlo
offers wider range of apparel in terms of styles and functions and seasonal collections.


Uniqlos rival in fast fashion labels includes H&M and Zara who both share the same
strategy of integrated supply chain as Uniqlo. Both have more profound presence with
H&M owning over 3500 stores worldwide and Zara owning more than 2000 stores.
H&M has the strongest position in the US with over 400 stores while Zara focused in
Spain with over 450 stores. Majority of Uniqlos physical locations concentrated in
Japan with over 700 stores.

One of the reason behind Uniqlos lack of presence in the Western markets may be
attributed to its minimalist approach to fashion and its narrow and deep policy (Woo
& Jin,2014). It refers to offering huge volume of limited style of items which also allows
the company to lower the cost through mass production. Obviously Zara and H&M
carry a broad and shallow policy where fashion trend is the focus. Zara targeted the
broadest range of customers by offering over 10000 different items a year while most
labels offer less than 4000 items. H&Ms unique strategy is to collaborate with high-
fashion designers such as Lanvin and Versace and introduce featured items which
become an distinctive line apart from its staple. To avoid being dated and boring
without copying the latest runway, Uniqlo also started to collaborate with celebrities
such as Pharrell Williams and famous designers to offer limited edition items.


Strategic Challenges in different markets

Uniqlos approach to avoid most branding logo is brave, if not downright risky. So far,
Uniqlos expansion in North America has been cautious, the reasons behind can be
traced back to its first attempt of entering foreign market. In 2002, Uniqlo launched
21 stores in the UK which most of them were closed in a few years. The label admitted
they failed to establish a brand identity before the aggressive stores opening and
learnt from the mistake.

While Uniqlo was cheap for the quality in Japan, there were already plenty of labels in
the UK offering quality clothing at reasonable prices and much wider range. The no-
logo strategy didnt relate to the customers either because in Europe consumers
bought by brand. Moreover, Uniqlo had a mismatched location strategy which they

located its flagship store in Knightsbridge where all the luxury malls and high-end
brands concentrated. The market was extremely different to Japan and Uniqlo didnt
fully educated itself on it.

The major component of Uniqlos global domination is its expansion in the US. As it
tries to penetrate in the US, it is tapping on a highly competitive terrain where trendy
labels like Abercrombie & Fitch and American Eagle can hardly emulate the industry
leader.
The companys expansion in the US has been facing some bumps since its first
attempt in 2005. Three mall stores were opened only to close them after few months.
Uniqlo said that opening stores in mall first when nobody knew about the brand was a
strategic mistake where it was hard to raise brand awareness in a mall. The company
launched its second time American expansion in 2011 with large-scale flagship stores
in central areas and high-profile campaigns. It has been striving for deeper penetration
in the US market in the past few years, but obviously something has gone wrong again.

After its announcement of cutting the US openings from 15 to 5 stores a year citing
weak sales and low brand recognition, Uniqlo quietly closed another 5 stores in the US
after three months in January this year, mostly in suburbs where the brand is poorly
recognized.

Financial Analysis

Revenue

2013

2014

2015

Revenue Growth

23.08% 20.99% 21.61%

The financial analysis is conducted on the period from FY2013 to FY2015 due to the
companys switch from JGAAP to IFRS in FY2013. Uniqlo's store count outside of
Japan exploded to 798 in FY2015 from 136 in FY2010. The revenue recorded a 61%
compound annual growth rate from FY2013 to FY2015. The company registered a
revenue of JPY1.68 trillion (21.61% year-on-year) in FY2015 where the Uniqlo
business outside of Japan contributed the most to the growth in revenue. The share of
Uniqlo International in the revenue of the company has increased from 22% in FY2013
to 35.9% in FY2015. Despite the strong performance of Asian market including China,
Hong Kong, Taiwan, Korea, the performance of the 42 U.S. stores fell short with an
widening operating losses. The brand recognition in the U.S market is still struggling
after the rapid opening of stores especially in the malls in FY2015. The year-on-year
growth in sales of Uniqlo International has slowed down to 45.9% in FY2015 from 64%
in FY2013 despite the 352 new stores opened since FY2013.


Goss Profit

2013

2014

Gross Profit Growth

18.62%

23.82% 21.26%

Gross profit Margin

49.45%

50.60% 50.45%

administrative 37.29%

39.71% 39.95%

Selling,

general

and

2015

expenses (% of Revenue)
Salaries (% of revenue)

12.26%

13.37% 13.72%

Most of the revenue is always reflected on its Gross Profit, which is a demonstration
of the financial stability and harmony. The gross profit has been increasing rapidly over
the period with a 21% growth year-on-year to JPY 849billion in FY2015. However, the
gross profit margin decreased by 0.15% to 50.45% in FY2015 after a rise in FY2014
due to the higher the selling, general and administrative expenses(SGAE) relatively to
the revenue. The ratio of SGAE to revenue has increased by 2.66% since FY2013 due
to the higher cost of salaries, as well as higher distribution and warehousing expenses
after the decision of raising inventory of year-round basics. The ratio of salaries to
revenue has increased by more than 1.4% since FY2013. Another reason of the shrink
in gross profit margin is that Uniqlo Japan recorded a higher cost of sales due to some
procurement in spot exchange rates. Also the stores have to offer discounts to the
extremely price-sensitive customers.


Operating Profit

2013

2014

2015

Operating profit growth

5.1%

-2.76%

26.1%

Operating profit (millions of JPY)

134,101 130,402 164,463

Operating profit margin

11.7%

Impairment losses (millions of JPY) 5,068

9.4%

9.8%

23,960

16,146

Operating profit rebounded by 26% to 164 billion in FY2015 after the shrink in FY2014.
However, the operating profit margin is still 1.9% lower than that of 11.7% in FY2013.
One of the reason is the increase in impairment losses of JPY 24 billion in FY2014 and
JPY 16billion in FY2015 in the J Brand and Uniqlo U.S. stores. J brand was acquired
in 2012 however its performance fell short of expectation with an increasing operating
losses.

Indeed, the operating profit margin of Uniqlo has always been significantly lower than
its competitors and industry standard (FY2015: 9.8% for Uniqlo, 17.65% for
Inditex,14.9 for H&M). It is believed that the global expansion has been dragging down

the margin. Despite the increasing share of Uniqlo International in the revenue, it
should be noticed that the low-margin Uniqlo International is detrimental to the
operating profit margin of the company. Uniqlo Internationals operating profit margin
is 7.2% comparing to that of 15.0% of the saturated but mature Uniqlo Japan business.
The growth of operating profit of Uniqlo International shrank to 31.6% in FY2015 from
165.1% in FY2014 and 66.8% in FY 2013. The cost related to rapid openings can
make the operation came close to breaking even when the brand recognition is less
than desired in Europe and the U.S.


Non-operating income

2013

2014 2015

Finance income (Million of JPY)

22,269 6,001 17,354

Foreign exchange gains (Million of JPY) 21,667 5,104 15,084

The depreciation of Japanese yen in FY2013 and FY2015 generated most of the
companys non-operating income. It is expected the appreciation of Japanese yen due
to the BREXIT in FY2016 will bring substantial foreign exchange losses of over 25000
million (23446 million losses recorded in the first 3Q).


Cash flow
Free cash flow

36,890

54,272 61,786

Free cash flow(% of Revenue)

3.23%

3.92% 3.67%

Net cash from operating activities(% of Revenue) 8.70%

8.00% 8.02%

Income before income taxes(% of Revenue)

13.63% 9.80% 10.74%

Free cash flow and cash and cash equivalents at end of year has been increasing
since FY2013 to JPY 71786 and JPY 355212 respectively in FY2015. However, the
ratio of net cash from operating activities to the revenue shrank by 0.68% comparing
to FY2013 due to the dropping margin of profit before income taxes.


Performance Retio

Uniqlo

2013

2014

2015

ROE (%)

21.70% 12.50% 16.10%

ROA (%)

13.90% 7.90%

Return on Capital Employed (%) 15.300 10.366

10.20%
12.626

H&M
ROE (%)

38.4

41.3

38.1

Return on Capital Employed (%) 50.0

53.1

49.3

25%

26%

33%

34%

Inditex
ROE (%)

27%

Return on Capital Employed (%) 35%

The decrease of ROE by 5.6% and ROA by 3.7% respectively from FY2013 to FY2015
exhibits some fundamental problem in its operational strategy and asset utilization
efficiency. Comparing Uniqlos ROE and ROCE with the industry competitors, it seems
that Uniqlo can hardly achieve any outsize economic returns. All of the three return
ratios has been significantly lower than that of Inditex and Zara. It shows that Uniqlo
does not have much economic moat or competitive advantage to its largest
competitors. It can be attributed to the lack of economies of scales comparing to the

two competitors. The fact that Uniqlo is unwilling to give up quality for lower cost by
switching to cheaper supply more or less made it unable to leverage its purchasing
power more effectively than its competitors.

2013

2014

2015

Asset Turnover

1.26

1.39

1.44

However, Uniqlo has been improving its asset turnover since FY2013 which means
the company is generating more revenue from per dollar of assets. In FY2015, the
asset turnover is 1.44 for Uniqlo, much higher than 1.27 of Inditex. Together with the
ratios in previous paragraph, the manufacturing capabilities of the company are
seemingly efficient but there are alarming operational inefficiencies. Again, this shows
that Uniqlos low profit margin is dragging down its ROA, ROE and ROCE (ROA=Net
Profit Margin*Asset Turnover).


Financing

2013

2014

2015

D/E Ratio

0.063

0.05

0.04

Interest-bearing debt

37,259 37,561 38,035

Non-current financial liabilities(% OF E+L) 3.34% 2.78% 2.19%

Its debt to equity ratio is significant higher than that of competitors (D/E ratio in FY2015:
4.9% for Uniqlo,0.36% for Inditex 0.49% for industry). This can be explained by the
R&D-intensive nature of Uniqlo. The D/E ratio is not concerning. The ratio of non-
current financial liabilities to asset shows healthy financing that Uniqlo has managed
to reduce its proportion of debt while having a higher debt year-on-year.

Liquidity

2013

2014

2015

Current Ratio

2.93

2.62

2.99

Quick Ratio

2.16

1.80

2.10

Interest Cover

247.19

172.79

177.85

Total current assets(% of Total asset)

70.74% 72.26% 75.14%

As expected from an apparel company, current asset accounts for the most of the total
asset with over 70% in the past 3 years. The increase of the ratio is because of the
increase of inventory. Interest does not seem to be a problem for Uniqlo as seen by
the high interest cover. There are more than sufficient short-term assets to cover the
current liabilities as It has a high current ratio and quick ratio throughout the period
which is considerably high than Inditex and the industry standard (Current ratio in FY
2015: 2.99 for Uniqlo, 1.6 for Inditex and 1.72 for industry standard)

Inventory

2013

2014

2015

Inventory Turnover

3.44

3.06

3.20

Day Sales of Inventory

105

119

113

Inventories (% OF ASSET)

18.59% 22.50% 22.34%

Inventory turnover has become slower since FY2013 where it took 105 days to sell the
inventory on hand, it took 14 more days in FY2014. It is because the firm has decided
in FY 2014 to increase inventory on basic year-around items. Lower inventory turnover
increases the warehousing expenses. Moreover, as new stores are opened rapidly,

the company is piling up more inventory, as seen by the increasing ratio of inventories
to the total asset (FY2013: 28.59% - FY2015: 22.34%).


Recommendations

From the financial analysis, it is found that there is serious operational inefficiencies
which has significantly affected the profit margin as reflected by its ability to convert
the investment in assets and inventories into cash flow. The root of the operational
inefficiencies can be attributed to the aggressive internationalization. As seen from the
decreasing margin of Uniqlo International comparing to the growing margin of Uniqlo
Japan which is of double size. 7.295%,7.95%7.17% 14.17,14.8,15.0% .

While the label claimed that they have learned their lesson from the past, their
expansion policy still seems too ambitious at times. The target of opening 1000 shops
in China by 2020 seems too aggressive and it can make Uniqlo become over-
dependent on one country. The company sometimes seemed in a rush to match the
industry leader. Under the assumption of constant growth rate of store openings,
Uniqlo International store count is estimated to be 2000, which the Chinese market will
occupy half of it. The company should be more cautious as the slowdown of economic
growth in China can have a huge impact on its global sector.

However in the long term, the increasing scale of economies of Uniqlo International
will hopefully expand the margins when the operation efficiencies improve due to the
growing scale. Fixed overheads will be more widely spread. When the label gains
higher brand recognition in these markets, it should focus on a high-quality product
mix which has higher value-added to push the margins.

The strong financial performance as reflected in the growing revenue and net income
should not make the company off guard. The troubles with its expansion in the U.S.
shows a range of shortfalls including brand marketing, supply chain management and
product planning agility which requires immediate solution. The existing unified global
marketing strategy which the pricing, salaries and advertising are same in all the
countries, needs to be more agile and flexible to reflect the different market situation

and brand acceptance. Local management is the key: product modification in response
to the different demands without giving up its branding concept. While retaining its
price-conscious customers who are looking for minimalist basic clothings, it is also
important to capture some fashion element and avoid coming off as boring and uncool,
thus broadening its customer base.

In terms of product planning agility, the company should introduce items which suit the
local weather. The troubles in its foreign market sales have been related to the
abnormal warm weather which hurts the sales of winter clothings. If thats the case,
the local management should have displayed less seasonal-sensitive items and
introduce its spring collection earlier. Retailers needs to respond and adapt quickly to
circumstance or otherwise there will be serious customer defection given the low
switching cost in the apparel industry.

Bibliography

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Dunning, J. H. (1977). Trade, location of economic activity and the MNE: A search for an
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Forsgren, M. (2002). The concept of learning in the Uppsala internationalization process
model: a critical review. International business review, 11(3), 257-277.
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Jin, B., & Cedrola, E. (Eds.). (2016). Fashion Brand Internationalization: Opportunities and
Challenges. Springer.

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Lopez, C., & Fan, Y. (2009). Internationalisation of the Spanish fashion brand Zara. Journal of
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theories to the cases of Giordano and Muji. Fashion and Textiles, 1(1), 1-14.
http://link.springer.com/article/10.1186/s40691-014-0004-7

Zhao, X., & Decker, R. (2004). Choice of foreign market entry mode-Cognitions from
empirical and theoretical studies.

Common-size of I/S
Revenue
Cost of sales
Gross profit Margin
Selling, general and
administrative expenses
Advertising and promotion
Rental expenses
Depreciation and amortization

Outsourcing
Salaries
Others
Other income
Foreign exchange gains
Gains on sales of property, plant
and equipment
Others
Other expenses
Foreign exchange losses
Loss on retirement of property,
plant and equipment
Impairment losses
Others
Operating profit Margin
Finance income
Foreign exchange gains
Interest income
Dividend income
Others
Finance costs
Foreign exchange losses
Interest expenses
Others
Profit before income taxes
Income taxes
Profit for the year
Attributable to
Owners of the parent
Non-controlling interests

Common-size of B/S
Cash and cash equivalents
Trade and other receivables
Other current financial assets
Inventories
Derivative financial assets
Income taxes receivables
Others
Total current assets

FY2013 FY2014 FY2015

100.00% 100.00% 100.00%
50.55% 49.40% 49.55%
49.45% 50.60% 50.45%
37.29%
4.61%
9.74%
2.07%
1.50%
12.26%
7.11%
0.35%
0.18%

39.71%
4.41%
10.03%
2.23%
1.66%
13.37%
8.02%
0.51%
0.28%

39.95%
4.07%
9.90%
2.25%
1.74%
13.72%
8.27%
0.52%
0.35%

0.03%
0.14%
0.78%

0.07%
0.15%
1.97%

0.00%
0.17%
1.25%

0.05%
0.44%

0.03%
1.73%

11.73%
1.95%
1.90%
0.05%
0.00%

9.43%
0.43%
0.37%
0.06%
0.00%

0.06%

0.07%

0.15%
0.96%
0.05%
9.78%
1.03%
0.90%
0.09%
0.00%
0.05%
0.07%

0.06%

0.07%

13.63%
4.22%
9.40%

9.80%
4.06%
5.74%

0.07%
0.00%
10.74%
3.76%
6.98%

9%
0%

5%
0%

7%
0%

32.92%
4.21%
0.27%
18.59%
12.61%
1.00%
1.14%
70.74%

31.65%
4.78%
0.92%
22.50%
9.99%
1.20%
1.22%
72.26%

30.52%
3.85%
1.94%
22.34%
13.53%
1.60%
1.35%
75.14%

Non-current assets
Property, plant and equipment
Goodwill
Other intangible assets
Non-current financial assets
Deferred tax assets
Others
Total non-current assets
Total assets
Liabilities and equity
LIABILITIES
Current liabilities
Trade and other payables
Derivative financial liabilities
Other current financial liabilities
Income taxes payable
Provisions
Others
Total current liabilities
Non-current liabilities
Non-current financial liabilities
Provisions
Deferred tax liabilities
Others
Total non-current liabilities
Total liabilities
EQUITY
Capital stock
Capital surplus
Retained earnings
Treasury stock, at cost
Other components of equity
Equity attributable to owners of
the parent
Non-controlling interests
Total equity
Total liabilities and equity

10.14% 11.53% 11.11%

4.11%
2.69%
2.33%
5.86%
4.73%
3.52%
7.06%
7.18%
6.53%
1.72%
1.13%
0.95%
0.37%
0.47%
0.41%
29.26% 27.74% 24.86%
100.00% 100.00% 100.00%

17.02%
1.05%
2.97%
1.27%
1.84%
24.14%

18.66%
0.10%
1.28%
3.30%
1.63%
2.57%
27.53%

15.60%
0.01%
1.33%
3.16%
1.94%
3.07%
25.11%

3.34%
0.65%
5.52%
0.92%
10.42%
34.56%

2.78%
0.78%
3.77%
1.05%
8.37%
35.90%

2.19%
0.88%
4.06%
1.17%
8.31%
33.42%

1.14%
0.76%
53.46%
-1.76%
9.70%

1.04%
0.99%
52.98%
-1.59%
8.91%

0.88%
0.99%
51.78%
-1.35%
12.22%

63.30% 62.32% 64.53%

2.14%
1.78%
2.05%
65.44% 64.10% 66.58%
100.00% 100.00% 100.00%

Ratios

Current Ratio
Quick Ratio
D/E Ratio
Asset Turnover
Inventory Turnover
Day Sales of Inventory

2.93
2.16
6.32%
1.27
3.45
105.82

2.62
1.81
5.91%
1.39
3.06
119.26

2.99
2.10
4.91%
1.45
3.20
113.89

Revenue

Income before income taxes

Depreciation and amortization
Impairment losses
Increase/(decrease) in allowance for doubtful
accounts
Increase/(decrease) in other provisions
Interest and dividend income
Interest expenses
Foreign exchange losses/(gains)
Losses on retirement of property, plant and
equipment
Decrease/(increase) in trade and other
receivables
Decrease/(increase) in inventories
Increase/(decrease) in trade and other
payables
Decrease/(increase) in other assets
Increase/(decrease) in other liabilities
Others, net
Subtotal
Interest and dividend income received
Interest paid
Income taxes paid
Income taxes refund
Net cash from operating activities
Decrease/(increase) in bank deposits with
maturity over 3 months
Purchases of property, plant and equipments
Proceeds from sales of property, plant and
equipments
Purchases of intangible assets
Proceeds from sales of intangible assets
Payments for lease and guarantee deposits
Proceeds from collection of lease and
guarantee deposits
Increase in construction assistance fund
receivables
Decrease in construction assistance fund
receivables
Acquisitions, net of cash acquired

2013
1,142,971

2014
1,382,935

2015
1,681,781

155,732
23,607
5,068

135,470
30,808
23,960

180,676
37,758
16,146

-258
2,298
-601
638
-21,667

-24
2,703
-897
933
-5,104

372
5,096
-1,477
1,137
-15,084

519

391

2,479

-11,070
-51,426

-7,489
-45,627

3,977
-29,295

46,911
-4,326
11,395
-1,878
154,940
598
-642
-65,795
10,375
99,474

10,420
-6,552
25,958
1,265
166,216
896
-938
-65,534
9,954
110,595

-18,611
-1,900
22,839
1,339
205,456
1,477
-1,155
-84,728
13,881
134,931

-27,668

-2,156
-41,414

-16,173
-44,663

1,399
-7,525

261
-6,503

280
-4,070
0 -
-5,205

-
-6,982

-8,849

2,126

841

3,442

-2,736

-2,892

-2,445

1,706
-26,771 -

1,895

1,895
-

Others, net
Net cash used in
investing activities
Net increase/(decrease) in short-term loans
payable
Additions to long-term loans payable
Repayments of long-term loans payable
Cash dividends paid
Cash dividends paid to minority interests
Repayments of lease obligations
Acquisition of
non-controlling interests
Others, net
Net cash used in
financing activities

-243

511

-109

-62,584

-56,323

-73,145

-1,722
862
1,814
16,640 -
-
-7,474
-3,826
-5,090
-27,507
-30,574
-33,127
-891
-633
-1,226
-3,298
-3,656
-4,587
-
28

-6,026 -
-205

431

-24,226

-44,060

-41,784

Effect of exchanges on cash and cash

equivalents
Net increase/(decrease) in cash and cash
equivalents
Cash and cash equivalents at beginning of year

18,020

7,129

21,162

30,684
266,023

17,340
296,708

41,162
314,049

Cash and cash equivalents at end of year

296,708

314,049

355,212

36,890

54,272

61,786

13.63%

9.80%

10.74%

2.07%

2.23%

2.25%

0.44%

1.73%

0.96%

-0.02%

0.00%

0.02%

0.20%

0.20%

0.30%

Free cash flow

*FR adopted IFRS from fiscal 2014. Fiscal 2013
data recalculated using IFRS
*"-"denotes items where the balance is zero. "0"
denotes items where the balance is less than 1
million yen
*"Cash and cash equivalents" refers to cash and
deposits, time deposits with a term of less than 3
months, and short-term investment securities
*Free cash flow = Net cash from operating activities
+ Net cash used in investment activities.
Common-size of CF/S

Income before income taxes

Depreciation and amortization
Impairment losses
Increase/(decrease) in allowance for doubtful
accounts
Increase/(decrease) in other provisions

Interest and dividend income

Interest expenses
Foreign exchange losses/(gains)
Losses on retirement of property, plant and
equipment
Decrease/(increase) in trade and other
receivables
Decrease/(increase) in inventories
Increase/(decrease) in trade and other
payables
Decrease/(increase) in other assets
Increase/(decrease) in other liabilities
Others, net
Subtotal
Interest and dividend income received
Interest paid
Income taxes paid
Income taxes refund
Net cash from operating activities
Decrease/(increase) in bank deposits with
maturity over 3 months
Purchases of property, plant and equipments
Proceeds from sales of property, plant and
equipments
Purchases of intangible assets
Proceeds from sales of intangible assets
Payments for lease and guarantee deposits
Proceeds from collection of lease and
guarantee deposits
Increase in construction assistance fund
receivables
Decrease in construction assistance fund
receivables
Acquisitions, net of cash acquired
Others, net
Net cash used in
investing activities
Net increase/(decrease) in short-term loans
payable
Additions to long-term loans payable
Repayments of long-term loans payable

-0.05%

-0.06%

-0.09%

0.06%

0.07%

0.07%

-1.90%

-0.37%

-0.90%

0.05%

0.03%

0.15%

-0.97%

-0.54%

0.24%

-4.50%

-3.30%

-1.74%

4.10%

0.75%

-1.11%

-0.38%

-0.47%

-0.11%

1.00%

1.88%

1.36%

-0.16%

0.09%

0.08%

13.56%

12.02%

12.22%

0.05%

0.06%

0.09%

-0.06%

-0.07%

-0.07%

-5.76%

-4.74%

-5.04%

0.91%

0.72%

0.83%

8.70%

8.00%

8.02%

0.00%

-0.16%

-0.96%

-2.42%

-2.99%

-2.66%

0.02%

0.10%

0.02%

-0.36%

-0.54%

-0.39%

-0.46%

-0.50%

-0.53%

0.19%

0.06%

0.20%

-0.24%

-0.21%

-0.15%

0.15%

0.14%

0.11%

-0.02%

0.04%

-0.01%

-5.48%

-4.07%

-4.35%

-0.15%

0.06%

0.11%

-0.28%

-0.30%

0.00%

-2.34%

1.46%
-0.65%

Cash dividends paid

Cash dividends paid to minority interests
Repayments of lease obligations
Acquisition of
non-controlling interests
Others, net
Net cash used in
financing activities
Effect of exchanges on cash and cash
equivalents
Net increase/(decrease) in cash and cash
equivalents
Cash and cash equivalents at beginning of year

-2.41%

-2.21%

-1.97%

-0.08%

-0.05%

-0.07%

-0.29%

-0.26%

-0.27%

-0.44%
0.00%

-0.01%

0.03%

-2.12%

-3.19%

-2.48%

2.68%

1.25%

2.45%

3.23%

3.92%

3.67%

Cash and cash equivalents at end of year

Free cash flow

FY2015