Legal, Political and Economic, Labor, and Supply Interruption Risks Associated with Reliance on Overseas Production
First written in FY2018. 12 of 20 entries say "Materialised", first in FY2019-Q2. Latest entry: FY2027-H1.
Yokowo moved to the "Worse" side of this theme in 2018, 3 years before the typical company in this theme (2021).
The whole theme swung hardest in 2022: 32 of 66 companies on the "Worse" side.
38 other companies' latest entry also says "Restated".
- FY2027-H1MaterialisedAnnual report
「Segment profit was ¥143 million, down 84.0% year on year, due to costs associated with optimizing the production structure at Chinese production sites, higher costs at the Vietnam and Philippines production sites resulting from the weaker yen, increased transportation costs due to higher crude oil prices, and surging raw material prices.」
Costs of optimizing production structures at overseas production sites, higher costs due to foreign exchange movements, and increases in transportation and raw material costs were reflected in VCCS’s lower profit. - FY2024RestatedAnnual report
「More than 80% of our production activities are carried out by production subsidiaries in China, Malaysia, Vietnam, the United States and the Philippines. If changes in the legal environment or economic policies in those countries occur, our earnings outlook may fluctuate substantially.」
The company continues to identify dependence on overseas production, with production subsidiaries in 5 countries accounting for more than 80% of output, and the risk of earnings fluctuations caused by changes in the legal environment and economic policies. - FY2024-Q3MitigatedAnnual report
「Segment profit was ¥2,009 million, compared with a loss of ¥1,434 million in the same period of the previous year. This was despite higher labor and other costs at the Chinese and Vietnamese production sites due to local-currency appreciation and higher production volume, as profit increased with higher revenue, logistics costs declined with the easing of ocean freight rates, and recovery of higher costs progressed.」
Although labor costs at the China and Vietnam production sites continued to rise, lower logistics costs as ocean freight rates eased and progress in recovering higher costs eased the earnings burden arising from overseas production, and VCCS swung from a loss in the same period of the previous year to a profit. - FY2024-Q2Logistics costs declined, while labor costs at overseas sites continued to riseAnnual report
「Segment profit was ¥717 million, compared with a loss of ¥1,287 million in the same period of the previous year. This was despite higher labor and other costs at the Chinese and Vietnamese production sites as a result of local-currency appreciation, as logistics costs declined with the easing of ocean freight rates and profit increased with higher revenue.」
Although labor costs continued to rise at overseas production sites, VCCS’s profit and loss improved as lower logistics costs resulting from the easing of ocean freight rates offset the increase. - FY2024-Q1Logistics costs declined, while labor costs at overseas sites continued to riseAnnual report
「Although labor costs and other expenses at the China and Vietnam production sites increased due to the appreciation of local currencies, profit was ¥155 million, compared with a loss of ¥1,102 million in the same period of the previous year, due to lower logistics costs as ocean freight rates eased and higher profit from increased revenue.」
Regarding the burden associated with dependence on overseas production, logistics costs declined as ocean freight rates eased, while higher labor costs at the China and Vietnam production sites continued. - FY2023-Q3WorsenedAnnual report
「Segment loss was ¥1,728 million, compared with a loss of ¥788 million in the same period of the previous year. This was despite partial recovery of higher costs, as costs increased due to persistently high raw material prices and ocean freight rates, raw material and labor costs increased at the Chinese and Vietnamese production sites as a result of local-currency appreciation, and productivity declined at the Chinese production site due to the spread of COVID-19.」
In addition to elevated raw-material and labor costs and ocean freight rates at overseas production sites, lower productivity caused by the spread of an infectious disease at the China production site became an actual loss factor, and losses in the automotive communications equipment business increased from the same period of the previous year. - FY2023-Q2WorsenedAnnual report
「Although costs remained elevated due to high raw-material prices and ocean freight rates and labor costs increased at the China and Vietnam production bases because of appreciation of local currencies, the loss in the second quarter narrowed substantially due to partial recovery of the higher costs and a decrease in deductions for unrealized profits related to inventory valuation. The segment posted a loss of ¥1,475 million, compared with a loss of ¥488 million in the same period of the previous year.」
Higher labor costs and elevated raw-material prices and ocean freight rates at overseas production sites continued to be actual loss factors, and cumulative losses in the automotive communications equipment business increased from the same period of the previous year. - FY2023-Q1MaterialisedAnnual report
「Segment loss was ¥1,201 million, compared with profit of ¥1 million in the same period of the previous year, due to continued higher logistics costs from soaring ocean freight rates and other factors, higher labor costs at the China and Vietnam production bases resulting from appreciation of local currencies, higher costs from rising raw-material prices, and a substantial increase in deductions for unrealized profits associated with higher inventory valuations resulting from the weaker yen.」
The burden of logistics, labor and raw-material costs and inventory valuation arising from foreign exchange movements at overseas production sites actually materialized and appeared as a loss in the automotive communications equipment segment. - FY2022WorsenedAnnual report
「More than 80% of our production activities are carried out by five production subsidiaries in China, Malaysia, Vietnam, the United States and the Philippines. If changes in the legal environment or economic policies in those countries occur, our earnings outlook may fluctuate substantially.」
The company states that overseas production is carried out by five subsidiaries, including the Philippines, and continues to identify the risks of regulatory and policy changes associated with dependence on overseas production of more than 80%. Longer logistics lead times and difficulty procuring materials have also continued to weigh on results. - FY2022-Q3MaterialisedAnnual report
「The substantial increase in inventories was due to higher inventories in transit in the automotive communications equipment segment as lead times for global ocean and air transportation continued to lengthen, as well as further increases in production and inventory levels to maintain supply in response to those conditions.」
Longer lead times for overseas logistics have continued to manifest themselves in higher inventories in transit and higher production and inventory levels to maintain supply. - FY2022-Q2MaterialisedAnnual report
「Sales of semiconductor back-end inspection fixtures, a core group product, exceeded the same period of the previous year despite some production delays caused by operating restrictions at the Malaysia plant during the lockdown, supported by steady growth in orders for sockets for logic semiconductor inspection and sockets compatible with high-frequency testing, as well as the launch of new mass production.」
The risk of supply interruptions related to overseas production sites materialized as operating restrictions and partial production delays at the Malaysia plant caused by the lockdown. - FY2022-Q1MaterialisedAnnual report
「Sales of semiconductor back-end inspection fixtures remained below the same period of the previous year, despite firm orders for sockets for logic semiconductor inspection and sockets compatible with high-frequency testing, due to a reactionary decline from the increase in orders in the same period of the previous year and partial production delays caused by operating restrictions at the Malaysia plant during the lockdown.」
The risk of supply interruptions and production delays associated with dependence on overseas production actually materialized as operating restrictions and partial production delays at the Malaysia plant caused by the lockdown. - FY2021MaterialisedAnnual report
「The global economy is expected to remain subdued due to the continuing threat of COVID-19, while our business environment remains extremely uncertain because of semiconductor shortages, soaring logistics costs and higher raw-material prices.」
Risks related to overseas production and the supply framework are actually affecting results through semiconductor shortages, soaring logistics costs, higher raw-material prices, difficulty procuring materials and production delays. - FY2021-Q1MaterialisedAnnual report
「Segment profit and loss was a loss of ¥942 million, compared with profit of ¥105 million in the same period of the previous year, due to lower profit from declining revenue, lower operating rates at both the China and Vietnam plants, and a higher fixed-cost ratio resulting from securing personnel in preparation for a recovery in production.」
Lower operating rates at overseas production sites and the fixed-cost burden of securing personnel in preparation for a recovery in production actually occurred, worsening the earnings of the automotive communications equipment segment from profit in the same period of the previous year to a loss. - FY2020MaterialisedAnnual report
「Segment profit was ¥30 million, down 93.8% from the previous fiscal year, due to higher start-up costs for newly introduced automated lines, temporary expenses caused by defects in newly procured materials, and increased holiday and overtime work resulting from temporary shortages of manufacturing personnel and delays in material supplies at Chinese production bases following the spread of COVID-19.」
Supply, labor and site-operating risks associated with dependence on overseas production actually materialized as staff shortages at the China site due to an infectious disease, delays in the supply of materials, and additional labor costs. - FY2020-Q3MaterialisedAnnual report
「Segment profit was ¥124 million, down 69.4% year on year, due to increased holiday and overtime work associated with the rapid transfer of production from China to the Vietnam plant, higher depreciation expenses for newly introduced automated lines, and temporary expenses arising from defects in newly procured materials.」
Risks related to the overseas production framework continued to materialize as higher labor and depreciation costs associated with the rapid transfer of production and costs caused by defects in procured materials. - FY2020-Q2MaterialisedAnnual report
「Segment profit was ¥109 million, down 58.1% year on year, due to increased holiday and overtime work associated with the rapid transfer of production from China to the Vietnam plant, higher depreciation expenses for newly introduced automated lines, and temporary loss costs arising from defects in newly procured materials.」
Risks related to the overseas production framework actually materialized as higher labor and depreciation costs associated with the rapid transfer of production and loss costs caused by defects in procured materials. - FY2020-Q1MaterialisedAnnual report
「In addition to higher product transportation costs caused by procurement delays due to shortages of materials, manufacturing labor costs increased with the expansion of business volume, resulting in profit of ¥105 million, down 28.2% year on year.」
Supply constraints and procurement delays related to the overseas production and supply framework actually occurred, affecting results through higher product transportation costs. - FY2019-Q2MaterialisedAnnual report
「Although manufacturing labor costs in China remained high and higher tariffs on products exported to the United States were a factor depressing profit, profit was ¥261 million, compared with a loss of ¥76 million in the same period of the previous year, due in part to lower transportation costs for components and products.」
Higher tariffs on products exported to the United States have emerged as a factor depressing profit, as a specific example of external-environment risks related to overseas bases and transactions. - FY2018First statedAnnual report
「More than 80% of our production activities are carried out by four production subsidiaries in China, Malaysia, Vietnam and the United States. If changes in the legal environment or economic policies in those countries, or demonstrations, strikes or other events arising from anti-Japanese sentiment, continue for an extended period and become large-scale, our earnings outlook may fluctuate substantially.」
Against a backdrop of overseas production accounting for more than 80%, the company lists changes in the legal environment and economic policies, social disruption, wages and labor-acquisition costs, and supply disruptions caused by infectious diseases and natural disasters as risks.