Changes in China's political, institutional, foreign-exchange and trade environment

「The appreciation of the yen caused the average Chinese renminbi exchange rate during the period to fall approximately 2% year on year, negatively affecting the consolidated financial statements translated into yen.」

「The appreciation of the yen caused the average renminbi exchange rate during the period to fall approximately 3.3% year on year, negatively affecting the yen-translated amounts in the Chinese financial statements.」

「Although the average Chinese renminbi exchange rate during the period fell approximately 5% year on year due to the appreciation of the yen, both net sales and profit increased for the third consecutive period and reached record highs.」

「As a result, although the average renminbi exchange rate during the third quarter was approximately 5% lower year on year due to the appreciation of the yen, orders received during the third-quarter consolidated accounting period were ¥25,450 million, up 35.3% year on year; net sales were ¥21,846 million, up 28.3%; operating income was ¥3,180 million, up 36.3%; ordinary income was ¥3,186 million, up 43.9%; and profit attributable to owners of the parent was ¥2,292 million, up 41.9%. Net sales and profit both reached record highs for the period, with net sales setting a record for the third consecutive period.」

「As a result, although the average renminbi exchange rate during the second quarter was approximately 5% lower year on year due to the appreciation of the yen, net sales for the cumulative second-quarter consolidated period were ¥12,282 million, up 26.9% year on year; operating income was ¥1,429 million, up 16.4%; ordinary income was ¥1,472 million, up 24.6%; and profit attributable to owners of the parent was ¥1,075 million, up 23.2%. Net sales and profit both reached record highs for the period, with net sales setting a record for the third consecutive period.」

「However, the company believes that risks such as factory operating restrictions arising from responses to environmental regulations and the holding of political events will continue to occur.」

「However, environmental regulations in China are being strengthened rapidly, and cases have been occurring one after another in which companies have been unable to respond fully and have been subject to fines or restrictions or suspension of production for regulatory violations.」

「However, environmental regulations in China are being strengthened rapidly, and cases have been occurring one after another in which companies have been unable to respond fully and have been subject to fines or restrictions or suspension of production for regulatory violations. Sales were affected by temporary factory operating restrictions associated with an international political summit held in Qingdao in June.」

「As a result, net sales for the cumulative first-quarter consolidated period were ¥3,830 million, up 8.4% year on year. Operating income, however, was ¥367 million, down 5.8%, due to successive environmental investments at all 3 factories, including the installation of high-performance dust-collection equipment and wastewater-treatment equipment for painting, following the strengthening of environmental regulations by the Chinese authorities. This was also affected by start-up expenses and higher fixed costs, including depreciation, at 吉屋(青島)家居有限公司, a company that manufactures and sells sinks, washbasins and storage boxes and began trial operations in October last year.」

「The strengthening of environmental regulations also had a significant impact on the production activities of factories, including those operated by Japanese companies, through substantial expenditures on capital investment to address VOCs and dust, as well as production stoppages.」

「The strengthening of environmental regulations also had a significant impact on the production activities of factories, including those operated by Japanese companies, with small and medium-sized factories closing one after another.」

「The depreciation of the local currency amid the appreciation of the yen during the consolidated fiscal year resulted in an approximately 15% negative impact on results.」

「The depreciation of the local currency amid the appreciation of the yen during the cumulative third-quarter consolidated period had an approximately 15% negative impact on results when the China business was translated into yen for the consolidated financial statements.」

「China sales on a local-currency basis, excluding the impact of foreign exchange, increased 1.5% year on year, but the depreciation of the local currency amid the recent appreciation of the yen also affected results.」

「Although the depreciation of local currencies against the yen in the recent yen appreciation environment affected results, during the cumulative first-quarter consolidated period, net sales were ¥3,180 million, up 0.2% year on year, and operating income was ¥413 million, up 12.9%. Due in part to foreign-exchange losses, ordinary income was ¥372 million, down 1.2%, and profit attributable to owners of the parent was ¥254 million, down 0.9%.」

「In China, where the Group conducts production, sales and procurement, political and economic instability, unexpected changes in laws or regulations, trade protection measures and changes in import and export licensing requirements, tax reforms, foreign-exchange fluctuations, and risks associated with the collection of trade receivables based on business practices specific to China's construction industry could arise and adversely affect the Group's results of operations and financial position, although it has no history of bad debts to date.」