Financial Results in FY2023
The results were mixed for each business but INNOTECH Group operating profit increased YoY.
In FY2023, INNOTECH Group consolidated operating profit increased YoY. System Service Business, such as for internally- developed CPU boards and cloud settlement system, was strong and the sales of EDA software of the Semiconductor Design-related business was stable. On the other hand, profit of the Test Solution Business declined as the recovery of demands for tester products was slow. Due to the continued recession in the semiconductor market since the second half of FY2022, the inventory level of semiconductor products remained high, thus the operation rate of semiconductor factories dropped, which affected the Test Solution Business.
However, despite the tough business environment as such, INNOTECH was able to achieve a certain level of profitability; we believe that this shows the solidness of INNOTECH Group management base.
Achievements and Challenges of the Previous Mid-range Management Plan (FY2019-2023)
We made achievements which would form the basis for our long-term growth, such as sales ratio increase for internally-developed products, co-creation and cooperation among the Group companies, and so on.
Our numeric target in the previous mid-term management plan was to achieve 8% ROE. In FY2021, 10.4％ ROE was marked and the target was achieved for a single year; however in FY2022 and FY2023, ROE was less than 8% due to the semiconductor market recession and the special loss which came from the loss on valuation of investment securities. Therefore, the profitability level was not consistently stable. In our mid-term management plan, the ROE numerical target is set as 10％ and INNOTECH will devise its strategy to improve its profitability and investment efficiency and to maintain 8% ROE or higher.
As for our achievements of the previous mid-term management plan, one of them was the sales ratio increase of INNOTECH internally-developed products. During the period of the previous mid-term management plan, the ratio continued to increase and the number grew from 68.9％ in FY2019 to 74.9％ in FY2023. This increase was achieved not by shrinking the trading house business but by strengthening the manufacturing function and enriching the product portfolio as well as expansion of our customer base, including customers overseas.
Also, co-creation and cooperation across our business units and group companies have started to bear fruit and it is getting reflected to the business results, which we see as another achievement from the previous mid-term management plan. In our new mid-term management plan, we will continue to pursue product development and enhance our added values so that we will create new products and services to help our customers resolve their issues and to further increase our profitability.
Concept and Measures of the New Mid-term Management Plan (FY2024-2026)
INNOTECH will further pursue INNOTECH-original added values under the new vision.
In devising the new mid-term management plan starting from the FY2024, the slogan “INNOTECH Changes the Future” was adopted to represent our vision. This slogan clearly describes our vision to see the world from our customers’ standpoint and to devote ourselves to technical innovation which will change the future. As INNOTECH continues to provide products and services with INNOTECH-original added values and resolve customers’ challenges, we believe that INNOTECH will achieve sustainable growth and contribute to addressing social issues.
In the new mid-term management plan, our strategy is to “Improve Our Operating Profit Ratio”, “Enhance Stability of Profitability”, and “Optimize the Business Portfolio”. INNOTECH will identify the areas of focus for growth, review its business portfolio, and redistribute the management resources to concentrate its investment in the areas of growth.
As for promotion of sustainability, INNOTECH will work to achieve the KPIs which are set for the five materiality items. In recent years, investment in human resources including pay raise, is drawing social attention. I personally believe as well that employees’ expertise, work experience, and skills are valuable assets which are worth the investment. INNOTECH will keep promoting diversity as well as secure and nurture human resources, review the compensation system, and enrich the employee welfare program.
Message to Shareholders and Investors
INNOTECH will strive to further enhance its corporate value as one of the important players in the semiconductor and electronics industry, both from financial and non-financial perspectives.
Semiconductors are regarded as strategic materials which support the country’s social infrastructure and national security, and governments worldwide are promoting industrial development and making investments. This is a very positive trend for INNOTECH business, and we expect the company can grow long-term along with such trend. In order for INNOTECH Group to expand along with such trend, its business strategy, financial strategy, and promotion of sustainability must be linked together organically and INNOTECH will continue to enhance its corporate value and contribute to the society for a long term and in a sustainable manner.
June, 2024
President and Representative DirectorNobuyuki Otsuka