NOK reports lower operating income on weaker sales

Tokyo – Japanese sealing products and electronics components supplier NOK Corp. has reported lower operating income for the fiscal year ended 31 March, as weaker sales and higher costs weighed on earnings despite stronger foreign exchange gains.

Net sales for the year fell 3.7% year-on-year to Yen738.4 billion (€4 billion), while operating income declined 11.5% to Yen33.0 billion, the group said in its latest financial results statement.

Ordinary income, however, rose 3.7% to Yen49.8 billion, while profit attributable to owners of the parent increased 52.8% to Yen46.3 billion.

NOK said operating income declined “due to a decrease in net sales,” while ordinary income increased “mainly owing to higher foreign exchange gains.”

Within the group’s seal business, net sales increased 1.3% to Yen367.4 billion and operating income rose 6.3% to Yen27.9 billion.

NOK said that, although production of Japanese cars in Japan declined, sales increased due to “expanded sales to non-Japanese customers in China” and “the recovery of the automotive market in Thailand.”

Sales for industrial machinery applications also increased, “particularly for construction machinery in China,” the company added.

The group said segment sales were further supported by “the positive effect of foreign exchange rates.”

Operating income in the seal business rose despite deteriorating fixed costs, including personnel expenses, due to “price revision activities such as passing on selling prices.”

Furthermore, improvements in variable costs due to lower raw material prices and cost-reduction measures also helped improve earnings.

In the electronic products business, net sales fell 7.0% to Yen345.1 billion, while operating income slumped 55.6% to Yen4.0 billion.

The company said the decline reflected “the negative impact of foreign exchange rates,” lower component costs included in sales, and an overall fall in sales volumes.

Sales tied to automotive applications decreased “mainly because growth in sales for automotive battery applications slowed,” NOK added.

In other businesses, net sales declined 21.8% to Yen25.9 billion and operating income fell 46.4% to Yen1.1 billion.

NOK noted that all shares in Shinji Tech Group and seven other companies linked to its roll products business were transferred 30 Jan, although the transfer was deemed completed at the beginning of the fourth quarter. (ERJ report)

Looking ahead, the Japanese group forecast net sales of Yen756.6 billion for the next fiscal year, up 2.5% year-on-year, alongside operating income of Yen35.0 billion, up 6.1%.

For the seal business, NOK forecast net sales of Yen393.4 billion and operating income of Yen30.8 billion.

The group expects automotive sales growth despite lower Japanese vehicle production, citing “the positive effect of exchange rates,” “the transfer of products from other segments,” and “increased sales to non-Japanese customers in the Chinese market.”

Meanwhile, electronic products sales are forecast to rise to Yen356.8 billion, supported mainly by “the positive effect of exchange rates.”

NOK also expects “higher sales for smartphones and hard disc drives due to increased demand,” while automotive-related sales are expected to remain flat.

However, the group warned that “the tense situation in the Middle East may affect our business,” though its forecast assumes it can “absorb the potential impact” currently identified.

“We will continue to closely monitor developments and revise our performance outlook appropriately as needed,” the company added.