In FY 2022, the cost of raw materials, energy and distribution rose sharply, significantly influencing our business performance. Despite our best efforts to reduce costs, increase production, and launch new products, we were unable to balance out the cost increases. We discussed our options with customers and decided to increase product prices.
Even after the adjustment of prices, however, according to the consolidated financial results for FY 2022, operating income was minus 713 million yen, ordinary income was minus 117 million yen, and net income was minus 1,204 million yen. The major cause of the decrease in net income was the inclusion of impairment loss in the heat insulation materials and flooring materials businesses. For both businesses, we continue promoting new product development as well as cost reduction from the viewpoint of lowering the break-even point and working on price revision. In addition, since costs are expected to remain high in the current fiscal year, we continue seeking proposals for values that provide effective solutions for problems encountered by our customers as well as the improvement of percentage yield and services while considering price revisions in other businesses.
Besides addressing increased costs, we need to adjust our business activities to a rapidly changing management environment. I look forward to the continuing support of our stakeholders.
Achilles (Foshan) New Materials Co., Ltd. was established in Foshan City, Guangdong Province, China in 2019 as a manufacturing and sales subsidiary of Achilles Corporation for interior materials for vehicles and aircraft. Due to COVID-19 pandemic, the installation of equipment was delayed. However, installation was completed and the company held its opening ceremony in December 2022. In this term, Achilles (Foshan) New Materials continues making proposals for specifications to customers using our technology and products to lead to full-scale mass production. Since EVs have rapidly become popular in China, Achilles (Foshan) New Materials utilizes the merits of its products to reinforce marketing for EVs.
At manufacturing bases in Japan, we have been increasing foam molding and processing equipment at plants manufacturing soft urethane foam. Furthermore, we have also installed foam molding equipment for research and development to improve quality and productivity as well as focusing on new product development. In regard to investments, we continue working as one to ensure the recovery of the investments.
We announced our agreement with the TCFD* recommendations in April 2023, and analyzed the risks and opportunities that climate change presents to our business using the less than 2 °C scenarios and 4 °C scenarios. When using the less than 2 °C scenario under the implementation of carbon tax in Japan, although the financial impact increases, we confirmed that our company businesses can be used as solutions. Since we have confirmed the impact of flooding risk when using the 4 °C scenario, we have taken appropriate mea-sures for mitigation.
While responding to the Japanese government’s goal of realizing carbon neutrality by 2050, Achilles Corporation also sets the goal of reducing greenhouse gas (GHG) emissions (Scope 1, 2) by 30% compared with FY 2018 by 2030. Specifically, we comprehensively ensure energy saving, the implementation of cogeneration equipment, the procurement of renewable energy, solar energy self-consumption, implementation of the J-credit Scheme, and the promotion of technologies that may become popular in the near future to optimize our business.
We also strive to identify Scope 3 of GHG emissions, and the reduction of GHG emissions at group companies, including overseas subsidiaries.
Achilles Corporation has expanded its businesses globally based on its plastic processing business. To fully utilize its combining technology, processing technology, equipment design capability, information processing technology, intellectual property creation capability including new-product development, as well as improving capabilities required to promote overseas business expansion, including unique sales strategies, corporate management capability that includes financial and accounting abilities, language proficiency, and skills for overseas business, it is essential for the company to cultivate employees in individual specializations and utilize them as pillars to ensure sustainable growth. In order to do so, we have established a basic policy for the cultivation and utilization of diverse human resources. The basic concept is that, through communication, the diverse values and personalities of diverse human resources can be integrat-ed, leading to the creation of innovation. Achilles Corporation aims to cultivate a climate and culture that allows individual employees to fully express their motivation and capability. As an important aspect of cultivating diversity, it is essential for us to assign female employees to managerial positions. As a prerequisite to this, we have ensured the hiring of a certain rate of female employees, and we have supported their acquisition of necessary skills through opportunities available in a wide variety of training.
In addition, to respond to work requiring specialized skills and experience, we actively hire mid-career employees for managerial positions.
Employees are the most important asset that the Achilles Group has, and the growth of our employees is essential for the sustainable growth of the Achilles Group.
Looking at the portfolio of our company’s sales, the shoes business accounts for 13.7%, the plastics business accounts for 50.9%, and the industrial materials business accounts for 35.4%.
Since it is urgent that the Achilles’ shoes business improves profits, we select and concentrate categories. We conduct detailed market analyses in individual segments to identify and focus on the most important ones. We will also work on early improvement of profitability by further increasing business efficiency using web systems and expanding sales to East Asia to minimize the influence of exchange rates.
As our plastics business encountered stagnation in sales for automobile-related businesses due to COVID-19 pandemic, in FY 2023, it is important for us to absorb costs that have remained elevated while anticipating recovery. We prioritize the expansion of business in the Disaster Response Division, which was established in FY 2021. The disaster response business leverages our advantage in diverse product manufacturing technologies. At the newly established disaster prevention plant, we promote the expansion of sales by utilizing our comprehensive capabilities to accelerate new product development in areas such as products for use by local residents in areas affected by disasters, and products relating to employer support for individuals unable to return home during disasters, in line with the shift in emphasis from public assistance to mutual assistance and self-help. In addition, we develop products such as rescue boats and air tents for disaster response.
In the industrial materials business, we need to improve profitability in its heat insulation materials business. This business has the potential to contribute to the popularization of high-quality energy-saving housing, which Achilles Corporation sets as one of the major pillars of its business strategy. As an important sales opportunity in response to the current state in which semiconductor manufacturing sites have been built nationwide, the Industrial Materials Division is handling antistatic products and reinforcing marketing.
In regard to our overseas business, we are planning the reinforcement of manufacturing facilities for medical film at Achilles USA, Inc. as we promote the expansion of overseas business, including business conducted by Achilles (Foshan) New Materials Co., Ltd. We are also entering new fields utilizing both existing and newly-established overseas manufacturing and sales bases.
As described above, improvement in the profitability of individual businesses is an urgent issue; however, from the medium- to longterm viewpoint, we are of the opinion that timely and appropriate investment can address these issues to ensure the growth of our business since we have many growth opportunities due to a broad range of individual segment fields.
Our hope is to use Achilles Corporation products and services to increase customer smiles by solving their problems and social issues, confident that doing so will lead to a society filled with smiles. In order to do so, we cultivate corporate culture while building a safe and secure working environment where all employees respect one another and work both happily and with a high sense of responsibility.
With its corporate philosophy, “Living with Society” = “Customer First,” as its backbone, the Achilles Group continues to make each step forward a step toward realizing a society filled with smiles through the unified effort of all group companies.