An active market environment contributed to sales and profit growth in Q2. We will aim for the 11th consecutive period of growth in both sales and profit by meeting the ever-growing demand for engineers from our clients, including manufacturers in industries related to automobiles and semiconductor manufacturing equipment.
The demand for engineers was strong across all industry fields but mainly from manufacturers in industries related to automobiles and semiconductor manufacturing equipment that are developing at an increasing pace.
Manufacturers in industries related to automobiles, including electric vehicles, hybrid vehicles, and fuel cell vehicles for achieving “carbon neutrality,” are actively developing, and their pace of development is exceeding last year’s. As a result, there was a strong demand for our engineers. Notably, there was a marked increase in the development of fuel cells, which are considered to hold the key to CO2 reduction. Additionally, with the remarkable advances in generative AI, the demand for semiconductors rose, leading to a higher demand for engineers from manufacturers in industries related to semiconductor manufacturing equipment. The demand for engineers was also strong in a range of other industry fields, including the digital transformation-related sector and the information and communications sector.The utilization rate remained high, and both the number of operative personnel and the unit price of engineers rose. The Company absorbed the costs of upfront investments from Q1, and both net sales and profit for Q2 surpassed those of the same period of the preceding year.
An an active market environment, not only did the utilization rate of engineers remain high, but also, newly graduated engineers were assigned ahead of schedule and the number of operative personnel surpassed that of the same period of the preceding year. Furthermore, the rise in the unit price for newly graduated engineers at their first assignments, coupled with the strategic rotation of engineers between our clients to improve their work level, brought about high negotiating unit prices for current engineers. As a result, the unit price of engineers surpassed that of the same period of the preceding year, strongly reflecting market conditions characterized by robust demand. Q1 profit decreased slightly as the Company was unable to absorb the costs of various upfront investments. In Q2, however, we absorbed these costs, and both net sales and profit surpassed those of the same period of the preceding year. In response to our client needs, the share of our sales from the contracting business was increased to 10.9%. We transferred projects from the engineer dispatching business to the contracting business, and afterwards, made efforts to replenish the engineer dispatching business. Based on the above, the Company achieved net sales of ¥5,447 million (up 8.8% year on year), an operating profit of ¥960 million (up 8.9% year on year), an ordinary profit of ¥962 million (up 9.0% year on year), and a profit of ¥671 million (up 8.8% year on year).Although the world situation, including unstable exchange rates and stock prices, remains unpredictable, no negative impact on the market environment has been observed to date. We continue to anticipate strong demand for our engineers.
The world situation, including unstable exchange rates and stock prices, remains unpredictable. However, nothing has occurred that negatively impacted our full-year financial results for Reporting Period 63 to date. In the second half of the year, we anticipate continued strong demand for our engineers, particularly from manufacturers in industries related to automobiles and semiconductor manufacturing equipment, as well as in the information and communications software field centered around digital transformation. Based on the above, the Company expects to post sales and profit growth for the full year of Reporting Period 63, with net sales of ¥10,656 million, operating profit of ¥1,696 million, ordinary profit of ¥1,700 million, and profit of ¥1,178 million.We will further enhance segment management to recruit and train talent who can meet client needs and supply them to our clients.
The current Medium-Term Business Plan will conclude at the end of FY2025. We plan to establish a new Medium-Term Business Plan to begin in FY2026 and unveil it when we announce our FY2025 financial results in March 2025. Considering the present market environment, I believe that demand will continue to be strong over the next five to ten years. Our fundamental approach is not product orientation but market orientation. Recruitment will become most critical for the Company’s preparations to respond to market needs. We expect the central theme of the new Medium-Term Business Plan to be: further evolving segment management, which is one of our features, in order to pursue a business cycle that recruits and trains talent who can meet client needs and supplies them to our clients.To achieve our targets of hiring 200 new graduates and 100 career hires, we will continue with our approach to recruit with speed year-round.
Artner’s recruitment strategy focuses on the recruitment of new graduates, along with securing engineers through career hires, including non-recent and recent graduates. We are conducting recruitment activities with a goal of hiring 200 newly graduated engineers to join in April 2025 (171 new graduates joined in April 2024). For career hires, we have set a target of hiring 100 of them in FY2025. While we are still far short of the plan, we hired 39 career hires in Q2, surpassing the 32 in the same period of the preceding year (up seven year on year). Companies have tended to bring forward their recruitment schedule each year, especially for new graduates. To keep pace with this speed, we will enhance our recruitment system and appeal to students that Artner is an “Engineer Support Company.” In addition, throughout the year, we will continue to reach out to students and others who initially wished to pursue graduate studies or civil service exams but have since changed their plans.We will aim for the 11th consecutive period of growth in both sales and profit. With our basic policy to maintain a 50% payout ratio, we will distribute stable dividends that are at least at the same amount as the previous year.
We would like to thank our shareholders and investors for their continued support. We consider supplying stable dividends to shareholders and investors as a management priority of the Company. Our basic view is to maintain a payout ratio of 50%, while improving our financial results and increasing our profit to distribute dividends that are at least at the same amount as the previous year. With your support, we have achieved sales and profit growth for ten consecutive periods through Reporting Period 62, and our Q2 financial results are on track for achieving the 11th consecutive period of growth in both sales and profit in Reporting Period 63. For Reporting Period 63, the interim dividend was ¥40.0. The year-end dividend is planned to be ¥40.0, for an annual dividend of ¥80.0.We at Artner are grateful for your continued understanding support, and cooperation.
Q. Impact of unstable exchange rates A. If our main clients, manufacturers in industries related to automobiles, are regarded as export manufacturers, yen depreciation would have a positive impact on financial results, while yen appreciation would put pressure on profits. So far, however, unstable exchange rates have had no negative impact on their transactions with the Company. That said, as yen depreciation poses various risks, such as rising raw material and fuel costs, we will continue to closely monitor client trends and swiftly identify any changes in the situation.
Q. Impact of production halt by major automobile manufacturers A. If the number of vehicles sold by major automobile manufacturers decreases and their financial results are negatively impacted, it is anticipated that R&D budgets would be constrained and demand for our engineers would decline. However, no such trends have been observed at this point in time. Manufacturers in industries related to automobiles have large R&D budgets and demand our engineers based on their pace of development.
Q. Impact of wage increases by companies A. The current growing momentum for wage increases at our clients has positively impacted our negotiations for higher contract unit prices. Additionally, negotiations on the terms and conditions for contract renewal proceeded very smoothly and concluded favorably, which we believe contributed to improving our financial results. As for wage increases for our employees, we view that we should aim for a system that continuously increases base wages every year if certain conditions are met, rather than joining in on the current momentum and raising wages temporarily. We are now working to create a system that will align the interests of individual employees and the organization, with both labor and management exchanging various opinions, which will help boost the motivation of every employee.
October 7, 2024
SEKIGUCHI Sozo
President and CEO
