Company Overview
1. Business content The main business of Sakai Heavy Industries <6358> is the manufacturing and sale of road rollers used for road paving, and road roller related products account for about 95% of its revenue. In addition, the company's corporate philosophy is to contribute to the world's land development through its road construction machinery business. 2. Characteristics and strengths As previously mentioned, the company is a specialist manufacturer of road construction machinery such as road rollers, but has the following characteristics and strengths. (1) Long history as a specialist manufacturer The company's biggest feature (strength) is its long history as a specialist manufacturer of road construction machinery, including road rollers. In other words, by focusing on and specializing in its global niche strategy, it has accumulated its own unique technologies. This long history and experience have enabled it to enhance its technical and credit strengths. (2) Technical strengths Simply saying "compacting or paving roads" requires different pressures, rotation forces, etc. (compaction technology) depending on the location, soil conditions, etc. According to the company, the construction function of the roller itself determines the final quality (density, flatness, lifespan) of the road or embankment, and it is generally said that if the compaction density is increased by 1%, the road lifespan is extended by 10%. Therefore, for construction clients and contractors, product quality (performance) is also a very important factor, in addition to the price of road rollers. Since the company has been a specialist manufacturer of road construction machinery, including road rollers, for a long time, it boasts high technical strengths in compaction technology that are not easily matched by other companies in the same industry. In summary, the technical strength of the company can be described as "knowledge about entities and concepts." In other words, it is their engineering ability to oversee the entire construction project and their ability to adapt to a variety of materials. Specifically, it is the combination of various technologies, such as mixing with tires, vertical vibration to increase the compaction force, horizontal vibration to scrape the ground, vertical vibration to form a thick layer of compaction, further high-density compaction by tire vibration, and solution to difficult compaction problems through high-frequency vibration. An example of the company's high technical strength is the ability to control the relationship between "mechanical vibration technology" and its "vibration suppression technology." Various mechanical vibrations are an important means of improving construction performance in road rollers, but this vibration itself can cause machine malfunctions and have a significant impact on operator comfort. Therefore, the power (technology) to control the conflicting relationship between vibration compaction strength and machine quality is important, and this cannot be accumulated in a short period of time.
Delica Foods Holdings Co., Ltd. <3392> is a holding company that operates five subsidiaries including Delica Foods Co., Ltd., which is the industry's leading company in the procurement and sales of commercial vegetables and the manufacturing and sales of cut vegetables, F-S Logistics Co., Ltd., which is responsible for logistics business, Designer Foods Co., Ltd., which conducts research and analysis of fresh produce and consulting services, Delica Foods Nagasaki Co., Ltd., which manufactures and sells meal kits and seasonings, and Rakusai Co., Ltd., which sells meal kits and other products to consumers through e-commerce and retail stores. Delica Foods, the main subsidiary, has built business sites in 20 locations from Hokkaido to Nagasaki as of March 2024 and is supplying fresh vegetables safely and securely to approximately 30,000 stores nationwide (approximately 800 companies in terms of the number of employees) every day, including area cooperative companies.
*1 Designer Foods Co., Ltd. absorbed and merged (Medical Fresh Produce Research Institute Co., Ltd.) one of its subsidiaries, which conducts research and analysis of fresh produce, as of April 1, 2024.
*2 Meal kits are products that provide ingredients such as meat, fish, and vegetables and seasonings in packs to make it easy to cook predetermined dishes. Meat and fish are pre-cooked, and vegetables are offered in a cut state.
The company discloses its three business segments: fresh produce business (Delica Foods, Delica Foods Nagasaki, and Rakusai), logistics business (F-S Logistics), and research and analysis business (Designer Foods) (excluding holding company). The revenue composition ratio (external customer basis) for the fiscal year ending March 2024 is 98.6% for fresh produce business, 1.2% for logistics business, and 0.2% for research and analysis business, with fresh produce business accounting for most of the revenue.
In terms of product-specific revenue composition for fresh produce business, whole (round) vegetables, which distribute purchased vegetables as is, accounted for 38.9%, cut vegetables, which process and sell vegetables according to customer requests, accounted for 45.7%, and others (daily products, meal kits, etc.) accounted for 15.4%. In the mid-2010s, whole vegetables accounted for more than 50%, but the composition ratio was reversed in the fiscal year ending March 2021 due to an increase in demand for cut vegetables due to a chronic shortage of labor in the foodservice industry. In addition, since the start of the meal kit business after the COVID-19 pandemic, the composition ratio of other sales has risen from around 12% before the pandemic to the 15% range.
The industry-specific revenue composition ratio also underwent a significant change due to the promotion of business portfolio transformation in the wake of the COVID-19 pandemic. In the fiscal year ending March 2020 before the pandemic, sales to the foodservice industry (excluding those that are resilient to the pandemic) accounted for 78.4% of total revenue, but it changed drastically during the pandemic and fell to 49.7% in the fiscal year ending March 2022. Since then, as the pandemic subsided, demand from the foodservice industry has also recovered, and in the fiscal year ending March 2024, it had recovered to 55.4%, but has not returned to pre-pandemic levels. In order to cover the decline in sales to the foodservice industry during the pandemic, the company has expanded its customer base in the fast-food industry, mass retail, and school lunch industry, in addition to resilient foodservice such as take-out, delivery, drive-through, and other formats. Furthermore, the company has been working on developing new businesses such as the BtoC business and meal kit business, and has achieved a certain level of customer satisfaction in these areas, contributing to sales. As a result, in the fiscal year ending March 2024, sales to the pandemic-resilient foodservice industry accounted for 14.3% (4.9% in the fiscal year ending March 2020), sales to the mass retail industry accounted for 14.2% (8.1% in the same period), and meal kit and BtoC businesses, which were not present before the pandemic, together accounted for 6.1%. It is believed that the company was able to smoothly expand its customer base in industries other than the foodservice industry due to the safe and secure logistics services and high-quality cut vegetables it had cultivated as a business-to-business fresh produce wholesaler. The ratio of sales to the entire foodservice industry is 69.7%, which is lower than before the pandemic (83.3% in the fiscal year ending March 2020), but in terms of yen value, it has exceeded the level of the past four fiscal years and updated the record high.
(Written by FISCO guest analyst, Jo Sato)