Message from the CFO
How to secure liquidity and financial stability amid the impact of COVID-19
Senior Executive Officer,
Chief Financial Officer (CFO)
The novel coronavirus pandemic has caused a growing lack of transparency in business environments. Amid such conditions, our Group is implementing strategies to minimize the impact on our business. In addition to ensuring the health and safety of our employees, we are working to ensure stable plant operations, secure our supply chain, preserve receivables, and reduce costs. As the same time, we are working to secure liquidity and financial stability.
As of the end of the fiscal year, cash on hand was 18.6 billion yen. Additionally, we have concluded a commitment line agreement with a financial institution for 10.0 billion yen. Blommer has also established a commitment line of US $350 million. We are maintaining positive relationships with financial institutions to secure liquidity.
Equity ratio as of the end of the fiscal year increased by 2.3pts YoY to 42.3%. Our D/E ratio was 0.94 with a net D/E ratio of 0.82, indicating improvement for both figures over the previous fiscal year. Interest-bearing debt as of the end of the fiscal year was 146.2 billion yen, down 14.2 billion yen compared to the end of the previous fiscal year.
After capital adjustments based on the rating of the subordinated bonds (35.0 billion yen) we issued this year, this results in an equity ratio of 47.1%, D/E ratio of 0.74, and a net D/E ratio of 0.64. We are working to strengthen our financial platform and secure financial stability.
This was an irregular financial accounting period of 15 months for our overseas subsidiaries. This resulted in cash flows from operating activities of 37.1 billion yen and free cash flow of 18.8 billion yen, both record highs.
During FY 2020, with the projected reduction in cash flow from operating activities due to the impact of the novel coronavirus, we will carefully examine investments that have already been executed in order to make appropriate decisions (including suspension and postponement) and generate free cash flow of 10.0 billion yen. We will continue to improve CCC, exit non-core business, and sell strategic shareholdings as we aim to generate cash flow.
Status of financial management policies in Medium-Term Management Plan
For the 4-year period of the FY 2020 Plan, we forecast total cash flow from operating activities of 121.6 billion yen, which exceeds our goal of 100.0 billion yen. Total cash flow from investing activities related to capital expenditures and M&A is forecast to be 129.2 billion yen, which is largely on par with our Medium-Term Management Plan. However, our D/E ratio may fall below plans after reflecting the interest-bearing debt of companies acquired through M&A. Furthermore, while we set a CCC reduction goal of 10 days, we are forecasting a reduction of 6 days by the end of FY 2020. We will implement measures to make further improvements.
At the same time, efforts to exit or liquidate non-core businesses, sell off strategic shareholdings, and efforts to optimize Group financing are progressing ahead of plans. We will strengthen efforts towards improving our financial stability in order to respond to increasing financial risks.
As part of global integration (to enhance Group operations) we are striving to consolidate accounting and financial standards. Excluding Blommer and another company acquired through M&A, we aligned the accounting periods of overseas companies to March accounting.
We also completed the integration of the SAP backbone system in Group companies representing approximately 90% of consolidated revenues (excluding Blommer) this fiscal year.
We expect this integration will contribute to the proposal and implementation of new Group strategies.
Shareholder returns and dividend policy are positioned as core management issues in our Medium-Term Management Plan.
To aim for stable and continuous dividends, we have outlined a dividend payout ratio of 30 to 40% as a management goal.
In FY 2019, we issued dividends of 56 yen for the full year. In FY 2020, despite the lack of transparency due to the novel coronavirus and issues related to enhancing capital, we are planning on a dividend of 58 yen.
We are planning for our 9th consecutive year of increased dividends.
Increase communication with stakeholders
Amid the uncertainty caused by the novel coronavirus, we recognize it is critical that our investors and stakeholders have an accurate understanding of the impact on our earnings and our financial status.
As we face increased risks due to the rapid globalization resulting from our M&A activities, we understand the need for appropriate risk response and for initiatives that address the changes in social structures in a post-coronavirus world.
We will engage in dialogue with our stakeholders to further understanding of current conditions and explain our post-coronavirus strategies. We will incorporate the advice and recommendations we receive into the Fuji Oil Group as we aim to meet the expectations of and our responsibilities to our stakeholders.