April 27, 2005

Sanix Announces Early Adoption of the Accounting Standard on Impairment of Fixed Assets and Revised Financial Result Outlook


Fukuoka, April 27, 2005 - SANIX Inc. (Ticker: 4651, TSE/OSE/FSE, President & CEO: Shin-ichi Munemasa) announce that the Board of Directorsf meeting resolved to adopt accounting standard on impairment of fixed assets to its financial results ended march 31, 2005, one year ahead of mandatory deadline. Following the adoption of this accounting standard, the Company has revised consolidated and non-consolidated result outlook for the year ended March 31, 2005, previously announced on February 9, 2005.

1. Details of the revisions
  1) Revision to full-year consolidated results forecast

(April 1, 2004 to March 31, 2005)

(Millions of yen)
Net Sales
Recurring Profit
Net Income
Previous Forecast
(as of February 9, 2005)
43,841 
(526) 
(763) 
Revised Forecast
44,080 
70 
(10,000) 
Difference
239 
596 
(9,237) 
% Change
0.5 
Results from year before
43,987 
(4,661) 
(7,099) 

  2) Revision to full-year non-consolidated results forecast

(April 1, 2004 to March 31, 2005)

(Millions of yen)
Net Sales
Recurring Profit
Net Income
Previous Forecast
(as of February 9, 2005)
41,700 
(680) 
(830) 
Revised Forecast
42,010 
(70) 
(10,000) 
Defference
310 
610 
(9,170) 
% Change
0.7 
Results from year before
43,091 
(4,581) 
(7,281) 

  3) Reason for Amending Business Forecast

During this term, we worked on improving our profitability, mainly through productivity improvement and cost reduction with the aim of returning to profitable operations. Particularly during the fourth quarter, consolidated sales increased by 15.7% compared with the same period last year, and consolidated recurring profit for the quarter is expected to have a surplus for the first time since the second quarter of the fiscal year ending March 2004. The prospects of business recovery are becoming clearer. As a result of our efforts to improve business efficiency such as consolidation and closing of sales offices, and increase sales per capita, our profitability has improved: the operating profit ratio for the fourth quarter this term is expected to be 21.9% (78.8% increase compared with same period last year) for the HS Division and 12.5% (return to profitable operations: operating loss during the same period last year) for the ES Division. Regarding the Environmental Resources Development Division, greater volumes of waste were processed in plastic recycling plants. The SANIX Energy Tomakomai Power Plant made efforts to continue stable operation of the plant, and as a result increased its revenues from power sales. Furthermore, cost reduction efforts were made and succeeded in reducing the deficit.

Under these circumstances, consolidated net sales for this term is expected to exceed our previous forecast announced on February 9, 2005. As a result of our efforts to improve profitability, we are expecting a return to profitability: recurring profit is expected to increase by 596 million yen in comparison to our forecast. Therefore, we have upwardly revised our previous forecast for consolidated recurring profit.

To strengthen our financial soundness, we would like to implement accounting for the impairment of fixed assets from the term ending March 2005, earlier than the beginning of regulation, as explained below. Therefore, the net profit for this term will include a 9.5 billion yen loss on impairment of assets, which are to be reported as extraordinary losses. Consequently, our forecast consolidated net profit for the term is amended from our previous forecast. Full-year non-consolidated earnings forecast is also revised for the same reasons.


2. Early Introduction of Accounting for the Impairment of Fixed Assets

The resource-recycling power generation business, using waste plastic as fuel, which has become the object of accounting for the impairment of fixed assets, concludes its business with sale of power. The Tomakomai Power Plant, the core of this business, had to extend its test operation period since operation commenced in April 2003. Until the inspection and major modifications were implemented in July 2004, the plant was unable to maintain stable operation under high loads; we had to spend most of the time finding problems and solving them. We thought modification of the plant in July succeeded in improving the operating ratio, the plant would be able to maintain stable operation under high loads at this mid-term. However, the future cash flow of the resource-recycling power generation business will be less than the book value of fixed assets, as a result that we reconsider the level of stable operation judging from the operating situation and our experience in the power sales business at the end of this term.

Consequently, we are planning on the early introduction of accounting for the impairment of fixed assets for the term ending March, 2005.


Regarding dividend distribution, our basic policy is to continue stable distribution of dividends. Since our business recovery has become clear, we would like to distribute 10 yen per share, as announced on May 12, 2004.

* The above stated business forecast is based on the information available as of the date of announcement of this material. Actual business results may differ from the forecast, due to various factors that may occur in the future.


 

For more information, please contact:
Kozo Inoue, Managing Director
E-mail: k-inoue@sanix.co.jp