In this Research Note, we examine Azbil, a public company with a leading position in the Japanese building automation market.  Our analysis is based on their annual results, year ending 31^st March 2022 and investor presentations.

The Building Automation (BA) business, the largest of three business units, accounts for 46.4% of consolidated net sales for the Azbil Group, which increased 3.9% to 256,551 million yen, year ending 31 March 2022.

The overall vision for the BA business is to become an Asia-based world-class supplier of building systems. Core strategies include:

• Integrating their building automation systems, IoT devices and field equipment to optimize energy usage, air quality and temperature quality.
• Introducing cloud-based energy efficiency and virtual power plant services.
• Developing proven energy-saving apps and engineering services meeting safety and comfort needs in the overseas market.

The BA business provides solutions incorporating the latest technology in sensing, controls, IT, building system optimization, construction, and maintenance services, as demonstrated in more than 25,000 installed systems to date. Azbil does its own development and manufacturing of the products that are essential for BA systems to ensure a high level of compatibility and a high level of performance from an integrated system.

BA sales, year ending 31 March 2022 increased 1.9% year on year to 119,764 million yen (around $823 million) due to growth in the fields related to new large-scale buildings and the refurbishment of existing buildings. However, sales fell short of the plan due to long delivery times triggered by parts shortages and the prolonged impact of the pandemic in overseas markets, which resulted in the postponement of construction projects and continued construction delays in some regions. 

In the domestic market, demand has continued to grow for urban redevelopment projects in the Tokyo metropolitan area and for HVAC control equipment and systems for factories. There is also growing interest in solutions related to ventilation improvement, energy savings and CO₂ reduction.  The impact of the COVID-19 pandemic on domestic markets was limited although some negative impact from parts procurement difficulties was evident.

BA segment margin was 11.6%, down from 11.9% in the previous year. Although initiatives to enhance profitability have progressed, segment profit was 13,862 million yen, on par with the 14,023 million yen recorded for the previous fiscal year. BA employed 3,283 people in March 2022.

With a 1.9% increase in revenues, following a 5.1% decline the previous year, Azbil Group is anticipating continued recovery in its major business unit in 2022. The financial plan for year ending March 2023 targets BA sales of 129 billion yen, a 7.7% year-on-year increase. The plan to increase both sales and profitability back to pre-pandemic levels is backed up by the order backlog and robust demand for HVAC control equipment and systems in both new large-scale buildings and refurbishment of existing buildings. 

This article was written by Daphne Tomlinson, Senior Research Associate at Memoori.