Q: Looking back at the fiscal year 2022 ended March 2023, can you give us a summary of the sales results?

CEO Suzuki:
We increased sales and profits in the powertrain market, with net sales growing over 50 billion yen, which was a record high.

Helped by a weakening yen, sales in the powertrain market in the automotive industry expanded, which also led to the company’s growth in the consumer market. As a result, sales reached a record high of 5,293 million yen (a 20.6% increase from the previous fiscal year) and exceeded 50 billion yen for the first time ever in the company's history. In terms of profitability, we offset selling price increase due to rising raw material prices by boosting sales and improving our earnings structure. We thus achieved an operating profit of 6,940 million yen (a 53.5% increase), an ordinary profit of 7,661 million yen (a 58.3% increase), and a net profit attributable to the shareholders of the parent company of 5,541 million yen (a 41.6% increase), which exceeded our intended targets. Operating profit margin increased from 10.3% in the previous year to 13.1% this year, which has led to the highest net profit in the company’s history.

In the automotive market, we faced an ongoing shortage of parts such as semiconductors, and global auto production did not return to the normal level. However, the xEV (electric vehicle) market particularly in China and Europe saw strong growth, which drove a significant 84% increase in sales in the powertrain market compared to the previous year level. Notably, sales in the EV battery and charger markets steadily grew. Sales in the infotainment and safety system markets grew over the previous year level, which resulted in a 22.0% increase in overall sales in the automotive market.

In the consumer market, sales increased by 25.7%, which was driven by sales for all-in-one printers and game consoles. In the industrial market, sales for FA equipment including programmable logic controllers (PLCs) and for 5G base stations remained strong as a result of China's growing investment in equipment. However, in the latter half of the previous year, there was only a modest 3.1% increase in annual sales due to production quantity adjustments.

Q: What is the outlook for fiscal year 2023 ended March 2022, the final year of the medium-term management plan?

CEO Suzuki:
We are expecting to exceed the sales targets. We will continue to promote the profitability improvement project.

We have set a long-term vision to achieve 100 billion yen in net sales by our fiscal year 2029 ending March 2030. As a road to achieve it, we have been running our business based on a three-year medium-term management plan, which sets our fiscal year 2023 ending March 2024 as the final year. This plan sets a final year sales target of 52 billion yen and a 20% operating profit margin, as well as a goal of becoming a truly global company and making a leap to the next stage.

Over the past two years, despite the impact of semiconductor shortages and a decline in automobile production, sales exceeded expectations as a result of the powertrain market expansion, which was driven by the growth of global xEVs production and weakening yen. However, operating profit margin fell short of the target due to dropping capacity utilization rate and increased costs such as soaring raw material prices. Thus, we have been working on a profitability improvement project to recover from this challenging situation.

Looking ahead to the automotive market outlook for the final year of the mid-term plan, which is our key focus area, global auto production is projected to continue to grow gradually from 82 million units in the previous year to 84 million units this year. Notably, the xEV production is projected to grow remarkably by increasing from 16 million to 22 million units, which stands at 25% of the total automobile production, as a result of the global decarbonization trend. In the consumer market, a rebound in demand is projected thanks to the nesting effect, while in the industrial market, a slowing in China’s high rates of investment is anticipated and production quantity adjustments are likely to continue in the first half of the year.

For all the reasons above, projected fiscal year 2023 financial results are net sales of 55 billion yen (a 4.0% increase from the previous year), an operating profit of 7.7 billion yen (a 10.9% increase), an ordinary profit of 7.55 billion yen (a 1.4% decrease) and net profit attributable to the shareholders of the parent company of 5.7 billion yen (a 2.9% increase). Net sales are expected to continue to hit new record highs and to exceed the targets of the medium-term management plan, while the operating profit margin is anticipated remaining 14%, which falls short of the 20% target.

As a key strategy for financial improvement and further growth, we will focus on “reaping the results of the Profitability Improvement Project" by reviewing our pricing policies, reducing product costs and improving productivity, as well as on "expanding strategic product lines", including new product launches for automotive xEVs and the development of next-generation high-speed transmission connectors, while building a stronger sales force and increasing production capacity. The launch of the Hanamaki Factory in Iwate Prefecture is scheduled for November 2023, and production capacity is expected to increase through in-house tooling manufacturing. Besides, a connector plant will be built in Akita Prefecture, and a construction project will be run for its launch in 2025.

Q. Do you have any Messages for Shareholders?

CEO Suzuki:
We aim for sustainable development and commit to building a prosperous future together with all stakeholders.

We have been committed to our shareholder return policy of maintaining a dividend payout ratio of over 30% and increased dividend for fiscal year 2022 ended March 2023 from the initially planned 60 JPY per share to 80 JPY per share (a 20 JPY increase compared to the previous year) by reflecting improved productivity into the ratio. As a result, the dividend payout ratio for the fiscal year 2022 has come to 34.0%. Based on this, dividend for the fiscal year 2023 ending March 2024 will be 90 JPY. Going forward, we will secure funding for growth investment to drive business expansion and review our capital policy to achieve a "ROE exceeding 10%", which is set in our long-term growth vision, and deliver even greater shareholder returns by increasing dividends and share buybacks.

We have recently set out our “Purpose (why we exist in society)” and “Dream (what we envision making happen in society”. By doing so, the notion of "what we should do for society", to which we will pursue through the practice of our management philosophy, will be shared and embedded in employees across the company, and clearly communicated to our stakeholders outside the company. Besides, for demonstrating our commitment to creating a better society through our business practices and addressing environmental and social issues, we have set our "CSR Policy".

To bring our enthusiasm　and commitment to these activities into shape, together with shareholders, customers, the local community, and all stakeholders including our employees, we will be committed to fostering sustainability in society and building a prosperous future. We would sincerely appreciate your continued long-term support.