Q: Can you summarize the company’s sales performance in FY2024?

Suzuki:
A: Although the weak yen boosted our sales in each market, and the company hit record high on net sales, we could not avoid profit decline in the end.

FY2024 sales increased in all business sectors in the mobility, consumer and industrial markets, helped by the weak yen, although the FY2024 results were affected by some pull forward in sales towards FY2023 in preparation for shift to new ERP system during FY2023.

However, the company’s profits declined because of increased costs due to the launches of the new ERP system and new Akita plant, as well as soaring raw material, labor, and transportation costs. Although cost reduction strategies helped mitigate the drop, we could not avoid profit decline in the end.

For 2024, the company reported net sales of ¥56.332 billion (up 1.9%), which is our highest sales ever, an operating profit of ¥5.307 billion (down 10.6%), and an ordinary profit of ¥5.504 billion (down 23.4%). Net profit was ¥2.662 billion (down 52.4%) because structural reform costs of ¥1.991 billion were recorded as special expenses. Operating margin dropped from 10.7% in the prior year period to 9.4%, although it has remained above 10% since FY2024 Q2. Operating cash flow was ¥12.043 billion, and the cash flow margin was 21.4%, which proves that we still have strong “earning power”.

Looking at sales by market, helped by strong EV sales in China, sales for powertrain in the mobility market increased, driven by sales of the WtoB (wire-to-board) connectors used in battery management systems (BMS) and three directional floating BtoB (board-to-board) connectors "Z-Move". Sales in the infotainment market were also on a steady growth track, driven by sales of high-speed transmission BtoB connectors, which is about three times more than the prior year period level. However, sales in the sensor market decreased from the previous year period level because of a fall in sales for radar due to a decline in the number of the vehicles that use this connector and design changes in some types of equipment.

In the consumer market, net sales were boosted by growing connector sales, helped by sales of connectors for printers and digital cameras, whereas sales for game consoles continued to fall.

In the industrial market, although sales for factory automation products remained weak, net sales slightly increased from the prior year period level, helped by growing sales in the energy management market that we have recently been entering and developing.

Q: Can you explain your structural reforms and key focus strategies?

Suzuki:
We have been improving our cost structure. In FY2025, our efforts will be focused on growing our business in each market and building a stronger business foundation.

In February 2025, we have been practicing our structural reforms across the company. To improve cost efficiency, we have been increasing productivity through reviewing the roles of the group production facilities and improving operational efficiency by using the new ERP system. As mentioned earlier, in FY2024, we recorded ¥1,991 million for structural costs as special losses. We moved the group’s production function from the Ibaraki plant to the new Akita plant, reworked to develop operational functions at some group facilities and ran an early retirement scheme to optimize staffing based on group locations in Japan.

In FY2025, our focus will be on sales growth and profit recovery in both the short term and the long term, and ensuring that our business has grown and business foundation has been solidified. In the next mobility market, we will grow our powertrain business by promoting our products that meet U.S. and European standards, while expanding our product line of three directional floating BtoB connector “Z-Move.” In the infotainment market, we will introduce next-generation high-speed transmission connectors and scalable connectors for auto centralized control ECU, while in the sensor market, we aim to make an early start of mass production of a new product codeveloped with KEL Corporation.

To grow business in the industrial market, we will expand our global sales network through using a distribution agreement with Arrow Electronics signed in February 2025, while we will grow sales in the energy management market and explore business opportunities in the AI, semiconductor equipment, and telecommunications markets. To explore more opportunities for business growth in each market, we will develop a production operational system that integrates manufacturing, sales and engineering in Japan to reach more Chinese customers.

To build a stronger business foundation, we will improve productivity and develop a production system by launching the new Akita plant as fast as possible, while we will redefine headquarters functions and improve productivity in back-office departments. Besides, by using the new ERP system to standardize operations and visualize supply chains, we will cut overhead costs, improve capital investment efficiency and reduce fixed costs.

Financial forecasts for FY2025 includes net sales of ¥55.0 billion (down 2.4% from FY2025), an operating profit of ¥5.5 billion (up 3.6%), ordinary profit of ¥5.4 billion (down 1.9%), and net profit attributable to owners of the parent of ¥3.9 billion (up 46.5%). Although earnings will decrease because a drop in global car production is anticipated, we still expect a 1.6% increase in revenue, excluding the impacts from changes in foreign exchange. Operating profit is also expected to increase because increasing fixed costs due to the start of the new Akita plant operation and other expenses will be offset by the positive effects of structural reforms (about ¥0.81 billion) and cost reduction.

When it comes to business risks associated with U.S. tariffs, we currently estimate a negative impact of about ¥2.5 billion due to a decline in global auto production, including ¥1.0 billion from a drop in car sales in North America. However, the business environment is still changing from time to time, and our financial forecast has not reflected this negative impact. We will respond swiftly and precisely to the changing situations and may consider moving our production base for the U.S. market to countries with most favorable tax environment.

Q: Do you have a message to your shareholders?

Suzuki:
We will prepare the ground for issue resolution and getting growth back on track to achieve our goals, and aim for further growth.

For the year-end dividend, we committed to our stable dividend policy that aims at a payout ratio of above 40% or a DOE (Dividend on Equity) of above 5%, and paid ¥100 per share (an increase of ¥10 from FY2024) as planned, by following our total shareholder return policy, as well as conducting share buyback. During FY2024, we repurchased 2.09 million shares worth ¥5.8 billion. In FY2025, we will plan to increase the dividend to ¥110 per share. 

We see the three years starting from FY2024 to FY2026 of the mid-term management plan as a period when we lay the basis for issue resolution and getting growth back on track. During the second year of the plan, we will ensure our business has grown and business foundation has been solidified, while we will improve profitability, as mentioned earlier.

We also want to thank you, our shareholders, for your continuing support, your confidence and above all for your trust.