Sakai Heavy Industries, Ltd.TSE: 6358

Consolidated Financial Results for the Three Months Ended June 30,2024

Sep 5, 2024 at 1:01 AM UTC · Issued by Sakai Heavy Industries, Ltd.

Consolidated Financial Results

for the Three Months Ended June 30, 2024

SAKAI HEAVY INDUSTRIES, LTD.

Stock code: 6358

URL https://www.sakainet.co.jp/en/

August 9, 2024

Summary of Consolidated Financial Results

Highlights of Consolidated Business Performance

1. Summary of Consolidated Business Performance for the Three Months Ended June 30, 2024

Consolidated net sales: ¥6,706 million, down 10.9% YoY

The Construction Machinery Market also entered a period of adjustments to inventory amid slowdowns in the world economy.

Operating profit: ¥449 million, down 18.5% YoY

Operating profit declined due to decreased sales and increased payroll, despite cost-of-sales ratio improvement of 3.3% YoY through the progress in profit structure reform and the effect of yen depreciation.

3) Profit:

¥690 million, up 46.3% YoY

Posted gain on sale of investment securities of ¥280 million.

Sales in Japan:¥2,497 million, down 10.8% YoY

Although construction investment remained strong against the backdrop of measures to accelerate national land resilience, repeated price revisions and the overtime cap on construction and logistics brought investment in construction machinery to a continued standstill.

Sales in North America: ¥2,203 million, down 4.3% YoY

Showed a movement toward adjustments to inventory by dealers, despite continued high-level investment in road construction against the backdrop of the Infrastructure Investment and Jobs Act.

Sales in Asia:¥1,650 million, down 21.1% YoY
Demand stagnated in Indonesia and Vietnam, our major markets.

Highlights of Consolidated Business Performance

2. Adapting to a Changing Business Environment

1) Initiatives for enhancing the profitability of capital

(1) Progress of medium-term management policy

Five-yearmedium-term management policy: Net sales of ¥30 billion, operating profit of ¥3.1 billion, ROE of 8.0%

Results for the previous fiscal year (third year): Net sales of ¥33 billion, operating profit of ¥3.31 billion, ROE of 9.0%

Forecast for the current fiscal year (fourth year): Net sales of ¥33 billion, operating profit of ¥2.73 billion, ROE of 6.2%

Results for three months ended June 30, 2024: Net sales of ¥6.7 billion, operating profit of ¥0.44 billion, ROE of 9.4%

(2) Progress of enhancing corporate value (PBR above 1)

At the end of March 2024: PBR 0.98 times (Share price ¥6,680)

At the end of June 2024: PBR 0.85 times (Share price ¥5,930)

Timely disclosure of policies regarding initiatives has been provided in the Status of Initiatives for Enhancing Profitability of Capital, dated April 13, 2023. https://www.sakainet.co.jp/en/news/item/20230425EnhancingProfitabilityofCapital.pdf

2) Profit structure reform through sales price revisions, high added value, and efficiency

Cost-of-sales ratio improvement: 69.8%, improvement of 3.3% YoY

Progress in profit structure reform and the effect of yen depreciation

3) Increased investment in human capital

Wage improvement and stabilized employment: Rise in wages (5.1% in the fiscal year ended March 31, 2024, 6.0% in the fiscal year ending March 31, 2025)
Increasing on-site skilled labors and improving working conditions: Enhance factories and service areas, and establish healthy working environments.

4) Dealing with volatile demand

Inventory turnover: 2.65 times, down 0.36 times/12% YoY

Currently making adjustments to optimize inventory levels, as the Construction Machinery Market entered

a period of adjustments to inventory amid slowdowns in the world economy.

Highlights of Consolidated Business Performance

3. Mid- to Long-Term Growth Strategy

1) Make more significant inroads into the Asian market:

Expand the ASEAN market centered on our Indonesian hub (net sales down 21.1% YoY)

2) Expand the scope of overseas business:

Develop the overseas market for road maintenance equipment (start the local production in Indonesia)

3) Pursue business opportunities in North America:

Increase our market share through niche marketing (net sales down 4.3% YoY)

4) Develop next-generation businesses:

Focus on market development for emergency brakes, compaction management systems, and Automatic Cutter Control System.

Research and development on autonomous rollers and EV rollers is underway.

4. Outlook for Business Environment

1) Global Construction Machinery Market

Potential demand is expected to remain stable due to factors such as large-scale infrastructure investment plans in Japan and the U.S., infrastructure investment and mine development becoming active in emerging countries, together with renewal of aging infrastructure and disaster-related countermeasures.

2) Risks and Countermeasures

The future direction of the world economy is unpredictable, due to factors such as global economic slowdowns, tensions in security issues, and rapid changes in the social structure.

In order to transition to a management structure adapted to these changes in the times, we will move forward with the approach of adapting to a changing business environment.

Consolidated Business Performance

				(Millions of yen)

	First three	First three	YoY change
	months	months

	ended June	ended June	Amount	%
	30, 2023	30, 2024


Net sales	7,529	6,706	▲ 822	▲10.9%
Japan	2,798	2,497	▲ 301	▲10.8%
Overseas	4,730	4,209	▲ 521	▲11.0%
Operating profit	551	449	▲ 102	▲18.5%
Operating profit ratio	(7.3%)	(6.7%)
Ordinary profit	692	503	▲ 188	▲27.2%
Profit attributable to	471	690	218	46.3%
owners of parent

Cost-of-sales ratio

(73.1%)

(69.8%)

Consolidated Business Performance (Graph)

Sales by Region in Which Customers Are Located

(Millions of yen)

	First three	First three	YoY change
	months	months

	ended	ended
	June 30,	June 30,	Amount	%
	2023	2024


Japan	2,798	2,497	▲ 301	▲10.8%
Overseas	4,730	4,209	▲ 521	▲11.0%

North America	2,301	2,203	▲ 97	▲4.3%
Asia	2,092	1,650	▲ 441	▲21.1%
Other regions	337	355	17	5.3%

Total	7,529	6,706	▲ 822	▲10.9%

Sales by Region (Map)

(Millions of yen)	First three months	First three months	YoY change
ended June 30, 2023	ended June 30, 2024

	Japan	2,798	2,497	(▲301, ▲10.8%)
	Overseas	4,730	4,209	(▲521, ▲11.0%)


	Total	7,529	6,706	(▲822, ▲10.9%)

Asia
2,092 → 1,650	2,092	1,650
（▲441, ▲21.1％）

Indonesia segment 994 → 760 （▲234, ▲23.5％）

China segment	North America
54 → 9
2,301 → 2,203
（▲45, ▲83.4％）	2,301 2,203

	（▲97, ▲4.3％）
Japan
2,798 → 2,497	2,798	2,497

（▲301, ▲10.8％）

Other (Africa, Oceania, Latin America)

337 → 355	337	355
（+17, +5.3％）

		Plants and sales office
		Sales offices
		Service and sales offices

Segment Information by Region in Which Our Manufacturing Facilities and Sales Offices Are Located

(Millions of yen)

	First three	First three	YoY change
Japan	months	months

ended June	ended June	Amount	%
	30, 2023	30, 2024

Sales to external	4,179	3,733	▲ 445	▲10.7%
customers

Intercompany	1,042	1,084	41	4.0%
sales

Total net sales	5,221	4,817	▲ 403	▲7.7%
Operating profit	121	37	▲ 83 ▲69.0%

			(Millions of yen)

	First three	First three	YoY change
Indonesia	months	months

ended June	ended June	Amount	%
	30, 2023	30, 2024

Sales to external	994	760	▲ 234	▲23.5%
customers

Intercompany	1,063	747	▲ 316	▲29.7%
sales

Total net sales	2,058	1,508	▲ 550 ▲26.7%
Operating profit	187	79	▲ 107 ▲57.5%

(Millions of yen)

	First three	First three	YoY change
	months	months

North America ended June	ended June	Amount	%
	30, 2023	30, 2024

Sales to external	2,301	2,203	▲ 97	▲4.3%
customers

Intercompany	3	2	▲ 1	▲41.8%
sales

Total net sales	2,304	2,205	▲ 99	▲4.3%
Operating profit	194	387	192	98.6%

			(Millions of yen)

	First three	First three	YoY change
China	months	months

ended June	ended June	Amount	%
	30, 2023	30, 2024

Sales to external	54	9	▲ 45	▲83.4%
customers

Intercompany	344	372	27	8.1%
sales

Total net sales	398	381	▲ 17	▲4.4%
Operating profit	37	35	▲ 1	▲5.1%