Performance Trend 1. Overview of performance for FY3/2024 Consolidated performance for FY3/2024 of G-7 Holdings <7508> was 192,992 million yen in increased operating income of 9.1% over the previous year, and increased ordinary income of 7.4% to 7,318 million yen, and attributed to the parent company's net income of 5,175 million yen, an increase of 35.3% over the previous year. Sales were driven by the Business Supermarket Business and the Meat Business, and continued to set a new record high, exceeding the company's plan by 4.3%. However, in terms of profits, the automobile-related business was affected by a decrease in profits due to poor sales of winter tires due to a warm winter, and could not reach the company's plan, it turned to a profit increase for the second time due to the growth of other businesses centered on the Business Supermarket business. The sales cost ratio has increased by 0.8 points over the previous year due to changes in the sales composition ratio; however, the selling, general and administrative expense ratio decreased by 0.7 points due to the effect of increased earnings, and the operating margin decreased by 0.1 points to 3.6%. The main reasons for the increase/decrease of selling, general and administrative expenses were a decrease of 600 million yen in energy costs due to subsidies from rising electricity prices, and an increase of 1 billion yen in labor costs due to improvements in employee treatment and increased education costs. In addition to this, depreciation expenses increased by nearly 600 million yen due to rising construction material costs and rising costs of opening stores etc. The EBITDA margin has increased by 0.1 points from the previous year. Also, the reason for the large increase in the net income of the parent company's shareholders attributable to the current period is due to the elimination of 500 million yen in retirement benefits paid to executives that were recorded as special losses in the previous year, a decrease of 455 million yen in impairment losses, and a gain of 127 million yen on the sale of investment securities in FY3/2024.

Overview of consolidated performance for fiscal year ending March 2024.

In FY2024, consolidated sales revenue of Inomaruyun <9119> was JPY 137.95 billion, down 2.4% YoY. Operating income was JPY 190.63 billion, a 4.8% decrease YoY, ordinary income rose 4.5% YoY to JPY 218.00 billion, and net income attributable to parent company shareholders decreased 15.5% YoY to JPY 197.45 billion. The average exchange rate was 143.82 yen/USD (compared to 135.07 yen/USD in the previous year), and the average applicable fuel oil price was $620/MT (vs $802/MT).

*The financial performance for the period ending March 2023 was retrospectively revised due to changes in accounting policies. The comparison is made using the revised figures.

Although there was a slight decline in operating profit, the profits of each business surpassed the company's estimates (last revised on January 31, 2024, with operating income at JPY 1.75 billion, ordinary income at JPY 1.90 billion, and net income attributable to parent company shareholders at JPY 1.80 billion) thanks to the contribution of the weaker yen. Gross profit increased by 1.3% YoY, and gross profit margin increased 0.7 percentage points to 21.2%. Selling, general and administrative expenses increased by 14.9% YoY, and the expense ratio increased 1.1 percentage points to 7.4%. As a result, the operating profit margin decreased 0.4 percentage points to 13.8%. However, the ordinary income improved due to the improvement in exchange gains and losses outside of operations (exchange losses of JPY 216 million in the previous year and exchange gains of JPY 1.495 billion in the current year). As for net income attributable to parent company shareholders, it decreased due to the decrease of gains on fixed asset sales under special profits (JPY 348.8 million in the previous year and JPY 92.2 million in the current year) and the increase of impairment losses under special losses (JPY 37.0 million in the previous year and JPY 213.7 million in the current year).

Performance by segment: International marine transportation had sales revenue of JPY 114.94 billion, down 2.6% YoY, and operating profit of JPY 15.14 billion, down 3.1% YoY. Domestic and short-haul marine transportation had sales revenue of JPY 10.12 billion, down 3.7% YoY, and operating profit of JPY 407 million, down 31.4% YoY. Real estate had sales revenue of JPY 12.97 billion, up 0.3% YoY, and operating profit of JPY 3.52 billion, down 7.5% YoY.

The breakdown of operating income (JPY 950 million lower than the previous year) is as follows: large crude oil tanker decreased JPY 10 million, chemical tanker decreased JPY 1.11 billion, large gas ship increased JPY 1.30 billion, dry bulk ship decreased JPY 1.89 billion, real estate decreased JPY 290 million, and others (excluding the exchange rate impact in each category) increased JPY 1.04 billion. Although the operation of large crude oil tankers decreased due to the sale of a ship in the previous year, the market remained stable due to the recovery trend of the market from autumn. Chemical tankers decreased profit due to the backlash of the previous year's high market, but they secured more operating profit than expected by efficiently incorporating both stable contract cargo and spot cargo. Large gas ships secured stable profits mainly from existing medium- to long-term contracts, and large LPG ships benefited from good conditions. Dry bulk ships secured slightly better operating profit than expected through efficient chartering and operation, but decreased profit due to the softening market. Real estate secured stable revenue by continuing to operate offices smoothly, but decreased profit due to increased repair and maintenance costs and management costs. The other business benefited from the weaker yen.

Financial situation:

Regarding finance, the total assets at the end of March 2024 increased 27,775 million yen from the previous period to 293,228 million yen. Mainly, cash and deposits increased by 3,333 million yen, net vessels increased by 5,421 million yen, investment securities increased by 5,719 million yen, and other assets of other investments increased by 7,799 million yen. Total liabilities increased by 6,236 million yen to 161,102 million yen. Mainly interest-bearing liabilities (total of short- and long-term borrowings and corporate bonds) increased by 4,080 million yen, and deferred tax liabilities increased by 2,170 million yen. Net assets increased by 21,539 million yen to 132,126 million yen. Mainly retained earnings increased by 13,078 million yen, other securities valuation difference increased by 3,820 million yen, and deferred hedge gains and losses increased by 4,063 million yen. As a result, the equity ratio increased by 3.4 points to 45.0%. Also, the D/E ratio decreased by 0.14 points to 0.90 times. Financial health, such as the improvement of the equity ratio and the decrease of the D/E ratio, is progressing. The company is building a stable earnings base with both marine transportation and real estate, and there is no particular concern about financial soundness.

(Authored by FISCO guest analyst Masanobu Mizuta)