Performance trend of Soft 99 Corporation <4464>

2024 FY Performance Overview 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. Changes in the ratio of revenues - while the revenue composition ratio increased by 0.8 points from the previous year, 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 factors affecting selling, general and administrative expenses were a drop of 600 million yen in energy costs due to subsidies from rising electricity rates and an increase of 1 billion yen in labor costs due to increases in treatment and education expenses for employees. Depreciation expenses also rose by just under 600 million yen due to increased costs of construction materials and opening new stores. The EBITDA (earnings before interest, taxes, depreciation, and amortization) margin rose 0.1 points from the previous year. Lastly, the reason for the increase in the net income of the parent company's shareholders attributable to the current period was due to the elimination of the 500 million yen for executive retirement bonuses paid in the previous period, the reduction of impairment losses by 455 million yen, and the realization of gains on investment securities of 127 million yen in FY3/2024.

The consolidated results for the fiscal period ending in March 2024 showed a decrease in revenue of 1.0% year-on-year to JPY 29,874 million, an increase in operating profit of 9.9% to JPY 3,579 million, an increase in ordinary profit of 9.9% to JPY 3,782 million, and an increase in net income attributable to shareholders of the parent company of 27.5% to JPY 2,631 million. Although revenue decreased slightly, each profit turned into a profit for the second time in two periods, exceeding the company's plan.

By business segment, revenue increased by JPY 61 million for the service business and JPY 119 million for the real estate-related business, but decreased by JPY 226 million for the main business of fine chemicals and JPY 249 million for the porous material business. On the other hand, operating profit decreased by JPY 43 million for the service business, but increased by JPY 201 million for fine chemical business, JPY 41 million for porous material business, and JPY 123 million for real estate related business.

The gross profit margin increased from 35.2% in the previous period to 35.7% due to the implementation of price increases in the fine chemical business to cope with the rise in raw material costs and an increase in the operating rate of the hot bath business, securing a slight increase in gross profit by 0.6% compared to the previous period. In addition, the goodwill amortization ended (JPY 142 million was recorded in the previous period), and sales promotion and advertising expenses were reduced (JPY 111 million reduction compared to the previous period), resulting in a reduction in selling, general and administrative expenses by JPY 256 million. In addition, the net income attributable to shareholders of the parent company became a double-digit increase due to the disappearance of the impairment loss of JPY 353 million that was recorded as a special loss in the previous period.

(Written by FISCO guest analyst, Jo Sato)