■The future outlook of Kato Manufacturing Co., Ltd. <6390>

●Performance outlook for the fiscal year ending March 2025

The consolidated financial estimates for the fiscal year ending March 2025 have been revised on November 8, 2024, with revenue expected to increase by 7.0% year-on-year to 61,500 million yen, operating profit projected to decrease by 9.3% to 1,500 million yen, ordinary profit estimated to decline by 37.9% to 1,600 million yen, and the net loss attributable to parent company shareholders expected to be 4,200 million yen (compared to a profit of 4,235 million yen in the previous period). Compared to the previous period, revenue is expected to increase due to the resolution of supply constraints on major components for certain types of construction cranes that occurred in the previous year and the strengthening of sales expansion; however, operating profit is anticipated to decrease due to overall demand stagnation, one-time factors in the interim period, rising raw material prices, and growth investments, while ordinary profit is expected to decline without currency exchange gains, leading to a projected final loss due to the recording of losses related to subsidiary restructuring. The assumed exchange rates for the second half are set at 140 yen per US dollar, 19 yen per yuan, and 155 yen per euro.

In comparison to the previous estimates (revised on August 9, 2024, forecasting revenue of 70,000 million yen, operating profit of 2,100 million yen, ordinary profit of 1,500 million yen, and a net loss of 5,400 million yen attributable to parent company shareholders), revenue has been revised downward by 8,500 million yen, operating profit by 600 million yen, ordinary profit has been revised upward by 100 million yen, and the net loss attributable to parent company shareholders has been reduced by 1,200 million yen. The downward revision in revenue is due to expected demand falling short in domestic and European markets; however, it is anticipated to secure an increase in revenue year-on-year. The downward revision in operating profit aligns with the downward revision in revenue. The upward revision in ordinary profit is based on an increase in rent and other income. Regarding the net income attributable to parent company shareholders, the previously anticipated special loss (loss due to subsidiary restructuring) from the dissolution and liquidation of two subsidiaries in China was around 7,000 million yen, but the loss amount has decreased due to revised inventory sales plans with high recoverability, leading to an upward revision and a forecast for a reduced loss compared to previous estimates. The breakdown of the subsidiary restructuring loss of 6,180 million yen recorded in the interim period is as follows: retirement-related expenses of 561 million yen, allowance for doubtful accounts of 2,930 million yen, inventory valuation loss of 2,566 million yen, impairment loss of 23 million yen, and other expenses of 98 million yen.

Although a decrease in profit is projected for the fiscal year ending March 2025, the sales of the new 80-ton rough-terrain crane equipped with a new engine, which had been postponed, will begin in December 2024, and as transient negative factors such as the dissolution and liquidation of two subsidiaries in China are resolved, along with improvements in selling prices and costs, significant improvement in earnings is expected for the fiscal year ending March 2026.

(Authored by FISCO guest analyst Masanobu Mizuta)