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.

1. Performance Overview for the Fiscal Year Ending December 2023.

The consolidated performance of Shin-Bio Pharmaceutical Co., Ltd. (4582) for the fiscal year ending December 2023 was: Operating revenue of 5,589 million yen, down 44.1% from the previous year; Operating loss of 811 million yen (compared to a profit of 1,963 million yen in the previous year); Ordinary loss of 736 million yen (compared to a profit of 1,999 million yen in the previous year); And net loss attributable to parent company shareholders of 1,962 million yen (compared to a profit of 1,179 million yen in the previous year), recording a decline in revenue for the fourth consecutive period and a loss for the third consecutive period.

Revenue fell significantly due to the spread of COVID-19, concerns about increased infection risks for malignant lymphoma patients and the proliferation and exacerbation of infections during or after bendamustine treatment, as well as the penetration of generic drugs leading to a decline in market share and price decline for Trearaxin(R).

Although the gross profit margin increased from 75.9% in the previous year to 78.9%, this is because the sales milestone payment of 550 million yen for Trearaxin(R) was included in the cost of sales for the previous year, and the gross profit margin excluding this factor was approximately 81%, indicating a slight decrease in reality. This is mainly due to a quality issue with Trearaxin(R) in June 2023, which temporarily increased costs. It should be noted that all sales milestone payments for Trearaxin(R) ended in the fiscal year ending December 2022.

Among selling, general and administrative expenses, research and development expenses increased by 3.3% to 2,638 million yen due to an increase in clinical trial expenses for BCV and joint research expenses. Other selling, general and administrative expenses decreased by 16.1% to 2,584 million yen, mainly due to a decrease in promotional expenses related to Trearaxin(R) (reduced by 543 million yen to 937 million yen). In addition, net loss attributable to parent company shareholders increased significantly due to impairment losses of 560 million yen on tangible fixed assets and software assets, as well as the reversal of deferred tax assets amounting to 744 million yen.

(Written by FISCO guest analyst, Jo Sato)