Performance trends for Tensho Electric Industry <6776>.

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.

P/L

For the consolidated performance of the year ending March 2024, revenue was 26,905 million yen (up 12.6% from the previous year), operating profit was 1,062 million yen (up 75.7% from the previous year), ordinary profit was 1,322 million yen (up 75.8% from the previous year), and net income attributable to parent company shareholders was 948 million yen (up 55.0% from the previous year).

In addition to the recovery of production and sales of automobile manufacturers, which are the main customers, the consolidated sales increased significantly due to the good performance of the US subsidiary, which has actively invested in facilities in recent years.

The gross profit margin was 16.1% (15.7% in the previous year), which improved by 0.4 points due to an increase in the operating rate of main automobile products. As a result, gross profit increased by 15.3% from the previous year, but selling, general, and administrative expenses remained at a 3.7% increase, resulting in a significant increase in operating profit from the previous year. The depreciation expense was 2,233 million yen (an increase of 340 million yen from the previous year) due to aggressive investment centering on mold, but the operating profit secured an increase by absorbing it. As a result, operating profit before depreciation was 3,295 million yen (an increase of 32.0% from the previous year). Ordinary profit also increased by 75.8% due to an increase in non-operating income such as increased interest income and exchange gains. Net income attributable to parent company shareholders, however, was lower than the growth rate of ordinary income, at an increase of 55.0% due to factors such as calculating government grants received as special income in the previous year.

(2) Segment information:

For the molding-related business in Japan, sales increased to 20,247 million yen (up 5.0% from the previous year), and segment profit increased to 568 million yen (up 34.1% from the previous year) due to the recovery of production by major customers, i.e., automobile manufacturers.

For molding-related business in China, sales decreased to 445 million yen (down 38.9% from the previous year) due to a slowdown in orders for IC trays, which had been relatively strong until the previous year, and segment profit decreased to 9 million yen (down 86.2% from the previous year).

For molding-related business in the United States, sales improved significantly to 5,927 million yen (up 65.0% from the previous year) due to a significant increase in production capacity resulting from investment in facilities over the past few years, as well as a recovery in demand for logistics. Despite depreciation expenses incurred by facility investment, segment profit improved significantly to 240 million yen (compared to a loss of 132 million yen in the previous year).

(3) Amounts invested in and depreciated for equipment: For the year ending March 2024, cash flow-based investment in tangible fixed assets decreased significantly to 2,733 million yen (down from 4,122 million yen in the previous year), as investment in the second plant in Mexico has been completed. On the other hand, depreciation and amortization expenses increased significantly to 2,233 million yen (up from 1,893 million yen in the previous year).

Due to the completion of investment in the second factory in Mexico, the amount of tangible fixed asset acquisitions for the March 2024 period investment decreased significantly, down to 2.733 billion yen on a cash flow basis, compared to 4.122 billion yen in the previous period. On the other hand, depreciation expenses increased significantly to 2.233 billion yen, compared to 1.893 billion yen in the same period.

(Written by FISCO guest analyst Noboru Terashima)