Hirose Electric : Annual Report (Year ended March 31, 2023)

76th Fiscal Term Annual Report

From April 1, 2022 to March 31, 2023

To Our Shareholders

In the first half of FY2022, orders remained favorable due to supply chain disruptions and COVID- 19-related lockdown demand. However, monetary tightening prompted an economic downturn in the second half, and there has been a mounting sense of uncertainty looking forward.

Meanwhile, new electronic devices that address changing lifestyles and labor shortages have been emerging, and moves toward digitization and automation have been persisting unabated.

Given Hirose Group's mission of creating value-based products, we will sustain our future-oriented investment without letting up in seeking to swiftly address such changes.

We will engage in business operations enlisting a medium- to long-term perspective with the aim of achieving consistent and continuous growth.

Kazunori Ishii, President and Representative Director

■ Results and business environment in FY2022

In FY2022, we achieved sales of ¥183.2 billion and an operating profit ratio of 25.5%.

This constitutes growth to the tune of 1.5 times the ¥121.8 billion in sales of FY2019 recorded amid the onset of component shortages due to the COVID-19 pandemic.

Whereas sales remained steady in the mature smartphone market, Hirose Group's sales growth has been driven by increases over the last three years of 85% in industrial equipment, 55% in consumer equipment, and 55% in automotive.

Electronic devices in each of the fields continue to evolve amid steadily progressing labor shortages and lifestyle changes. As such, we are convinced that opportunities are expanding when it comes to connectors that link electronic devices.

On the other hand, we are well aware that this growth is not solely attributable to our own efforts. Given the inclusion of orders exceeding actual demand due to supply chain disruptions, we encountered a slowdown in orders starting from the second half of FY2022.

However, despite a temporary phase of inventory adjustment, development of new devices by customers has been in full swing amid a scenario where the megatrends remain unchanged.

Hirose Group is an enterprise that engages in value-based product development in response to such customer expectations.

Despite the prospect of a downturn in demand with respect to the near-term of FY2023, we see this as a pivotal year in terms of unwaveringly laying the groundwork for full-fledged growth.

■ Investment from a medium- to long-term perspective

Over the past three years, we have been contending with shortages of materials and supply chain disruptions, thereby causing us to become acutely aware of the importance of stable product delivery.

With Hirose Group encountering growing sales volume, we believe that it has become necessary for us to take our efforts to the next level. As such, this calls for two major areas of significant investment.

1

① Strengthening manufacturing expertise

• Construction of new factory in Koriyama Japan primarily for automotive and industrial equipment connectors (slated for completion in 2024)
• Expansion‌ of HIROSE KOREA manufacturing of automotive connectors and smartphone and consumer equipment connectors (slated for completion in 2024)
• Establishment‌of Tohoku Advanced Technology Center in Morioka Japan to serve as production facility and development site (slated for

completion in 2023)

②Developing a next-generation supply chain management system

• ‌Establishment of a new system capable of ensuring flexible and timely response from a BCP perspective, while extending supplier partnerships worldwide

Uncertain economic times particularly give rise to opportunities for Hirose Group, given its robust financial structure.

We will continue to engage in business with our sights set on achieving sustained growth without letting up on investment enlisting a medium- to long-term perspective.

We look forward to the continual support and guidance of our shareholders.

TOPICCONNECTION 2022 Hirose Technology Exhibition

Held once every three years, the Hirose Technology Exhibition was most recently held in two locations in Yokohama and Osaka.

This technology exhibition, which is an event exclusively for our customers, is distinctive given that it mainly showcases new products and future concept items and also given that all of the exhibition guides are our engineers.

For Hirose Group, which seeks to offer high added value through differentiated products, this exhibition provides valuable opportunities for its customers and our engineers to exchange ideas about future electronic devices and connectors.

The CONNECTION 2022 event, which marked the 15th time we have held the technology exhibition, welcomed approximately 7,000 visitors from both Japan and overseas, despite travel restrictions imposed due to the COVID-19 pandemic.

At the venue, we showcased a diverse range of exhibits displaying products such as wearable devices as well as automotive and industrial equipment in a disassembled format. This generated ample feedback from customers who drew new inspiration from design philosophies of different industries.

We are pleased to have been able to provide our customers with value distinctive to Hirose Group, which handles an extensive range of applications enlisting its three-pillar strategy.

HIROSE ELECTRIC will keep striving to serve as a company that addresses and exceeds customer expectations.

2

Financial Highlights

• Sales

Millions of yen		Interim		Full year
200,000

		183,224
	163,671
150,000
133,538
100,000		94,704
	79,188
61,036
50,000
0
74th	75th	76th

• Operating profit

Millions of yen		Interim		Full year
50,000

			46,751
		40,765
40,000
30,000	27,885		27,170
20,000		19,792
	12,893
10,000
0
	74th	75th	76th

• Profit attributable to owners of parent

Millions of yen	Interim	Full year
36,000
		34,648
		31,437
30,000
24,000
	19,916		20,636
18,000
		14,797
12,000
9,338
6,000
0
	74th	75th	76th

• Basic earnings per share

Yen	Interim	Full year
1,200
1,000			1,002.04
		885.39
800
600	549.10		594.23
		414.96
400
	257.48
200
0
	74th	75th	76th

• ‌Equity attributable to owners of parent to total assets ratio & Operating profit to sales ratio

Equity attributable to owners of parent to total assets ratio

• Operating prot to sales ratio
  100

90
88.0	86.6	87.2
80
70
60
50
40
30
20	24.9	25.5
20.9

10

0

74th75th76th

• Dividends per share

Yen	Interim	Full year	500
500
		440
400
300
	240		220
200
		160
	120
100
0
	74th	75th	76th

3

Overview of Consolidated Statements of Financial Position

(Millions of yen)

Previous scal year

As of March 31, 2022

Current scal year

As of March 31, 2023

Previous scal year

As of March 31, 2022

Total liabilities

Current scal year

As of March 31, 2023

Total liabilities

Cash and cash equivalents 68,394

Trade and other receivables 43,427

Property, plant and equipment 61,148

Intangible assets 3,704

Other nancial assets 38,504

Total assets

394,783

Current

assets

280,823

Non-current

assets

113,960

Total assets

401,357

Current

assets

256,658

Non-current

assets

144,699

Cash and

cash equivalents 88,029

Trade and

other receivables 41,931

Property, plant and equipment 63,795

Intangible assets 4,212

Other nancial assets 63,466

Equity

attributable to owners of parent to total assets ratio 86.6%

and equity

394,783

Liabilities

52,714

Equity

342,069

and equity

401,357

Liabilities

51,504

Equity

349,853

Equity

attributable to owners of parent to total assets ratio 87.2%

Overview of Consolidated Statements of Income

(Millions of yen)

Previous scal year

From April 1, 2021 to March 31, 2022

Sales

163,671

Operating	Prot attributable
prot to
to owners of parent
sales ratio
24.9%	31,437

Operating prot

40,765

Current scal year

From April 1, 2022 to March 31, 2023

Sales
183,224		Income tax expense
	Finance income	13,943
46,751	2,188

Operating		Finance costs
prot to
	348		Prot attributable
sales ratio
25.5%	Operating prot		Prot before tax	to owners of parent
		34,648
		48,591

4