Sakai Heavy Industries : Consolidated Financial Results for the Fiscal Year Ended March 31,2024

Consolidated Financial Results

for the Fiscal Year Ended March 31, 2024

SAKAI HEAVY INDUSTRIES, LTD.

Stock code: 6358

URL https://www.sakainet.co.jp/en/

May 14, 2024

Summary of Consolidated Financial Results

1

Highlights of Consolidated Business Performance

1. Summary of Consolidated Business Performance for the Fiscal Year Ended March 31, 2024

1) Consolidated net sales: ¥33,020 million, up 5.0% YoY

Although sales in Japan and Asia began to decline, the drop was offset by increased sales in North America.

2) Operating profit: ¥3,318 million, up 32.4% YoY

Progress in profit structure reform and the upside effect of yen depreciation.

3) Domestic sales:¥14,320 million, down 5.8% YoY

Although construction investment remained strong against the backdrop of measures to accelerate national land resilience, repeated price revisions and the 2024 construction and logistics problems brought investment in construction machinery to a standstill.

4) Sales in North America: ¥9,700 million, up 25.1% YoY

High level of construction investment continues against the backdrop of the Infrastructure Investment and Jobs Act.

5) Sales in Asia:¥7,566 million, down 2.9% YoY

Slowdowns in the Chinese and ASEAN markets, despite the strong Indonesian market.

2

Highlights of Consolidated Business Performance

2. Adapting to a Changing Business Environment

1. Initiatives for enhancing the profitability of capital

1. Progress of medium-term management policy
   Five-yearmedium-term management policy: Net sales of ¥30 billion, operating profit of ¥3.1 billion, ROE of 8.0%
   Results for the current fiscal year (third year): Net sales of ¥33 billion, operating profit of ¥3.31 billion, ROE of 9.0%
2. Progress of enhancing corporate value (PBR above 1)
   At the end of March 2023: PBR 0.68 times (Share price ¥4,010)
   At the end of March 2024: PBR 0.98 times (Share price ¥6,680)
   Timely disclosure of policies regarding initiatives has been provided in the Status of Initiatives for Enhancing Profitability of Capital, dated April 13, 2023 https://www.sakainet.co.jp/en/news/item/20230425EnhancingProfitabilityofCapital.pdf

2) Profit structure reform through sales price revisions and high added value

Cost-of-sales ratio improvement: 71.6%, improvement of 2.4% YoY

Profit structure reform progressed with penetration of sales price revisions in Japan and overseas, and normalization of transportation costs.

3) Strengthening product supply capabilities

1. Enhancement of supply chain (stabilization through review of suppliers and dual sourcing)
2. Modification of global business activities (stabilization of business structure in Japan and overseas through expansion of production capacity at domestic plants and expansion of parts business at Chinese plants)

4) Dealing with volatile demand

Inventory turnover: 3.10 times, down 0.23 times/7% YoY

Increase in parts for increased production and safety stock. Currently adjusting to an optimized inventory level due to easing of supply constraints.

3

Highlights of Consolidated Business Performance

3. Mid- to Long-Term Growth Strategy

1) Make more significant inroads into the Asian market:

Expand the ASEAN market centered on our Indonesian hub (net sales down 2.9% YoY)

2) Expand the scope of overseas business:

Develop the overseas market for road maintenance equipment (start the local production in Indonesia)

3) Pursue business opportunities in North America:

Increase our market share through niche marketing (net sales up 25.1% YoY)

4) Develop next-generation businesses:

Focus on market development for emergency brakes, compaction management systems, and Automatic Cutter Control System.

Research and development on autonomous rollers and EV rollers is underway.

4. Outlook for Business Environment

1) Global Construction Machinery Market
In the domestic market, construction investment continues to be firm due to the five-year acceleration measures for
national land resilience, but structural adjustment of the entire supply chain is still ongoing due to a wide range of cost
increases, such as construction machinery, and the 2024 problem in construction and logistics, but after a temporary
standstill, the market is expected to return to a recovery trend. In the North American market, high levels of
government construction investment based on the Infrastructure Investment and Jobs Act are continuing, and a solid
market environment is expected.
In the Asian market, although the Chinese market continues to be sluggish, the ASEAN market is expected to bottom
out due to strong domestic demand.
2) Risks and Countermeasures
Domestically, prices, wages, and interest rates are expected to rise to balance the gap with those overseas. Globally,
supply chain risks and resource and logistics costs are expected to remain high due to the ongoing fragmentation of the
global economy caused by tensions in Ukraine and the Middle East.
In order to transition to a management structure adapted to these changes in the times, we will move forward with the
approach of adapting to a changing business environment.	4

Consolidated Business Performance

				(Millions of yen)
	Fiscal year	Fiscal year	YoY change
	ended	ended
	March 31,	March 31,	Amount	%
	2023	2024
Net sales	31,459	33,020	1,560	5.0%
Japan	15,208	14,320	▲ 888	▲5.8%
Overseas	16,251	18,699	2,448	15.1%
Operating profit	2,506	3,318	812	32.4%
Operating profit ratio	(8.0%)	(10.1%)
Ordinary profit	2,327	3,324	996	42.8%
Profit attributable to	1,694	2,440	746	44.0%
owners of parent
Cost-of-sales ratio	(74.0%)	(71.6%)

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Consolidated Business Performance (Graph)

6

Sales by Region in Which Customers Are Located

			(Millions of yen)
	Fiscal year	Fiscal year	YoY change
	ended	ended
	March 31,	March 31,	Amount	%
	2023	2024
Japan	15,208	14,320	▲ 888	▲5.8%
Overseas	16,251	18,699	2,448	15.1%
North America	7,751	9,700	1,948	25.1%
Asia	7,796	7,566	▲ 229	▲2.9%
Other regions	703	1,432	729	103.8%
Total	31,459	33,020	1,560	5.0%

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Sales by Region (Map)

(Millions of yen)	Fiscal year ended	Fiscal year ended
March 31, 2023	March 31, 2024

YoY change

Japan	15,208	14,320	(▲888, ▲5.8%)
Overseas	16,251	18,699	(+2,448, +15.1%)
Total	31,459	33,020	(+1,560, +5.0%)

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Segment Information by Region in Which Our Manufacturing Facilities and Sales Offices Are Located

(Millions of yen)

	Year	Year	YoY change
Japan	ended	ended
March 31,	March 31,	Amount	%
	2023	2024
Sales to external	20,730	19,225	▲ 1,504	▲7.3%
customers
Intercompany	3,826	4,185	359	9.4%
sales
Total net sales	24,556	23,411 ▲ 1,145	▲4.7%
Operating profit	836	983	146	17.5%
			(Millions of yen)
	Year	Year	YoY change
Indonesia	ended	ended
	March 31,	March 31,	Amount	%
	2023	2024
Sales to external	2,656	3,793	1,136	42.8%
customers
Intercompany	4,355	3,091	▲ 1,263	▲29.0%
sales
Total net sales	7,012	6,885	▲ 127	▲1.8%
Operating profit	836	1,004	168	20.1%

(Millions of yen)

	Year	Year	YoY change
North America	ended	ended
March 31,	March 31,	Amount	%
	2023	2024
Sales to external	7,751	9,700	1,948	25.1%
customers
Intercompany	50	20	▲ 29	▲58.4%
sales
Total net sales	7,802	9,721	1,919	24.6%
Operating profit	688	1,162	473	68.7%
			(Millions of yen)
	Year	Year	YoY change
China	ended	ended
March 31,	March 31,	Amount	%
	2023	2024
Sales to external	320	300	▲ 20	▲6.3%
customers
Intercompany	1,268	1,678	410	32.4%
sales
Total net sales	1,589	1,979	390	24.6%
Operating profit	133	209	75	56.2%

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