USS : Presentation Materials with Script（2.9 MB）

USS Co., Ltd.

Financial Results Briefing for the Fiscal Year Ended March 2024

May 9, 2024

Event Summary

[Company Name]	USS Co., Ltd.
[Company ID]	4732-QCODE
[Event Language]	JPN
[Event Type]	Earnings Announcement
[Event Name]	Financial Results Briefing for the Fiscal Year Ended March 2024
[Fiscal Period]	FY2024 Annual
[Date]	May 9, 2024
[Number of Pages]	27
[Time]	13:00 - 14:01
	(Total: 61 minutes, Presentation: 20 minutes, Q&A: 41 minutes)
[Venue]	Webcast
[Venue Size]
[Participants]
[Number of Speakers]	3
	Yukihiro Ando	Chairman and Representative Director, Chief
		Executive Officer
	Dai Seta	President and Representative Director, Chief
		Operating Officer
	Masafumi Yamanaka	Director, Executive Vice President, Officer of
		the Supervisory Office

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Presentation

Moderator: Thank you very much for taking time out of your busy schedules today to participate in our Financial Results Briefing for the Fiscal Year Ended March 31, 2024.

In attendance today are Mr. Ando, Chairman and CEO; Mr. Seta, President and COO; and Mr. Yamanaka, Executive Vice President and General Manager of the Corporate Planning Division. First, CEO Ando will explain the financial results, followed by a Q&A session. The entire meeting will last approximately one hour. Let me now turn the floor over to Mr. Ando for a brief explanation. Thank you, Mr. Chairman.

Ando: My name is Ando. Thank you for your cooperation. Thank you very much for taking time out of your busy schedules today to participate in the FY2023 financial results briefing.

As the secretary has just informed you, the system allows for a question-and-answer session and interactive communication with you. I look forward to working with you later in the Q&A session.

In addition, as of April 1 of this year, a two-for-one stock split was implemented, so the figures in the materials are after the stock split.

Now please see page four. There are three main points in today's explanation. The first is the consolidated financial results for the full year. New car sales were strong through December, but dropped sharply from January onward, affecting the number of used cars in circulation. On the other hand, demand for used vehicles remained strong along with domestic sales and exports.

Compared to the previous fiscal year, USS posted a record-high 104% in the number of units sold, 106% in the number of units contracted, and record-high consolidated results for net sales and all profit categories.

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The second point is the full-year forecast for FY2024, which is currently underway. In the auction business, the number of auctioned units is expected to remain high at 3.1 million and the contract ratio at 64.5%. The Company plans net sales of JPY101.9 billion and operating income of JPY51.5 billion.

The third point is shareholder return. We plan to pay an annual dividend of JPY37.70 per share in FY2023 and JPY40.20 per share in FY2024, aiming to increase the dividend for 25 consecutive fiscal years since our stock listing.

We have also decided on a three-year growth investment and shareholder return policy from FY2024 to FY2026. We will invest more than JPY20 billion in growth over the next three years to achieve a 50% market share and expansion of our recycling business.

In addition to a consolidated dividend payout ratio of at least 55%, the Company has decided on a shareholder return policy of a total return ratio of at least 80% for the three-year period from 2024 to 2026. This detail will be explained later.

The slide you are looking at is the consolidated results for FY2023 as explained in the financial highlights. As I mentioned earlier, we have recorded record highs in sales and all profit categories.

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Next are sales and operating income by segment. The details of each segment will be explained later.

This chart shows the change in operating income compared to the previous year. First, let me explain the main reasons for the increase in net sales.

In the auction business, in addition to an increase in the number of units handled, the increase in commissions also had an effect. The increase in the number of used cars purchased in the used car purchase and sales business and the increase in orders for large-scale demolition work in the plant recycling business were the main reasons for the increase in revenue. Cost of sales factors and SG&A expenses are as shown.

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The consolidated balance sheet shows that the equity ratio was 72%, maintaining a high level of financial security.

From here, we will explain the trends in the automobile distribution market. Trends in new and used cars are as explained at the beginning of this report. The number of used vehicles exported has a significant impact on the overall auto auction market. The previous record export volume was 1.37 million units in FY2007, but last fiscal year, with the continued historic depreciation of the yen, the export volume reached 1.6 million units.

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We would now like to explain the auction segment. I will begin my detailed explanation on the next slide.

The slide you see is a document that compares the unit price per contracted vehicle between USS and the industry as a whole. The current unit price per contracted vehicle was analyzed as a result of the shortage of new car supply since January, and while the number of vehicles on display declined, demand for used vehicles was strong, leading to an increase in the unit price per contracted vehicle.

Next is the difference between USS and industry averages for the unit price per contracted vehicle. The price per unit before Coronavirus was about JPY200,000, but has expanded to about JPY500,000 as recently as

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March 2024. Analyzing the difference between the average and USS, we believe that USS has an overwhelming competitive edge in the market for relatively young, high-unit-price vehicles that are used for retail in Japan.

The slide you see is an explanation of the changes in auction results. Below left is the market share transition. The market share in CY2023 was 39%, slightly lower than the previous year, but this was due to an increase in the share of automaker-affiliated auction venues as a result of higher new car sales.

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Next, I will explain the changes in the unit price of fees. In January 2023, the Tokyo and Nagoya venues, and other venues, will raise contract and bidding fees in April 2023. First, the listing fee per unit was JPY5,702, up JPY73 from the previous period.

The main positive factors were a decrease in the number of events and a decrease in the percentage of exhibits in the low unit price sections at HAA Kobe and Kyushu venues.

Continuing on, the increase in the per-unit closing and bidding fees is due to an increase in the unit price of commissions. First, starting this April, we have raised the Internet bidding fee by JPY3,000 per unit to JPY20,000. In FY2024, this price increase is expected to have the effect of increasing revenues.

The following section describes the segment of used cars and other used vehicles for purchase and sale. The Rabbit increased its sales by 10% YoY to JPY6.8 billion and its operating income by 60% YoY to JPY177 million as the number of visits and sales volume increased due to improved evaluation of the store environment and the quality of customer service.

In the purchase and sales business of accident-damaged vehicles, sales increased 8% from the previous fiscal year to JPY4.5 billion and operating income rose sharply to JPY153 million due to an increase in the number of vehicles sold and firm auction market prices.

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Next, I will explain the recycling segment. In the resource recycling business operated by subsidiary ARBIZ, net sales increased 5% from the previous year to JPY5.3 billion and operating income decreased 10% from the previous year to JPY0.4 billion, mainly due to an increase in depreciation expenses despite an increase in the number of end-of-life vehicles handled.

In the plant recycling business operated by SMART Corporation, net sales increased 32% from the previous year to JPY5.1 billion and operating income decreased 14% from the previous year to JPY0.6 billion, due to increased outsourcing and labor costs, despite an increase in the number of orders for large-scale demolition projects.

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