Daishinku : Transcript of the Second quarter financial results briefing for the fiscal year ending March 2024

Presentation

[Title]

Daishinku's Photolithography sales ratio has exceeded 20% for the first time; In the next fiscal year, the automotive electronics market is expected to be strong, and both the consumer and industrial equipment markets will also trend toward recovery.

[Lead]

The following is a transcription of Daishinku Corp.'s financial results presentation for 2Q of the fiscal year ending March 31, 2024, which was released on November 29, 2023.

[Speaker]

Shimpei Hasegawa, Director, Senior Managing Executive Officer, General Manager of Marketing & Sales Division, Daishinku Corp.

[Text]

Topics of Financial Results for 2Q of FY2024

Hasegawa: Thank you very much for taking time out of your busy schedule to participate in our financial results briefing today. I will move on to the explanation.

First, here are the financial results topics for 2Q of FY ending March 2024. Revenues and profits decreased YoY amid a sluggish market environment. In the automotive electronics field, revenues posted a double-digit YoY increase. The photolithography sales ratio exceeded 20% for the first time. The annual dividend remains unchanged at JPY28 per share.

Performance Report for 2Q of FY2024 (YoY)

Here are the financial results for 2Q. Net sales were JPY19,332 million, operating profit was JPY901 million, ordinary profit was JPY1,977 million, and profit attributable to owners of parent was JPY1,391 million. Both sales and profits decreased YoY. The exchange rate was JPY141.06 to USD1.

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Sales by Market (YoY Change)

Here are sales by market. Sales in the telecommunications market decreased by 4%, those in the automotive electronics market increased by 10%, those in the consumer equipment market decreased by 18%, and those in the industrial equipment market decreased by 9%.

The telecommunications and consumer equipment markets have been on a recovery track after bottoming out in 4Q of the previous fiscal year. However, we believe that a full-fledged recovery will be possible from next year onward.

As for the automotive electronics market, there were some inventory adjustments in Europe, but the strong markets in the US, Asia, and other regions led to the double-digit sales growth.

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Operating Profit Analysis (YoY Change)

Here is the analysis of operating profit. Operating profit decreased by JPY2,470 million from JPY2,810 million in 2Q of the fiscal year ended March 2023 due to price fluctuation and changes in the volume and product mix. In addition, it increased by JPY460 million due to fluctuations in fixed costs and by JPY90 million due to changes in SG&A and other expenses. As a result, operating profit for 2Q of the fiscal year ending March 2024, decreased by JPY1,909 million YoY to JPY901 million.

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Quarterly Performance Report for FY2024

Here are the quarterly financial results for 2Q. In July to September, sales were JPY10,014 million, operating profit was JPY383 million, ordinary profit was JPY925 million, and profit attributable to owners of parent was JPY952 million, with sales up QoQ and profits down QoQ.

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Sales by Market (QoQ Change)

Here are sales by market. Sales in the telecommunications field increased by 10% QoQ, those in the automotive electronics segment increased by 14%, those in the consumer equipment field increased by 8%, and those in the industrial equipment segment decreased by 11%.

As for the industrial equipment field, the timing of inventory adjustments was postponed to the current year due to a lot of order backlog at customers in the previous year as their lead time was very long.

The telecommunications and consumer equipment fields continued to recover after bottoming out in 4Q of the previous fiscal year, and the automotive electronics segment remained strong.

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Taiwan Segment

As for the Taiwan segment, which represents the performance of our consolidated subsidiary HARMONY ELECTRONICS CORP, sales and profits had been declining since 2H of the previous fiscal year due to the high ratios of the telecommunications and consumer equipment fields, which remained sluggish. However, both fields have begun to recover as the markets recovered.

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Operating Profit Analysis (QoQ Change)

This is an analysis of the QoQ change in operating profit. Compared to operating profit of JPY518 million for the April to June period, price fluctuation and changes in volume and product mix caused an increase of JPY190 million, fixed cost fluctuations caused a decrease of JPY100 million, and changes in SG&A and other expenses caused a decrease of JPY230 million. As a result, operating profit for the July to September period declined JPY134 million from the previous quarter to JPY383 million.

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Capital Expenditures / Depreciation / R&D Expenses

In 2Q, capital expenditures totaled JPY2,229 million, depreciation totaled JPY1,859 million, and R&D expenditures totaled JPY1,073 million. Capital expenditures decreased by JPY1,347 million YoY. Major capital expenditures included spending on photolithography-related equipment and core systems.

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Full-Year Forecast for FY2024

This shows the full-year forecast for the current fiscal year. We made an upward revision to the forecast, estimating net sales at JPY38 billion, operating profit at JPY1.5 billion, ordinary profit at JPY1.7 billion, and profit attributable to owners of parent at JPY1.1 billion.

We assume an exchange rate of JPY145 to the US dollar in 2H and JPY143.03 for the full year. In consideration of the further appreciation of the Japanese yen, we assume a year-end exchange rate of JPY135 to USD1.

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