Kaga Electronics : Earnings Release FY2023/3 Q1

August 4, 2022

Summary of Consolidated Financial Results

for the First Quarter Ended June 30, 2022 [Japan GAAP]

Name of Company:	KAGA ELECTRONICS CO., LTD.
Stock Code:	8154	URL: https://www.taxan.co.jp/
Stock Exchange Listing:	Tokyo Stock Exchange, Prime Market
Representative	Title: Representative Director,	Name: Ryoichi Kado
President & COO
Contact Person	Title: Director, Managing Executive Officer	Name: Eiji Kawamura
Head of Administration Headquarters
Phone:	[phone]

Date of filing of quarterly securities report (tentative):	August 15, 2022
Date of commencement of dividend payment (tentative):	-
Quarterly earnings supplementary explanatory documents:	Yes
Quarterly earnings presentation:	No

(Yen in millions, rounded down)

1. Financial results for the first quarter of the fiscal year ending March 2023 (April 1, 2022 - June 30, 2022)

1. Result of operations (Consolidated, year-to-date)

(Percentage figures represent year on year changes)

Net sales

Operating income

Ordinary income

Profit attributable

to owners of

parent

Million yen

%

Million yen

%

Million yen

%

Million yen

%

First quarter ended June 2022

149,302

40.9

9,820

120.6

9,858

115.9

6,984

143.2

First quarter ended June 2021

105,949

25.9

4,452

168.8

4,566

197.8

2,872

(66.6)

Note: Comprehensive income: 1Q of FY2023/3: 11,314 million yen [234.4%]

1Q of FY2022/3: 3,383million yen[ (63.0%)]

Earnings per

Earnings per

share

share

(diluted)

Yen

Yen

First quarter ended June 2022

266.10

－

First quarter ended June 2021

104.55

－

(2) Financial Position (Consolidated)

Total assets

Net assets

Equity ratio

Million yen

Million yen

%

As of June 30, 2022

286,756

115,119

40.1

As of March 31, 2022

272,139

105,800

38.8

Reference: Shareholders' equity：As of June 30, 2022: 115,008 million yen

As of March 31, 2022: 105,680million yen

2. Dividends

Dividend per share

1Q

2Q

3Q

Year-end

Full year

Yen

Yen

Yen

Yen

Yen

Fiscal year ended March 2022

－

45.00

－

75.00

120.00

Fiscal year ending March 2023

－

Fiscal year ending March 2023 (Forecast)

70.00

－

80.00

150.00

Notes: Change in the dividend forecast from the latest announcement: None

Breakdown of interim dividend for FY3/22: Ordinary dividend: 40.00 yen; Extraordinary dividend: 5.00 yen

Breakdown of year-end dividend for FY3/22: Ordinary dividend: 40.00 yen; Extraordinary dividend: 35.00 yen

Breakdown of year-end dividend for FY3/23 (Forecast): Ordinary dividend: 70.00 yen; 55th Anniversary

commemorative dividend: 10.00 yen

3. Forecast for the fiscal year ending March 2023 (Consolidated, April 1, 2022 - March 31, 2023)

(Percentage figures represent year on year changes)

	Net sales		Operating income	Ordinary income	Profit attributable	Earnings per
		to owners of parent	share
	Million yen		%	Million yen	%	Million yen	%	Million yen	%	Yen
Full year	540,000		8.9	24,000	14.7	24,500	14.2	16,000	3.9	609.58

Note: Change in the forecast from the latest announcement: Yes

With respect to the revision of consolidated performance forecast, please refer to "Notice Regarding Upward Revision to Earnings Forecast" announced today (August 4, 2022).

• Notes

1. Changes in significant subsidiaries (Changes in specified subsidiaries accompanied by changes in the scope of consolidation):None
2. Use of accounting methods specifically for the preparation of the quarterly consolidated financial statements: None
3. Changes in accounting policies, estimates, and retrospective restatement

1. Changes due to revision of accounting standards: Yes
2. Changes other than (a): None
3. Changes in accounting estimates: None
4. Retrospective restatement: None

Note: For more information, please refer "２．Quarterly Consolidated Financial Statements and Major Notes (3) Notes to quarterly consolidated financial statements (Changes in accounting policies)" on page 9.

1. Number of shares outstanding (common stock)

1. Shares outstanding (including treasury shares)

As of June 30, 2022:	28,702,118	As of March 31, 2022	28,702,118
(b) Treasury shares
As of June 30, 2022:	2,454,375	As of March 31, 2022	2,454,162
(c) Average number of shares (quarterly consolidated during the period)
Period ended June 30, 2022:	26,247,868	Period ended June 30, 2021:	27,472,177

• The quarterly audit procedures by a certified public accountant or auditing firm are not applicable to this Quarterly Financial Results report.
• Cautionary statement regarding forecasts of operating results and special notes

(Caution regarding forward-looking statements)

Forward-looking statements in these materials are based on information available to management at the time this report was prepared and assumptions that management believes are reasonable. Actual results may differ significantly from these statements for a number of reasons. For conditions as assumption for earnings forecast and cautionary statement regarding use of the forecast, please see "1. Results of Operations, (3) Qualitative information on consolidated earnings forecast" on page 4.

(How to obtain supplementary materials on quarterly financial results)

Supplementary materials on quarterly financial results are disclosed through TDnet and posted on the Company's website on the same date.

Index for Supplementary Information
1. Results of Operations............................................................................................	2
(1)	Overview of consolidated business performance ................................................	2
(2)	Overview of financial condition ........................................................................	4
(3) Qualitative information on consolidated earnings forecast ...................................	4
2. Quarterly Consolidated Financial Statements and Major Notes ...................................	5
(1)	Quarterly consolidated balance sheet................................................................	5
(2)	Quarterly consolidated statements of income and comprehensive income .............	7
	For the first quarter (April 1, 2022 - June 30, 2022).........................................	7
(3) Notes to quarterly consolidated financial statements ..........................................	9
	(Notes to going concern assumptions) ............................................................	9
	(Significant change in shareholders' equity).....................................................	9
	(Changes in accounting policies) ....................................................................	9
	(Additional information) ................................................................................	9
	(Segment information)................................................................................	10

1. Results of Operations

1. Overview of consolidated business performance

During the first quarter of the consolidated fiscal period under review, uncertainties continued to prevail in the overseas economy, due to the prolonged situation in Ukraine, the impact of lockdowns in China under its zero-COVID policy, and concerns about an acceleration of inflation triggered by the surge in prices of oil and other resources. Meanwhile, in Japan, personal consumption followed a recovery trend with the progressive easing of restrictions on economic activity as the number of COVID-19 cases continued to decline. Corporate earnings also showed signs of improvement, notably in the manufacturing industry.

In the electronics industry to which the Group belongs, business was affected by global supply shortages and extended lead times of certain semiconductors and electronic components, but demand remained robust in a broad range of areas, led by automotive- and industrial equipment-related applications.

As a result of these factors, net sales in the first quarter of the consolidated fiscal year rose 40.9% year on year to 149,302 million yen. This growth was driven by the electronic components business, which is the Group's core business. Operating income increased by 120.6% year on year to 9,820 million yen, due to a significant increase in gross profit resulting from higher net sales and improved gross profit margin. Ordinary income increased by 115.9% year on year to 9,858 million yen, and profit attributable to owners of parent increased by 143.2% year on year to 6,984 million yen. All metrics from net sales to ordinary income for the quarter achieved record highs for a consolidated first quarter.

In November 2021, the Group announced its three-year management plan, the Medium-Term Management Plan 2024 (2022-2024), which runs from the fiscal year ending March 31, 2023, to the fiscal year ending March 31, 2025. The new Medium-Term Management Plan sets "organic growth + further M&A challenges" as growth engines, seeks to reinforce and expand overseas and EMS (note) businesses, and aims to realize the goal of becoming "Japan's top-class corporate group in the industry with net sales of 750 billion yen" by the Plan's final fiscal year ending on March 31, 2025. In this first quarter of the first fiscal year of the new Medium-Term Management Plan, the Company was able to make a good start.

(Note) Electronics Manufacturing Service: Provision of product development and manufacturing services on an outsourcing basis.

	FY 2022/3 1Q	FY 2023/3 1Q
	(April 1, 2021 -	(April 1, 2022 -	YoY
	June 30, 2021)	June 30, 2022)
	（Million yen）	（Million yen）	（Million yen）
Net sales	105,949	149,302	43,352		40.9％
Gross profit	13,550	19,838	6,287		46.4％
（Margin）	12.8％	13.3％	0.5pt		－
SG&A	9,098	10,018	919		10.1％
Operating income	4,452	9,820	5,367		120.6％
Ordinary income	4,566	9,858	5,292		115.9％
Profit before income taxes	4,129	9,982	5,853		141.7%
Profit attributable to owners	2,872	6,984	4,112		143.2%
of parent
Exchange Rate
(Average rate during the year period)	109.49yen	129.57yen	20.08yen		－
USD

2

Business segment performance was as follows.

1. Electronic components (Development, manufacture and sale of semiconductors, general electronic components and other products, the electronics manufacturing service (EMS), and other activities)
   In this business, the components sales business achieved a significant increase in sales through early efforts to capture the requests of customers from a broad range of industries. While faced with prolonged supply constraints of certain semiconductors and electronic components which are continuing from the previous fiscal year, ongoing efforts were made to secure sales volume using the Company's strength in procurement capabilities and knowledge as an independent trading company. In addition, steady progress in PMI(Post Merger Integration) at acquired companies such as KAGA FEI Co., Ltd. and EXCEL Co., Ltd. contributed to profit growth in this business. In the EMS business, demand notably in automotive and medical equipment applications remained solid. In Shanghai, China, lockdowns had an impact, but it could be minimized without having to halt operations by making supply and sales channels mutually available to Group companies in China and implementing thorough process control.
   As a result, net sales increased by 47.3% year on year to 133,477 million yen, and segment income increased by 143.7% year on year to 9,018 million yen.
2. Information equipment (Sales of PCs, PC peripherals, home electric appliances, photograph and imaging products, original brand products, and other products)
   In this business, sales of PCs for corporations and educational institutions were firm, while sales of PC peripherals such as security software remained strong. In the LED installation business, large-scale work which had been delayed due to a shortage of materials resumed and contributed to profit in this business.
   As a result, net sales increased by 4.8% year on year to 11,147 million yen, and segment income decreased by 0.6% year on year to 564 million yen.
3. Software (Production of computer graphics, planning and development of amusement products, and other activities)
   In this business, games development, computer graphics production and other efforts were made to obtain new orders. The situation, however, remained challenging.
   As a result, net sales decreased by 12.3% year on year to 498 million yen, and segment loss of 33 million yen was recorded (67 million yen of segment loss in the same period of the previous fiscal year).
4. Others (Repair and support for electronics equipment, and sales of amusement equipment and sports goods, and others)
   In this business, the PC and PC peripheral recycling business was strong as demand for reused and recycled products increased amid continuing supply difficulties of items such as PC products caused by the shortage of electronic components. In addition, game equipment for the amusement industry in Japan and overseas as well as golf products saw growth in sales following a relaxation of pandemic-induced restrictions on movement.
   As a result, net sales increased by 1.4% year on year to 4,178 million yen, and segment income increased by 14.7% year on year to 249 million yen.

Financial Results by Business Segment

		FY 2022/3 1Q	FY 2023/3 1Q
		(April 1, 2021 -	(April 1, 2022 -	YoY
		June 30, 2021)	June 30, 2022)
Electronic	Net sales	（Million yen）	（Million yen）	（Million yen）	47.3％
90.624	133,477	42,853
components	Segment income	3,699	9,018	5,318	143.7％
Information	Net sales	10,636	11,147	511	4.8%
equipment	Segment income	568	564	(3)	(0.6％)
Software	Net sales	568	498	(69)	(12.3%)
	Segment income	(67)	(33)	33	－
Others	Net sales	4,120	4,178	57	1.4％
	Segment income	217	249	31	14.7%
Total	Net sales	105,949	149,302	43,352	40.9％
	Segment income	4,452	9,820	5,367	120.6％

Note: "Segment income" shows unadjusted figures for each business segment and adjusted figures for the total.

3