Q3 Results for the Fiscal Year

TSE Code: 5938

Ending March 31, 2023 (IFRS)

(From April 1, 2022, to December 31, 2022)

LIXIL Corporation

January 31, 2023

Copyright © LIXIL Corporation. All rights reserved.

LIXIL TRANSITIONED TO IFRS FROM FYE2016

CHANGE IN PROFIT LEVEL STRUCTURE IS AS SHOWN

JGAAPBELOW

IFRS (LIXIL Financial Reporting)

Continuing operations

Net sales

Revenue

Cost of sales

Cost of sales

Gross profit

Gross profit

SG&A

SG&A

Operating profit

Core earnings (CE)

Non-operating income/expenses

Other income/expenses

Ordinary income

Operating profit

Extraordinary income/loss

Finance income/costs

Share of profit (loss) of investments accounted for using equity method

Profit before income taxes

Profit before tax

Profit from continuing operations

Discontinued operations

Profit for discontinued operations

Net profit attributable to

Profit attributable to

Non-controlling interests

Owners of the parent

Owners of the parent

Non-controlling interests

"Core earnings" in IFRS is equivalent to JGAAP's "Operating profit"

1

KEY HIGHLIGHTS

  • Revenue increased while profits declined year-on-year for the nine-month period of FYE2023
  • Profitability improved in line with the plan for Q3, despite the impact of JPY depreciation and component price increases, helped by the implementation of price optimization
    • Impact of supply chain issues in Europe remains, but expected to be resolved by the end of FYE2023
    • Asia Pacific is generally solid, while the situation in the Americas and China needs to be monitored

Summary of results for the nine-month period of FYE2023 and outlook

  • Steady progress has been made on price optimization(1) in Japan in Oct and Nov 2022. Continued improvement in profitability is expected through Q4 onwards. Another round of price optimization(2) is scheduled for April 2023
  • Due to shipment delays in international businesses, particularly in Europe, the full-fledged positive impact from lower commodity prices are expected to appear from mid-March

(1)

Press release announced on June 23, 2022 "Partial Revision of Manufacturer's Suggested Retail Prices for Building Materials and Equipment"

(2)

Press release announced on December 6, 2022 "Partial Revision of Manufacturer's Suggested Retail Prices for Building Materials

2

and Equipment" ((1), (2) Japanese only)

Q3 FYE2023 RESULTS

Profitability for both LWT and LHT improved in Q3

Q3

FYE2023 Results

(9 months)

Q3

Q1

Q2

Q3

JPY billion

FYE2022

(9 months)

Revenue

1,074.4

360.3

372.4

391.2

1,123.8

LIXIL

CE

61.8

7.0

-0.8

14.8

21.0

(%)

5.7%

1.9%

-

3.8%

1.9%

Revenue

647.2

221.0

225.1

237.1

683.2

LWT

CE

64.5

13.2

7.4

15.3

36.0

(%)

10.0%

6.0%

3.3%

6.5%

5.3%

Revenue

441.4

143.0

150.2

161.0

454.3

LHT

CE

30.5

3.1

2.9

9.5

15.5

(%)

6.9%

2.2%

1.9%

5.9%

3.4%

Consolidation,

Revenue

-14.2

-3.7

-3.0

-7.0

-13.7

adj. & other

CE

-33.3

-9.4

-11.1

-10.0

-30.5

3

Q3 FYE2023 RESULTS (FROM JANUARY TO DECEMBER 2022)

Profitability improved in Q3 due to price optimization.

For international business, cost of sales improvement is expected from Q4 onwards, although accompanied by a decline in demand

（JPY billion) 8.0

6.0

4.0

Monthly trend of core earnings

Normalization of

distribution centers'

from January to December 2022 (Company-wide)

operation in Europe

Japan/Americas:

Japan/Europe:

Price optimization

Price optimization

Start of commodity price declines Widening deterioration in China's real estate environment

2.0

Europe/Middle East:

Change in Product Mix

Request started for price

0.0

optimization from suppliers

Weakening European

Delay

unloading in Europe/Americas

economy

-2.0

Commodity prices peak

Start of order resumption

Russia/Ukraine Crisis

JPY

from US distributors

- Price hikes for energy

Inventory adjustment by US distributors

-4.0

and ocean freight

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

4

CHALLENGES AND RESPONSES

  • Challenges
  1. Softening demand in Europe, Americas, China and Japan
  2. Price increases by small- to mid- sized suppliers, potential business closures that would affect supply
  3. Prolongation of Russia/Ukraine crisis
  4. Possible surge in global commodity prices as China economy recovers
  • Responses
  1. Differentiated products
    • Strengthening of environmental-friendly products such as Revia(1)（launch in Q4 FYE2023）
    • Strengthening of shower-related products (Acquisition of Basco(2) / KINUAMI U)
  3. Differentiated raw materials
    • Shift of yellow brass to zinc
    • Introduction of recycle aluminum products such as R70/R100(3)
  5. Streamlining of supply chain
    • Restructuring of inter-regional purchasing
    • Knockdown production / Localization of downstream process
    • Strengthening of businesses in Middle East and China
  7. Further transformation of business model in Americas and China

(1)

News Releasehttps://newsroom.lixil.com/2022101802

5

(2)

Business and ESG related topics p.26

"Promote Growth of International Water Technology Business"

(3)

Business and ESG related topics p.26

"Contribute to Decarbonized Society and Circular Economy"

PERFORMANCE HIGHLIGHTS

Revenue increased but profits decreased year-on-year

  • Revenue: JPY1,123.8 billion, up 5% year-on-year
    • Q3 (3 months) YoY: +1% in Japan and +9% in international markets (-2.9% excluding foreign exchange impact)
    • Q3 (9 months) YoY: +1% in Japan and +11% in international markets (-0.7% excluding foreign exchange impact)
  • Core earnings: JPY21.0 billion, down JPY40.8 billion year-on-year
    • Q3 (3 months) YoY: -JPY3.2 billion in Japan, -JPY7.6 billion in international markets and +JPY1.2 billion for consolidation adjustment/other factors
    • Q3 (9 months) YoY: -JPY20.1 billion in Japan, -JPY23.5 billion in international markets and +JPY2.8 billion for consolidation adjustment/other factors
  • Profit for the quarter(1): JPY11.0 billion, down JPY30.5 billion year-on- year
    • Decreased primarily due to decrease in core earnings

(1) Profit for the quarter = Profit for the quarter attributable to owners of the parent

6

Q3 FYE2023 CONSOLIDATED BUSINESS RESULTS

Q3 (9 months)

Q3 (3 months)

FYE2022

FYE2023

Increase/

%

FYE2023

Increase/

%

JPY billion

decrease

decrease

(YoY)

(YoY)

Revenue

1,074.4

1,123.8

+49.4

+4.6%

391.2

+13.0

+3.4%

Gross profit

373.4

352.5

-20.9

-5.6%

123.2

-6.0

-4.6%

(%)

34.8%

31.4%

-3.4pp

-

31.5%

-2.7pp

-

SG&A

311.6

331.5

+19.8

+6.4%

108.4

+3.6

+3.5%

Core earnings (CE)(1)

61.8

21.0

-40.8

-66.0%

14.8

-9.6

-39.4%

(%)

5.7%

1.9%

-3.9pp

-

3.8%

-2.7pp

-

Profit for the quarter including

41.5

11.0

-30.5

-73.4%

7.3

-8.5

-53.7%

Discontinued Operations(2)

EPS (JPY)

142.79

38.24

-104.55

-73.2%

25.46

-28.87

-53.1%

EBITDA(3)

122.2

82.5

-39.6

-32.4%

36.1

-8.6

-19.3%

(%)

11.4%

7.3%

-4.0pp

-

9.2%

-2.6pp

-

  • CE margin: Declined by 3.9pp YoY (Improved by 4.0pp from Q2 FYE2023)
  • Gross profit margin: Declined by 3.4pp YoY (Improved by 1.2pp from Q2 FYE2023)
  • SG&A expenses: Increased by JPY19.8 billion YoY (in Japan JPY1.7 billion increase, International JPY8.1 billion increase, forex effect JPY10.0 billion increase) due to expanded sales activities and higher logistics costs. SG&A ratio declined by 0.5pp mainly due to higher personnel expenses in the international business and logistics costs

(1)

Equivalent to "Operating profit" of JGAAP

7

(2)

Profit for the quarter attributable to owners of the parent

(3)

EBITDA=Core earnings + Depreciation + Amortization

Q3 FYE2023 BUSINESS RESULTS BY SEGMENT

Revenue increased in all businesses, but core earnings decreased year-on- year due to a sharp depreciation in JPY and impact of an accelerated increase in component prices

Q3 (9 months)

Q3 (3 months)

Increase/decrease (YoY)

Increase/decrease (YoY)

New

FYE2022 FYE2023

due to

excluding

FYE2023

due to

excluding

reporting

(1)

the

the

the

the

JPY billion

segment

segment

segment

segment

segments

683.2

+36.0

change(2)

change

237.1

+10.4

change(2)

change

LWT

Revenue

647.2

CE

64.5

36.0

-28.5

15.3

-8.4

LHT

Revenue

441.4

454.3

+12.9

+4.8

+8.1

161.0

+4.0

+0.8

+3.1

CE

30.5

15.5

-15.1

+1.1

-16.2

9.5

-2.4

+0.8

-3.2

Consolidation,

Revenue

-14.2

-13.7

+0.5

-0.8

+1.3

-7.0

-1.4

-0.2

-1.2

adj. & other

CE

-33.3

-30.5

+2.8

+0.0

+2.8

-10.0

+1.2

+0.0

+1.1

LIXIL

Revenue

1,074.4

1,123.8

+49.4

391.2

+13.0

CE

61.8

21.0

-40.8

14.8

-9.6

Forex impact(3)

Q3 9 months: Revenue +JPY42.4 billion, CE +JPY4.0 billion

Q3 3 months: Revenue +JPY14.5 billion, CE +JPY1.2 billion

(1) Please refer to "Notice Regarding Change in Reporting

(2)

Includes consolidation adjustments added by the change of

8

Segments" disclosed on July 29, 2022 for full-year and quarterly

(3)

reporting segments

results for FYE2022 in the new reporting segments

Forex translation effect gain(loss) from international subsidiaries

REFERENCE: Q3 FYE2023 BUSINESS RESULTS BY SEGMENT

Q3 (9 months and 3 months) business results in the former reporting segments are as follows

Q3 (9 months)

Q3 (3 months)

Former

FYE2022

FYE2023

Increase/

FYE2023

Increase/

reporting

Decrease

Decrease

segments

JPY billion

(YoY)

(YoY)

LWT

Revenue

647.2

683.2

+36.0

237.1

+10.4

CE

64.5

36.0

-28.5

15.3

-8.4

LHT

Revenue

354.4

362.5

+8.1

127.8

+3.1

CE

29.1

12.9

-16.2

7.6

-3.2

LBT

Revenue

65.7

71.6

+5.9

26.3

+1.2

CE

2.0

1.3

-0.6

1.5

+0.6

H&S

Revenue

22.7

20.8

-1.9

7.1

-0.6

CE

-0.5

1.2

+1.8

0.4

+0.2

Consolidation,

Revenue

-15.6

-14.3

+1.3

-7.2

-1.2

adj. & other

CE

-33.2

-30.5

+2.8

-10.0

+1.1

LIXIL

Revenue

1,074.4

1,123.8

+49.4

391.2

+13.0

CE

61.8

21.0

-40.8

14.8

-9.6

Forex impact(1) Q3 9 months: Revenue +JPY42.4 billion,

CE +JPY4.0 billion

Q3 3 months: Revenue +JPY14.5 billion, CE +JPY1.2 billion

(1) Forex translation effect gain(loss) from international subsidiaries

9

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LIXIL Group Corporation published this content on 31 January 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 31 January 2023 06:36:06 UTC.