Meidensha : Financial Result for FY2023 Q2

FOR IMMEDIATE RELEASE

Meidensha Corporation Reports Earnings for the Six Months Ended September 30, 2023

Tokyo, Japan, October 30, 2023 - Meidensha Corporation (TSE: 6508) reported consolidated net sales of ¥119,047 million and a net loss attributable to owners of the parent of ¥1,616 million, or minus ¥35.62 per share, for the six months ended September 30, 2023.

1. Operating Results

(1) Analysis of Operating Results

[Consolidated Results]

In the management environment surrounding the Meiden Group in the six months ended September 30, 2023, in addition to a recovery in economic activity within Japan and an improving trend in corporate performance, robust demand for heavy electrical equipment continued to be seen against the backdrop of heightened momentum toward green transformation globally. Furthermore, although conditions have not deteriorated concerning issues such as rising material costs and longer delivery times for parts and materials, the impact on performance continued to manifest.

The consolidated results for the six months under review are provided below.

Among the Meiden Group's businesses, sales of electrical equipment to electric power companies and government agencies and of water purification and sewerage treatment equipment to local government authorities tend to be concentrated at the end of fiscal year. For this reason, net sales in the first six months every fiscal year tend to be low in comparison with the full-year figure.

			(Unit: millions of yen)
	Six months ended	Six months ended	Change	Change (%)
	September 30, 2022	September 30, 2023
Net sales	111,742	119,047	7,304	6.5
Operating income (loss)	(4,892)	(2,366)	2,526	-
Ordinary income (loss)	(3,957)	(1,622)	2,334	-
Net income (loss)
attributable to owners	(2,746)	(1,616)	1,130	-
of the parent

The results for each business segment are presented below, with sales figures including inter-segment sales.

1) Power Infrastructure Business

Sales and income increased in both the Power & Energy business mainly operating in Japan and the Power T&D business mainly operating overseas. In the Power T&D business in particular, income improved significantly and became profitable due to growth driven by recovery in demand in the Singapore market, robust demand for environmentally friendly products in the North American market, and expansion of operations in the Indian market. As a result, net sales in the segment increased 29.2% year on year to ¥30,922 million, and operating income improved by ¥3,200 million to 919 million.

2) Public, Industrial & Commercial Sector Business

In the Railways business, although sales of major overseas projects decreased, income increased due to factors such as improvement of project costs. In the Social Infrastructure Systems business and the Water Infrastructure business, longer delivery times of parts and materials and delays in related construction work had an impact on the progress of construction work, and profitability declined due to increased costs on some projects, resulting in a deterioration of loss. As a result, net sales in the segment decreased by 10.7% year on year to ¥33,384 million, and operating loss deteriorated by ¥1,369 million to ¥2,790 million.

3) Mobility & Electrical Components Business

Sales decreased and income significantly decreased in the Electronics Products business due to a slump in demand for vacuum capacitors resulting from the decline in semiconductor market conditions. Meanwhile, sales and income increased in the Motor Drive Solutions business, the EV business and the Mobility T&S business. In particular, in the EV business, a recovery in production activity of automakers provided a tailwind, and due to factors such as the increased operating rate of production lines in Japan, income improved significantly year on year, resulting in a profit being recorded for the fourth consecutive quarter. As a result, net sales in the segment increased by 8.7% year on year to ¥38,519 million, and operating loss deteriorated by ¥380 million to ¥617 million.

4) Field Service Engineering Business

In addition to steady demand continuing for maintenance services, recording of sales for projects being pushed back from the previous year due to protracted delivery times of parts and materials resulted in net sales increasing by 11.0% to ¥14,101 million and operating income improving by ¥909 million to ¥293 million.

5) Real Estate Business

Net sales in the segment decreased by 0.5% year on year to ¥1,614 million, and operating income improved by ¥105 million to ¥738 million.

6) Other

In businesses not included in the reportable segments, net sales decreased by 1.1% year on year to ¥7,684 million, and operating loss improved by ¥29 million to ¥16 million.

(2) Analysis of Financial Condition

Total assets at September 30, 2023 amounted to ¥304,510 million, a decline of ¥2,880 million from the end of the previous fiscal year (March 31, 2023).

Current assets declined by ¥7,422 million to ¥180,328 million, as collection of notes and accounts receivable-trade, and contract assets recorded at the end of the previous fiscal year progressed.

Fixed assets rose ¥4,542 million to ¥124,181 million due to an increase in investment securities associated with the rise in the market value of listed shares held.

Total liabilities at September 30, 2023 were ¥190,676 million, a decrease of ¥5,833 million from the end of the previous fiscal year, attributable to a decrease in notes and accounts payable-trade.

Total net assets rose ¥2,952 million to ¥113,833 million due to an increase in unrealized gains on available- for-sale securities.

As a result, the equity ratio came to 36.4% as of September 30, 2023, compared with 35.1% at the end of the previous fiscal year.

(3) Forecast of Consolidated Results

With regard to the forecast of results for the year ending March 31, 2024, operating income and ordinary income are expected to be higher than the previously announced forecast due to improvements in performance being expected to continue against the backdrop of robust demand in the Power T&D business mainly operating overseas and the Field Service Engineering business providing maintenance services. Furthermore, as disclosed on October 30, 2023, extraordinary income (gain on sales of fixed assets) is expected to be posted due to the transfer of real estate held, and net income attributable to owners of the parent is expected to significantly exceed the previously announced forecast.

The current management forecast for consolidated financial results for the year ending March 31, 2024 is as follows.

Revision of consolidated results forecast figures for the year ending March 31, 2024 (April 1, 2023 to March 31, 2024)

	Net sales	Operating	Ordinary	Net income	Net income per
	attributable to
	income	income
	(millions	owners of the	share
	(millions of	(millions of
	of yen)	parent	(yen)
	yen)	yen)
		(millions of yen)
Previous forecast	290,000	10,000	10,000	7,000	154.29
(A)
Revised forecast	290,000	11,000	11,500	10,000	220.42
(B)
Change (B-A)	-	1,000	1,500	3,000	-
Change (%)	-	10.0	15.0	42.9	-
(Reference)
Results for the
previous fiscal	272,578	8,539	8,823	7,128	157.13
year
(Fiscal year ended
March 31, 2023)

2. Consolidated Financial Statements and Notes

(1) Consolidated Balance Sheets

	As of March 31,	As of September
	2023	30, 2023
	millions of yen	millions of yen
Assets
Current assets
Cash and time deposits	14,917	21,769
Notes and accounts receivable-trade, and contract	99,354	71,132
assets
Electronically recorded monetary claims-	8,760	7,836
operating
Merchandise and finished goods	10,571	11,235
Work in process	36,617	47,613
Raw materials and supplies	11,550	12,659
Other current assets	6,163	8,404
Allowance for doubtful accounts	(184)	(323)
Total current assets	187,751	180,328
Fixed assets
Property, plant and equipment
Buildings and structures, net	38,708	38,233
Machinery, equipment and vehicles, net	13,004	12,686
Land	12,697	12,711
Construction in progress	6,107	7,228
Other property, plant and equipment, net	5,271	5,303
Total property, plant and equipment	75,788	76,163
Intangible assets
Software	4,862	4,570
Goodwill	2,675	2,532
Other	925	774
Total intangible assets	8,462	7,876
Investments and other assets
Investment securities	16,696	21,869
Long-term loans receivable	37	37
Deferred tax assets	16,535	15,962
Other assets	2,148	2,299
Allowance for doubtful accounts	(28)	(27)
Total investments and other assets	35,388	40,141
Total fixed assets	119,639	124,181
Total assets	307,390	304,510

	As of March 31,	As of September
	2023	30, 2023
	millions of yen	millions of yen
Liabilities
Current liabilities
Notes and accounts payable-trade	38,971	33,278
Electronically recorded obligations-operating	3,997	4,211
Short-term borrowings	15,514	12,268
Commercial paper	8,000	9,000
Current portion of bonds payable	-	6,000
Accounts payable-other	5,268	4,359
Accrued income taxes	3,262	731
Contract liabilities	16,534	22,938
Accrued bonuses for employees	7,858	7,510
Provision for product warranties	1,104	1,103
Provision for loss on orders	590	720
Other current liabilities	17,204	15,509
Total current liabilities	118,307	117,632
Long-term liabilities
Bonds payable	6,000	-
Long-term debt	20,995	21,333
Net defined benefit liability	45,995	46,834
Provision for environmental measures	313	74
Other long-term liabilities	4,897	4,801
Total long-term liabilities	78,202	73,044
Total liabilities	196,509	190,676
Net assets
Shareholders' equity
Common stock	17,070	17,070
Capital surplus	10,211	10,226
Retained earnings	69,568	66,954
Treasury stock	(194)	(195)
Total shareholders' equity	96,656	94,056
Accumulated other comprehensive income
Unrealized gains on available-for-sale securities	6,524	10,026
Deferred gains or losses on hedging derivatives,	5	5
net of taxes
Foreign currency translation adjustment	5,103	7,112
Remeasurements of defined benefit plans	(392)	(285)
Total accumulated other comprehensive income	11,241	16,859
Non-controlling interests	2,983	2,917
Total net assets	110,881	113,833
Total liabilities and net assets	307,390	304,510

1. Consolidated Statements of Income and Consolidated Statements of Comprehensive Income

Consolidated Statements of Income

	Six months ended	Six months ended
	September 30,	September 30,
	2022	2023
	millions of yen	millions of yen
Net sales	111,742	119,047
Cost of sales	89,313	94,067
Gross profit	22,429	24,980
Selling, general and administrative expenses	27,322	27,346
Operating income (loss)	(4,892)	(2,366)
Non-operating income
Interest income	23	48
Dividend income	417	413
Rent income	49	49
Foreign exchange gains	930	707
Other	288	359
Total non-operating income	1,710	1,579
Non-operating expenses
Interest expenses	454	452
Seconded employee expenses	69	65
Other	250	317
Total non-operating expenses	774	835
Ordinary income (loss)	(3,957)	(1,622)
Extraordinary income
Gain on sales of investment securities	377	-
Compensation income	285	-
Other	6	1
Total extraordinary income	669	1
Extraordinary loss
Loss on sales of fixed assets	45	-
Loss on liquidation of subsidiaries and associates	-	170
Impairment loss	-	97
Other	0	35
Total extraordinary loss	45	303
Income (loss) before income taxes	(3,333)	(1,925)
Income taxes
Current	345	647
Deferred	(969)	(936)
Total income taxes	(624)	(288)
Net income (loss)	(2,709)	(1,637)
Net income (loss) attributable to the non-controlling	37	(20)
interests
Net income (loss) attributable to owners of the parent	(2,746)	(1,616)

Consolidated Statements of Comprehensive Income
		Six months ended	Six months ended
		September 30,	September 30,
		2022	2023
		millions of yen	millions of yen
	Net income (loss)	(2,709)	(1,637)
	Other comprehensive income
	Unrealized gains (losses) on available-for-sale	(847)	3,502
	securities
	Deferred gains or losses on hedging derivatives, net	(22)	-
	of taxes
	Foreign currency translation adjustment	2,430	2,032
	Remeasurements of defined benefit plans	110	107
	Total other comprehensive income	1,670	5,642
	Comprehensive income	(1,038)	4,005
	Comprehensive income attributable to:
	Owners of the parent	(1,107)	4,002
	Non-controlling interests	69	2

(3) Consolidated Statements of Cash Flows
		Six months ended	Six months ended
		September 30,	September 30,
		2022	2023
		millions of yen	millions of yen
	Cash flows from operating activities
	Income (loss) before income taxes	(3,333)	(1,925)
	Depreciation and amortization	5,198	4,854
	Amortization of goodwill	491	355
	Increase (decrease) in provisions	(243)	(434)
	Increase (decrease) in net defined benefit liability	793	971
	Interest and dividend income	(440)	(461)
	Interest expenses	454	452
	Loss (gain) on sales of investment securities	(377)	-
	Compensation income	(285)	-
	Decrease (increase) in trade receivables and	38,398	36,024
	contract assets
	Decrease (increase) in inventories	(11,888)	(11,157)
	Increase (decrease) in trade payables	(4,703)	(6,737)
	Other	(6,709)	(3,584)
	Sub total
	17,355	18,356
	Interest and dividends received	440	461
	Interest expenses paid	(453)	(434)
	Income taxes paid	(2,255)	(3,751)
	Proceeds from compensation	285	-
	Net cash provided by (used in) operating activities	15,371	14,632
	Cash flows from investing activities
	Purchase of property, plant and equipment, and	(6,219)	(4,423)
	intangible assets
	Proceeds from sales of investment securities	424	-
	Other	(120)	(526)
	Net cash provided by (used in) investing activities	(5,916)	(4,950)
	Cash flows from financing activities
	Net increase (decrease) in short-term borrowings	(3,292)	(1,621)
	Increase (decrease) in commercial paper	2,000	1,000
	Proceeds from long-term debt	-	159
	Repayment of long-term debt	(44)	(2,075)
	Redemption of bonds	(5,000)	-
	Cash dividends paid	(1,130)	(998)
	Cash dividends paid to non-controlling interests	(103)	(53)
	Other	(271)	(244)
	Net cash provided by (used in) financing activities	(7,841)	(3,834)
	Effect of exchange rate on cash and cash equivalents	634	783
	Net increase (decrease) in cash and cash equivalents	2,247	6,631
	Cash and cash equivalents at beginning of term	13,254	14,116
	Cash and cash equivalents at end of term	15,502	20,748

1. Notes on Consolidated Financial Statements (Notes on the Going-concernAssumption)
   Not applicable

(Notes on Significant Changes in the Amount of Shareholders' Equity) Not applicable

(Segment and Other Information)

1. Six Months ended September 30, 2022 (April 1 - September 30, 2022)
   Net sales and income/loss by reportable segment

(Millions of yen)

			Reportable segment						Amounts on
										consolidated
		Public,	Mobility &	Field						statements
	Power	Industrial &	Electrical	Service			Other		Adjustments	of income
	Infrastructure	Commercial	Components	Engineering	Real Estate	Total	(Note1)	Total	(Note2)	(Note3)
Net sales
Sales to
outside	23,689	36,098	34,264	11,884	1,605	107,542	4,200	111,742	-	111,742
customers
Inter-
segment	248	1,269	1,182	821	17	3,540	3,568	7,108	(7,108)	-
sales and
transfers
Total	23,937	37,368	35,447	12,705	1,622	111,082	7,768	118,851	(7,108)	111,742
Segment	(2,280)	(1,421)	(237)	(616)	633	(3,921)	(46)	(3,967)	(924)	(4,892)
income (loss)

Notes: 1. "Other" comprises businesses such as sales of other products, employees' welfare services, and provision of chemical products, that are not included in the reportable segments.

1. 1. Adjustment to segment income (loss), which amounted to minus ¥924 million, consists mainly of ¥379 million for elimination of inter-segment transactions among reportable segments, minus ¥0 million for adjustments of inventories, and minus ¥1,304 million for company-wide costs that do not belong to any reportable segments. Company-wide costs are comprised mainly of expenses for research and development conducted by the research and development division and other units that are not included in the reportable segments.
   2. Adjustment to segment income (loss) is based on operating income/loss reported in the quarterly consolidated statements of income for the corresponding period.
2. Six Months ended September 30, 2023 (April 1 - September 30, 2023)

Net sales and income/loss by reportable segment

(Millions of yen)

			Reportable segment						Amounts on
										consolidated
		Public,	Mobility &							statements
								of income
	Power	Industrial &	Electrical	Field Service			Other		Adjustments
	Infrastructure	Commercial	Components	Engineering	Real Estate	Total	(Note1)	Total	(Note2)	(Note3)
Net sales
Sales to
outside	30,663	32,059	37,132	13,312	1,595	114,763	4,283	119,047	-	119,047
customers
Inter-
segment	259	1,325	1,386	788	19	3,779	3,400	7,180	(7,180)	-
sales and
transfers
Total	30,922	33,384	38,519	14,101	1,614	118,543	7,684	126,227	(7,180)	119,047
Segment	919	(2,790)	(617)	293	738	(1,456)	(16)	(1,473)	(893)	(2,366)
income (loss)

Notes: 1. "Other" comprises businesses such as sales of other products, employees' welfare services, and provision of chemical products, that are not included in the reportable segments.

1. Adjustment to segment income (loss), which amounted to minus ¥893 million, consists mainly of ¥420 million for elimination of inter-segment transactions among reportable segments, ¥19 million for adjustments of inventories, and minus ¥1,333 million for company-wide costs that do not belong to any reportable segments. Company-wide costs are comprised mainly of expenses for research and development conducted by the research and development division and other units that are not included in the reportable segments.
2. Adjustment to segment income (loss) is based on operating income/loss reported in the quarterly consolidated statements of income for the corresponding period.

(Important subsequent events) (Transfer of fixed assets)

The Company resolved the transfer of fixed assets as stated below in the meeting of the Board of Directors held on October 30, 2023.

1. Reason for transfer

A decision was made to transfer the following asset to effectively utilize assets held and strengthen the Company's financial position.

2. Details of the transferred asset

Details of	Land
the asset
Address	Osaki 2-chome,
	Shinagawa-ku, Tokyo
Area	1,098.58 m2
Current	Parking area
condition

*The transfer price and book value will not be disclosed due to an agreement with the transferee, but the transfer was made at an appropriate price reflecting the market value.

3. Overview of transferee

The identity of the transferee will not be disclosed due to an agreement with the transferee, but it is one domestic corporation.

There are no notable business, capital or personal relationships between the transferee and the Company. Furthermore, it is not a related party of the Company.

4. Transfer schedule

(1)	Date of resolution of the Board of Directors	October 30, 2023
(2)	Date of conclusion of agreement	October 31, 2023 (scheduled)
(3)	Property delivery date	October 31, 2023 (scheduled)

5. Impact on earnings

A ¥3,200 million (approximate value) gain on sales of fixed assets is planned to be posted as extraordinary income in the year ending March 31, 2024.

• The gain on sales of fixed assets is an approximate value obtained by deducting the book value and transfer expenses from the transfer price.