Meidensha : Financial Result for FY2024 Q1

FOR IMMEDIATE RELEASE

Meidensha Corporation Reports Earnings for

the Three Months Ended June 30, 2023

Tokyo, Japan, July 28, 2023 - Meidensha Corporation (TSE: 6508) reported consolidated net sales of ¥53,532 million and a net loss attributable to owners of the parent of ¥2,102 million, or minus ¥46.34 per share, for the three months ended June 30, 2023.

1. Operating Results

(1) Analysis of Operating Results

[Consolidated Results]

In the management environment surrounding the Meiden Group in the three months ended June 30, 2023, elements causing expectation of a recovery in economic activity were broadly seen, such as a positive change in the non-manufacturing outlook due to the transition of COVID-19 to a Class 5 infectious disease in Japan, and movements of recovery in the automotive industry against the backdrop of improved availability of parts such as semiconductors. Meanwhile, broad ranging rises in prices showed no signs of subsiding,and increases in the prices of parts and materials and energy costs directly linked to the Company's business activities continued to apply downward pressure on income. Furthermore, it is unclear when a recovery can be expected for the decline in demand for semiconductor manufacturing equipment caused by the loosening of supply and demand for semiconductors.

The consolidated results for the three 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 three months every fiscal year tend to be low in comparison with the full-year figure.

			(Unit: millions of yen)
	Three months ended	Three months ended	Change	Change (%)
	June 30, 2022	June 30, 2023
Net sales	47,525	53,532	6,006	12.6
Operating income (loss)	(4,477)	(3,374)	1,103	-
Ordinary income (loss)	(3,732)	(2,648)	1,084	-
Net income (loss)
attributable to owners of	(2,496)	(2,102)	394	-
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 due to growth driven by recovery in demand in the Singapore market and robust demand for environmentally friendly products in the North American market. As a result, net sales in the segment increased 15.4% year on year to ¥13,006 million, and operating loss improved by ¥1,309 million to 188 million.

2) Public, Industrial & Commercial Sector Business

In the Social Infrastructure Systems business, although there was an increase in sales due to factors such as growth in business for the public sector in Japan, income decreased due to a deterioration in the income mix of sales. In the Railways business, although sales remained almost on par with the previous year, income increased due to improvements in the costs of major overseas projects. Sales and income decreased in the Water Infrastructure business due to factors such as delays in progress of construction work. As a result, net sales in the segment decreased by 7.2% year on year to ¥14,160 million, and operating loss deteriorated by ¥944 million to ¥2,099 million.

3) Mobility & Electrical Components Business

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 that the Company supplies 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 third consecutive quarter. Meanwhile, sales and income decreased in the Electronics Products business due to a slump in demand for vacuum capacitors resulting from the decline in semiconductor market conditions. As a result, net sales in the segment increased by 30.1% year on year to ¥18,771 million, and operating loss improved by ¥229 million to ¥692 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 17.3% to ¥6,353 million and operating loss improving by ¥435 million to ¥292 million.

5) Real Estate Business

Net sales in the segment decreased by 1.6% year on year to ¥806 million, and operating income improved by ¥62 million to ¥365 million.

6) Other

In businesses not included in the reportable segments, net sales decreased by 0.7% year on year to ¥3,565 million, and operating loss deteriorated by ¥1 million to ¥83 million.

(2) Analysis of Financial Condition

Total assets at June 30, 2023 amounted to ¥295,979 million, a decline of ¥11,411 million from the end of the previous fiscal year (March 31, 2023).

Current assets declined by ¥14,026 million to ¥173,724 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 ¥2,614 million to ¥122,254 million due to an increase in investment securities associated with the rise in the market value of listed shares held.

Total liabilities were ¥184,807 million, a decrease of ¥11,702 million from the end of the previous fiscal year, attributable to a decrease in commercial paper.

Total net assets rose ¥290 million to ¥111,171 million due to an increase in unrealized gains on available- for-sale securities.

As a result, the equity ratio came to 36.6% as of June 30, 2023, compared with 35.1% at the end of the previous fiscal year.

(3) Forecast of Consolidated Results

Among the Meiden Group's businesses, sales from electrical equipment for electric power companies and government agencies and water purification and sewerage treatment equipment for local governments tend to be concentrated at the end of fiscal year. For this reason, net sales in the first three months of the fiscal year are low in comparison with the full-year figure, and the Company has recorded a substantial loss. However, business performance has developed broadly as forecast, and there is no revision to the results forecast announced on May 12, 2023.

2. Consolidated Financial Statements and Notes

(1) Consolidated Balance Sheets

	As of March 31,	As of June 30,
	2023	2023
	millions of yen	millions of yen
Assets
Current assets
Cash and time deposits	14,917	21,200
Notes and accounts receivable-trade, and contract	99,354	66,145
assets
Electronically recorded monetary claims-	8,760	10,285
operating
Merchandise and finished goods	10,571	10,694
Work in process	36,617	45,384
Raw materials and supplies	11,550	12,215
Other current assets	6,163	8,118
Allowance for doubtful accounts	(184)	(319)
Total current assets	187,751	173,724
Fixed assets
Property, plant and equipment
Buildings and structures, net	38,708	38,429
Machinery, equipment and vehicles, net	13,004	12,869
Land	12,697	12,708
Construction in progress	6,107	6,262
Other property, plant and equipment, net	5,271	5,320
Total property, plant and equipment	75,788	75,591
Intangible assets
Software	4,862	4,574
Goodwill	2,675	2,652
Other	925	874
Total intangible assets	8,462	8,101
Investments and other assets
Investment securities	16,696	19,739
Long-term loans receivable	37	37
Deferred tax assets	16,535	16,565
Other assets	2,148	2,247
Allowance for doubtful accounts	(28)	(27)
Total investments and other assets	35,388	38,562
Total fixed assets	119,639	122,254
Total assets	307,390	295,979

	As of March 31,	As of June 30,
	2023	2023
	millions of yen	millions of yen
Liabilities
Current liabilities
Notes and accounts payable-trade	38,971	34,973
Electronically recorded obligations-operating	3,997	4,550
Short-term borrowings	15,514	13,886
Commercial paper	8,000	-
Accounts payable-other	5,268	2,939
Accrued income taxes	3,262	1,709
Contract liabilities	16,534	24,847
Accrued bonuses for employees	7,858	3,924
Provision for product warranties	1,104	1,064
Provision for loss on orders	590	771
Other current liabilities	17,204	17,587
Total current liabilities	118,307	106,255
Long-term liabilities
Bonds payable	6,000	6,000
Long-term debt	20,995	21,132
Net defined benefit liability	45,995	46,425
Provision for environmental measures	313	79
Other long-term liabilities	4,897	4,915
Total long-term liabilities	78,202	78,552
Total liabilities	196,509	184,807
Net assets
Shareholders' equity
Common stock	17,070	17,070
Capital surplus	10,211	10,219
Retained earnings	69,568	66,468
Treasury stock	(194)	(194)
Total shareholders' equity	96,656	93,563
Accumulated other comprehensive income

Unrealized gains on available-for-sale securities

Deferred gains or losses on hedging derivatives, net of taxes

Foreign currency translation adjustment Remeasurements of defined benefit plans

6,524	8,540
5	5
5,103	6,453
(392)	(339)

Total accumulated other comprehensive income	11,241	14,660
Non-controlling interests	2,983	2,947
Total net assets	110,881	111,171
Total liabilities and net assets	307,390	295,979

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

Consolidated Statements of Income

	Three months	Three months
	ended June 30,	ended June 30,
	2022	2023
	millions of yen	millions of yen
Net sales	47,525	53,532
Cost of sales	38,644	43,585
Gross profit	8,881	9,946
Selling, general and administrative expenses	13,358	13,320
Operating income (loss)	(4,477)	(3,374)
Non-operating income
Interest income	10	23
Dividend income	373	411
Rent income	24	25
Foreign exchange gains	604	468
Other	151	176
Total non-operating income	1,164	1,104
Non-operating expenses
Interest expenses	240	222
Seconded employee expenses	38	34
Other	139	121
Total non-operating expenses	419	378
Ordinary income (loss)	(3,732)	(2,648)
Extraordinary income
Gain on sales of investment securities	377	-
Compensation income	206	-
Other	6	1
Total extraordinary income	590	1
Extraordinary loss
Loss on sales of fixed assets	45	-
Loss on liquidation of subsidiaries and associates	-	22
Other	0	-
Total extraordinary loss	45	22
Income (loss) before income taxes	(3,187)	(2,669)
Income taxes
Current	194	325
Deferred	(878)	(870)
Total income taxes	(684)	(545)
Net income (loss)	(2,502)	(2,123)
Net income (loss) attributable to the non-controlling	(6)	(21)
interests
Net income (loss) attributable to owners of the	(2,496)	(2,102)
parent