Oki Electric Industry : Presentation (with notes)

• In Q1, sales were JPY78.1 billion, operating loss was JPY3 billion, and loss attributable to owners of parent was JPY3.2 billion, almost the same level as the previous year.
• First, let me explain the impact of the supply chain. In the market as a whole, there has been an increase in distribution volume, which appears to be an impact of inventory adjustment, and there are some bright spots toward a future normalization of supply, but the overall situation still remains uncertain, especially for regular products.
• In OKI's Q1 results, while some parts and materials were available ahead of schedule, there were new supply shortages of parts and delays in the delivery of semi-finished products such as servers and products of other companies.
• Operating income was almost the same level as the previous year due to positive factors, such as an increase for strong businesses and a decrease in fixed costs, despite some negative effects from the supply chain.
• The impact of volatile exchange rate had a positive impact of approximately JPY1 billion on net sales. There are both positive and negative impacts on income items, but in the end, we achieved the final results without any major impact.
• Net income/loss for the quarter improved by JPY0.5 billion from the previous year due to a decrease in extraordinary losses as structural reforms have passed the most critical phase.
• As shown at the bottom of the page, the average exchange rate during the

period was JPY129.6 to the US dollar, a depreciation of JPY20.1 from the previous year, and JPY138.1 to the euro, also depreciation of JPY6.1.

• Net sales and operating income by segment.
• In the Solution Systems business, net sales increased by JPY2.2 billion from the previous year to JPY36.1 billion due to the impact of projects that were postponed from the previous year due to difficulties in procuring parts and materials.
• In the Components & Platforms business, net sales decreased JPY4.0 billion from the previous year to JPY41.9 billion. Although sales of platforms for FA/semiconductor manufacturing equipment continued to be strong, the Components business, especially the Automation Systems business, suffered from the production impact of shortages of semiconductors and other components, resulting in a decline in overall sales.
• Operating income in the Solution Systems business decreased by JPY1.1 billion from the previous year to an operating loss of JPY1.2 billion due to the impact of higher parts and materials costs.On the other hand, the Components & Platforms business posted an operating loss of JPY0.8 billion, a JPY0.7 billion improvement from the previous year due to positive factors, such as fixed cost reductions from structural reforms and differences in project mix, which offset the negative effects of the supply chain.

• First, the total impact of the supply chain on operating income was a negative JPY3.2 billion. The breakdown of the impact was JPY1.5 billion due to a decrease in production and sales, and a total of JPY1.7 billion due to an increase in material and transportation costs. Breaking down the supply chain impact by segment, the Solution Systems business had JPY0.8 billion, and the Components & Platforms business had JPY2.4 billion. In the current fiscal year, our priority is to strengthen measures for supply chain impacts. Specific efforts are currently being made to strengthen procurement activities, promote alternative designs, and optimize prices. Although we do not expect a full-scale contribution to earnings until H2 of the fiscal year, we have seen some positive effects of price optimization in Q1, and we will continue to promote various measures.
• The overall impact of the changes in the volume and product mix was positive JPY1.3 billion, mainly due to an increase in the production volume of the Mono-zukuri Platform, and a decrease in the number of projects with high-cost ratios in the Automation Systems business.
• Fixed costs decreased by JPY1.4 billion due to the convergence of the Chinese bases in the Components & Platforms business and headcount reductions at sales companies in Europe and the United States.