Sato : Financial Result (Kessan Report) for 2nd Quarter of FY2024

Consolidated Financial Report

for the Six Months of Fiscal Year Ending March 2024

November 13, 2024

SATO HOLDINGS CORPORATION
Company code:	6287
Website:	www.sato-global.com
Shares traded on:	TSE Prime
Executive position of legal representative:	Hiroyuki Konuma, Representative Director,
	President and Group CEO
Please address all communications to:	Osamu Masuko, Executive Officer and CFO
	Phone: [phone]
Scheduled submission date for interim report:	November 14, 2024
Commencement date of dividend payments:	December 9, 2024

Supplementary explanatory materials for financial results: Available

Holding of meeting to explain financial results (for analysts and institutional investors): Yes

1. Consolidated operating results for Q2 (April 1, 2024 to September 30, 2024)

1. Consolidated financial results (cumulative)

(Percentage figures show year-on-year change)

	Net sales		Operating income		Ordinary income
Six months ended	Millions of yen	%	Millions of yen	%	Millions of yen	%
September 30, 2024	76,090	9.0	5,778	25.1	4,883	13.4
September 30, 2023	69,786	(1.0)	4,620	22.4	4,307	(13.3)

(Note) Comprehensive income:	Six months ended September 30, 2024:	¥2,549 million (-46.3%)
	Six months ended September 30, 2023:	¥4,748 million (-52.6%)
Net income attributable to owners	Basic earnings per share	Diluted earnings per share
	of parent
Six months ended	Millions of yen	%		Yen	Yen
September 30, 2024	3,028	52.0		93.36	93.34
September 30, 2023	1,991	(38.3)		61.47	61.46

(2) Consolidated financial position

	Total assets	Net assets	Equity ratio	Net assets per share
As of	Millions of yen	Millions of yen	%	Yen
September 30, 2024	132,050	75,545	54.9	2,235.10
March 31, 2024	132,457	74,085	53.8	2,199.41

(Note) Total equity:	As of September 30, 2024:	¥72,559 million
	As of March 31, 2024:	¥71,276 million

2. Dividends

		Annual dividend per share
	Q1	Q2	Q3	Year-end	Total
	Yen	Yen	Yen	Yen	Yen
FY 2023	–	36.00	–	37.00	73.00
FY 2024	–	37.00
FY 2024 (Forecast)			–	37.00	74.00

(Note) Revision to recently announced dividend forecast: None

3. Consolidated forecasts for FY 2024 (April 1, 2024 to March 31, 2025)

(Percentage figures show year-on-yearchange)

							Net income		Basic earnings per
	Net sales		Operating income	Ordinary income	attributable to owners
							of parent		share
	Millions of yen	%	Millions of yen	%	Millions of yen	%	Millions of yen	%	Yen
Full year	153,500	7.0	11,400	9.8	10,400	16.1	6,600	85.1	203.49

(Note) Revision to recently announced consolidated forecast: Yes

For details, please refer to section 1-(3) “Explanation of consolidated forecasts and other projections” (page 5) of the attached materials.

* Notes

1. Significant changes in the scope of consolidation during the term: None
2. Application of special accounting procedures for preparing the quarterly consolidated financial statements: None
3. Changes in accounting policies and estimates, and restatement of prior-period financial statements after error corrections
1. Changes in accounting policies due to revisions to accounting standards: None
2. Changes in accounting policies due to other reasons: None
3. Changes in accounting estimates: None
4. Restatement of prior-period financial statements after error corrections: None
4. Number of issued common shares
1. Number of issued shares, including treasury shares, at the end of term:

As of September 30, 2024:	33,635,942 shares
(As of March 31, 2024:	34,921,242 shares)
2) Number of treasury shares at the end of term:
As of September 30, 2024:	1,172,429 shares
(As of March 31, 2024:	2,513,996 shares)

3) Average number of shares during the term, cumulative from the beginning of the fiscal year:

Six months ended September 30, 2024:	32,434,645 shares
(Six months ended September 30, 2023:	32,398,100 shares)

*This interim report is not subject to interim review procedures by certified public accountants or an auditing firm.

* Explanation about the proper use of consolidated forecasts and other notes

Forward-looking statements, including the consolidated forecasts stated in these materials, are based on information currently available to the Company and certain assumptions deemed reasonable. Any statements herein do not assure particular results by the Company. Results may differ from the consolidated forecasts due to various factors. Please refer to section 1-(3) “Explanation of consolidated forecasts and other projections” (page 5) of the attached materials for assumptions behind the consolidated forecasts and other information.

Attached Materials
Index
1. Q2 Financials and FY 2024 Outlook
(1)	Overview of Q2 financial performance	2
(2)	Overview of Q2 financial position	4
(3)	Explanation of consolidated forecasts and other projections	5
2. Consolidated Financial Statements and Significant Notes Thereto
(1)	Consolidated balance sheets	6
(2)	Consolidated statements of (comprehensive) income
	Consolidated statements of income	8
	Consolidated statements of comprehensive income	9
(3)	Consolidated statements of cash flows	10
(4)	Notes to consolidated financial statements
	Notes related to going-concern assumption	11
	Notes in the event of material changes in amount of shareholders’ equity	11
	Changes in accounting policies	11
	Segment information	11

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1. Q2 Financials and FY 2024 Outlook

(1) Overview of Q2 financial performance Overview of Operating Results for the Interim Period

The SATO Group, with its vision to “be the customer’s most trusted partner for mutual growth, and always essential in an ever-changing world,” runs business based on management principles, growth strategies and business targets defined in its current Medium-term Management Plan (MTMP) for FY 2024 to 2028. Through this plan, we aim to take tagging to the next level and pursue “Perfect and Unique Tagging” to “give every ‘thing’ its own ID so it connects with the world.”

The first two years of the MTMP are designated to rebuild profitability, and the next three years set to restart growth investments. During the initial phase, we will strengthen our core business. In Japan, we will aim to get the business profiting at a higher level again, whereas overseas we will seek sustainable and efficient growth. In the subsequent phase, we will allocate profits generated from the recovered revenue base to advance solutions for Perfect and Unique Tagging, with the aims of accelerating growth and establishing a new profit base. Throughout the MTMP period, we will also focus on strengthening corporate management, improving capital efficiency, and applying sustainable business practices, to reinforce our fundamentals.

In the first six months of FY 2024, both sales and profit increased in our Japan and overseas businesses, leading to highest-ever first-half net sales and operating income on a consolidated basis.

Under IAS 29 Financial Reporting in Hyperinflationary Economies, hyperinflationary accounting is applied to the financial statements of our Argentine subsidiaries, resulting in a loss on net monetary position that is included in non-operating expenses.

With the aforementioned, the SATO Group posted net sales of ¥76,090 million (up 9.0% compared with the same period of the previous fiscal year), operating income of ¥5,778 million (up 25.1%), ordinary income of ¥4,883 million (up 13.4%), and net income attributable to owners of parent of ¥3,028 million (up 52.0%).

Performance by segment is as follows.

Auto-ID solutions (Japan)

ales of mechatronics products increased because of demand from customers wanting to tackle the 2024 logistics crisis and invest in digital transformation. Sales of consumables products also increased as we sold more RFID solutions and made price revisions. With increased sales, product repricing and more printer exports to overseas subsidiaries, profit increased too.

Under these circumstances, net sales increased 3.6% year on year to ¥37,545 million, and segment profit was ¥959 million (compared with segment loss of ¥103 million in the same period of the previous fiscal year).

For sales by market, please refer to the financial results briefing materials.

https://www.sato-global.com/ir/library/settlement/

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Auto-ID solutions (Overseas)

Outside Japan, our base business increased sales, driven by the robust performance of subsidiaries in Asia and Oceania, while our companies specializing in primary labels also increased sales thanks to strong demand for daily necessities. Profit grew with increased sales. Under these circumstances, net sales increased 14.9% to ¥38,545 million (increase of 13.5%, excluding foreign exchange effects), and segment profit increased 8.3% to ¥4,889 million, compared with the same period of the previous fiscal year.

For breakdowns of financial performance for/by (i) base and primary labels businesses, and (ii) individual region, please refer to our financial results briefing materials online.

https://www.sato-global.com/ir/library/settlement/

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1. Overview of Q2 financial position
   At the end of the interim consolidated accounting period, the balance of current assets was ¥85,390 million, a decrease of ¥877 million from ¥86,268 million at the end of the previous fiscal year. This was mainly due to a decrease of notes and accounts receivable-trade and contract assets (¥1,103 million), a decrease of merchandise and finished goods (¥254 million), an increase of raw materials and supplies (¥291 million), and an increase of work in progress (¥99 million). The balance of non-current assets was ¥46,659 million, an increase of ¥470 million from ¥46,188 million at the end of the previous fiscal year. This was mainly due to an increase of land (¥577 million) , a decrease of buildings and structures (¥572 million), a decrease of machinery, equipment and vehicles (¥219 million) in property, plant and equipment, an increase of software in progress (¥631 million) in intangible assets, and a decrease of goodwill (¥93 million).
   The balance of current liabilities was ¥39,250 million, a decrease of ¥3,813 million from
   ¥43,064 million at the end of the previous fiscal year. This was mainly due to a decrease of notes and accounts payable-trade (¥420 million), a decrease of short-term borrowing (¥2,452 million), a decrease of accounts payable-other (¥653 million), and an increase of contract liabilities (¥194 million). The balance of non-current liabilities was ¥17,253 million, an increase of ¥1,945 million from ¥15,307 million at the end of the previous fiscal year. This was mainly due to an increase of long-term borrowing (¥2,803 million) and a decrease of lease obligations (¥547 million).
   As for net assets, the balance at the end of the interim consolidated accounting period was
   ¥75,545 million, an increase of ¥1,460 million from ¥74,085 million at the end of the previous fiscal year. This was mainly due to an increase in retained earnings (¥1,825 million).
   Cash flows
   The balance of cash and cash equivalents at the end of the interim consolidated accounting period was ¥23,254 million, decreased by ¥847 million from the end of the previous fiscal year.
   The status of each cash flow in the current interim consolidated accounting period and the factors thereof are as follows.
   Cash flows from operating activities
   Net cash provided by operating activities increased by ¥6,184 million.
   The main factors for the increase were interim net income before income taxes of ¥4,878 million and depreciation and amortization of ¥2,590 million. There was also a factor for its decrease of income taxes paid by ¥799 million.
   Cash flows from investing activities
   Net cash used in investing activities decreased by ¥5,068 million.
   The main factor for the decrease was payments for time deposits of ¥1,433 million, purchases of property, plant and equipment of ¥2,922 million, and purchases of intangible of ¥1,389 million. There was also a factor for its increase of proceeds from withdrawal of time deposits by ¥638 million.

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Cash flows from financing activities

Net cash used in financing activities decreased by ¥1,491 million.

The main factors for the decrease were repayments of long-term borrowing of ¥511 million, repayments of lease obligations of ¥677 million, net increase (decrease) in short-term borrowing of ¥2,119 million, and dividends paid of ¥1,200 million. There was also a factor for its increase of proceeds from long-term borrowing by ¥3,017 million.

1. Explanation of consolidated forecasts and other projections
   The Company has revised the consolidated earnings forecast for the fiscal year ending March 31, 2025 as follows, taking into account the performance trends during the interim consolidated accounting period.
   Outlook for the Fiscal Year Ending March 31, 2025
   Net sales: ¥153,500 million (previous forecast: ¥151,000 million)
   Operating income: ¥11,400 million (¥10,400 million)
   Ordinary income: ¥10,400 million (previous forecast: ¥10,200 million)
   Net income attributable to owners of parent: ¥6,600 million (previous forecast: ¥6,400 million)
   The foreign currency exchange rates for this fiscal year are assumed to be 145 yen to the U.S. dollar and 160 yen to the euro.
   Forward-looking statements, including the consolidated earnings forecasts stated in these materials, are based on information currently available to the Company and certain assumptions deemed reasonable. Actual results may differ from these consolidated earnings forecasts due to various factors.

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2. Consolidated Financial Statements and Significant Notes Thereto

(1) Consolidated balance sheets

		Millions of yen
	As of March 31, 2024	As of September 30, 2024
Assets
Current assets
Cash and time deposits assets	25,029	24,865
Notes and accounts receivable-trade and contract	28,617	27,514
Securities	49	48
Merchandise and finished goods	13,691	13,437
Work in progress	818	918
Raw materials and supplies	12,626	12,918
Account receivable-other	1,994	1,798
Other	3,892	4,184
Allowance for doubtful accounts	(451)	(293)
Total current assets	86,268	85,390
Non-current assets
Property, plant and equipment
Buildings and structures (note)	15,409	14,836
Machinery, equipment and vehicles (note)	12,915	12,695
Land	3,936	4,514
Other (note)	4,144	4,401
Total property, plant and equipment	36,406	36,448
Intangible assets
Software	1,541	1,671
Software in progress	1,157	1,788
Goodwill	380	286
Other	763	672
Total intangible assets	3,841	4,419
Investments and other assets	5,941	5,792
Total non-current assets	46,188	46,659
Total assets	132,457	132,050
Liabilities
Current liabilities
Notes and accounts payable-trade	7,099	6,679
Electronically recorded obligations-trade	12,303	11,666
Short-term borrowing	3,732	1,279
Contract liabilities	7,518	7,713
Accounts payable-other	4,399	3,745
Income taxes payable	558	426
Provisions	2,224	2,189
Other	5,227	5,550
Total current liabilities	43,064	39,250
Non-current liabilities
Long-term borrowing	8,366	11,169
Lease obligations	4,196	3,648
Retirement benefit liability	1,065	1,057
Other	1,679	1,378
Total non-current liabilities	15,307	17,253
Total liabilities	58,372	56,504

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		Millions of yen
	As of March 31, 2024	As of September 30, 2024
Net assets
Shareholders' equity
Share capital	8,468	8,468
Capital surplus	7,763	5,347
Retained earnings	51,718	53,544
Treasury share	(4,801)	(2,265)
Total shareholders' equity	63,149	65,095
Accumulated other comprehensive income
Valuation difference on available-for-sale securities	429	869
Foreign currency translation adjustments	7,689	6,588
Remeasurements of defined benefit plans	9	5
Total accumulated other comprehensive income	8,127	7,463
Stock acquisition rights	19	12
Non-controlling interests	2,789	2,974
Total net assets	74,085	75,545
Total liabilities and net assets	132,457	132,050

（Note）Net of acquired value and accumulated depreciation

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