November 13, 2024

Q2 FY2024 Financial Results

(Six Months Ended September 30, 2024)

Securities Code: 6287.T

I am Konuma.

Thank you for taking time out of your busy schedule to join us today. Let's get started.

1

Jul-Sep 2024

Progress of initiatives

in FY24-28 Medium-Term

Results

Management Plan

2

Today, I will explain in two parts, "Jul-Sep 2024 Results" and "Progress of initiatives in FY24-28 Medium-Term Management Plan".

2

Jul-Sep 2024

Progress of initiatives

in FY24-28 Medium-Term

Results

Management Plan

3

3

Auto-ID Solutions Business (Consolidated)

Summary

  • Jul-SepResults
  • Consolidated sales and operating income increased year-on-year.
  • Sales increased and OI decreased overseas as a whole, while sales and OI increased in Japan.
    • Overseas Base business: Sales and OI increased.
    • Overseas Primary Labels business: Sales increased while OI decreased.
  • Sales and OI exceeded plans overseas, and almost met plans in Japan.
    • Base business in Asia and Oceania and Primary business led solid performance overseas.
    • In Japan, mechatronics sales and consumables price revisions progressed as initially planned.
  • FY24 (Apr-Mar) outlook
  • Consolidated full-year sales and OI forecasts have been upwardly revised.
    • Overseas business: Upward revision based on H1 (Apr-Sep) results.
    • Japan business: Unchanged forecasts.

4

The following are the highlights of our financial results.

First, regarding the Jul-Sep results, both sales and OI increased YoY on a consolidated basis. As FQ2, sales set a record high and OI was the second highest after FY22.

The combined total of the Base business and the Primary Labels business showed an increase in sales and decrease in OI. Sales and OI increased in Japan.

Overseas Base business: Sales and OI increased due to strong performance in Asia and Oceania and positive impact of foreign exchange.

In the Overseas Primary business, although there was a decline in demand due to inflation in South America, solid demand in Russian subsidiaries made up for it and sales increased. However, OI decreased due to intensified competition in Russia.

In the Japan business, sales and OI increased due to growth in mechatronics sales that captured demand in response to the '2024 logistics issue' (shortage of truck drivers) and price revision of consumables.

Compared to the internal plan, the Overseas business exceeded the plan, and the Japan business was almost in line.

In the Overseas business, although the sales plan for the Base business was not achieved mainly in Europe and the U.S., the improvement in profitability at the Asian factories due to the increase in printer sales, the strong performance of the Australian subsidiary, and the increase in sales of high-value-added products in the Primary business contributed.

In the Japan business, increase in mechatronics sales by capturing the above-mentioned demand and revisions of consumable prices progressed as planned.

With regard to the full-year outlook, the Company has revised upward its consolidated sales and OI forecasts considering the favorable results of both the Overseas Base business and the Primary business in Apr-Sep.

Details will be explained on the following pages.

4

Auto-ID Solutions Business (Consolidated)

Jul-Sep*1

Sales and OI by Business Segment * 2

Millions of JPY

FY23

FY24

YoY

In local currencies

Consolidated

Total Sales

35,797

38,415

+7.3%

+6.9%

Operating Income

2,460

2,914

+18.4%

+18.8%

Base

Total Sales

11,806

12,806

+8.5%

+6.5%

Operating Income

679

1,053

+55.1%

+58.4%

Overseas

Primary Labels

Total Sales

5,297

6,416

+21.1%

+22.4%

Operating Income

1,509

1,290

-14.5%

-15.0%

Eliminations

Operating Income

157

-40

-

-

Total

Total Sales

17,104

19,223

+12.4%

+11.5%

Operating Income

2,346

2,303

-1.8%

-1.2%

Japan

Total Sales

18,692

19,191

+2.7%

+2.7%

Operating Income

106

773

7.3x

7.2x

Eliminations

Operating Income

7

-162

-

-

* 1 Apr-Sep results are shown on p. 31.

5

* 2 Sales and OI excluding Russian subsidiaries are shown on p. 44.

From this slide onward, analyses are provided on a year-on-year comparison basis.

The table shows figures related to the summary from the previous slide. Please refer to P.31 for Apr-Sep results and Appendix P.44 for the results excluding Russian subsidiaries.

5

Auto-ID Solutions Business (Consolidated)

Jul-Sep*1

Consolidated Results* 2

Millions of JPY

FY23

FY24

Change

YoY

Net Sales

35,797

38,415

+2,618

+7.3%

Operating

2,460

2,914

+453

+18.4%

Income

Operating Income %

6.9%

7.6%

+0.7pt

-

Ordinary Income

2,235

2,471

+236

+10.6%

Profit attributable to

686

1,830

+1,143

2.7x

owners of parent

Effective Tax Rate

28.0%

16.8%

-11.3pt

-

EBITDA*

3,708

4,271

+562

+15.2%

FX sensitivity for FY24: JPY +503 mil in sales and JPY +19 mil in OI for +1 JPY against USD and assuming all others move by the same ratio

Average FX for Apr-Sep 2024: JPY 152.78/USD, JPY 166.06/EUR (Apr-Sep 2023: JPY 144.58/USD, JPY 156.74/EUR)

* EBITDA = Operating Income + Depreciation + Amortization

Depreciation for Jul-Sep 2024: JPY 1,319 million (Jul-Sep 2023: JPY 1,213 million)

Amortization for Jul-Sep 2024: JPY 38 million (Jul-Sep 2023: JPY 34 million)

* 1

Apr-Sep results are shown on p. 32.

6

* 2

Sales and OI excluding Russian subsidiaries are shown on p. 45.

This slide shows the consolidated results.

The improvement in the operating income margin was mainly due to the improvement in the Japan business.

As a result of JPY appreciation against various currencies at September end, the effective tax rate has decreased significantly from the same period of the previous year.

6

Auto-ID Solutions Business (Overseas)

Overview

Millions of JPY

FY23

FY24

Change

YoY

In local currencies

Base business Total Sales

11,806

12,806

+1,000

+8.5%

+6.5%

Primary Lablels business Total Sales

5,297

6,416

+1,119

+21.1%

+22.4%

Total Sales

17,104

19,223

+2,119

+12.4%

+11.5%

Gross Profit

7,422

7,490

+68

+0.9%

-

Gross Profit %

43.4%

39.0%

-4.4pt

-

-

Base business Operating Income

679

1,053

+374

+55.1%

+58.4%

Primary Lablels business Operating Income

1,509

1,290

-218

-14.5%

-15.0%

Elimination Operating Income

157

-40

-198

-

-

Operating Income

2,346

2,303

-43

-1.8%

-1.2%

Operating Income %

13.7%

12.0%

-1.7pt

-

-

* Includes impact of IAS 29, Financial Reporting in Hyperinflationary Economies ("Hyperinflation Accounting") in Argentina.

Jul-Sep

Sales

  • Sales increased in Base business driven by Asia and Oceania
  • Higher sales of high-value-added products in Europe contributed to higher sales in the Primary Labels business.

OI

+979

  • Positive factors
  • Negative factors

The Americas and

2,346 Europe Primary

Labels

Factories

Major Gains/Losses in OI

-912

-96

-14

The Americas and

Factories

The Americas Base

Europe Primary

2,303

biz

Labels

  • The Americas Base biz

Excludes FX impact

* Apr-Sep results are shown on p. 37.

  • In the Base business, OI increased due to improvement in factory earnings as printer inventory adjustments at distributors ran their course.
  • OI decreased in Primary business due to intensified competition for existing primary labels in Europe.

7

Next, I will take you through the results of our Overseas business. Sales increased and OI decreased overall.

Sales increased in the Base business, driven by Asia and Oceania, and in the Primary business, due to an increase in sales of high-value-added products in Russia.

OI increased in the Base business due to an improvement in factory profitability as printer inventory adjustments at distributors ran their course. At the same time, although operating income margin itself was high in Russia, OI declined at the Primary business due to an increase in costs associated with intensified competition for existing primary label products.

Further details for each region will be provided in the following slides.

7

Auto-ID Solutions Business (Overseas)

Jul-Sep

Quarterly Sales & OI

Sales (LHS)

OI (RHS)

Millions of JPY

30,000

3,000

25,000

2,500

20,000

2,000

15,000

1,500

10,000

1,000

5,000

500

0

0

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

FY22

FY23

FY24

Sales

16,394

18,483

18,626

15,153

16,452

17,104

17,648

16,725

19,321

19,223

YoY

+26.8%

+49.6%

+35.1%

+12.9%

+0.4%

-7.5%

-5.3%

+10.4%

+17.4%

+12.4%

OI

919

2,109

2,637

1,445

2,169

2,346

2,490

1,238

2,586

2,303

YoY

-21.8%

3.0x

2.4x

+44.0%

2.4x

+11.2%

-5.6%

-14.3%

+19.2%

-1.8%

8

This is a quarterly sales & OI trend.

8

Auto-ID Solutions Business (Overseas)

Jul-Sep*

The Americas Base business

Millions of JPY

FY23

FY24

Change

YoY

In local currencies

Total Sales

4,412

4,294

-117

-2.7%

-0.4%

Operting Income

80

54

-26

-32.9%

+46.1%

* Includes impact of IAS 29, Financial Reporting in Hyperinflationary Economies ("Hyperinflation Accounting") in Argentina.

Quarterly Sales OI

6,000

Sales (LHS)

OI (RHS)

600

4,000

400

200

2,000

0

0

-200

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

FY22

FY23

FY24

Sales

  • Sales decreased due to the economic downturn and a one-off large business in the same period of the previous fiscal year, despite capturing a large order for the retail market in the U.S.
  • Sales in South America decreased due to lower demand caused by inflation.

OI

  • OI decreased due to the above- mentioned decline in sales in the U.S. and South America and an increase in SG&A expenses such as R&D in the U.S.

Sales

4,214

4,694

4,626

3,731

4,353

4,412

4,293

4,274

4,568

4,294

YoY

+21.8%

+58.1%

+30.2%

+8.0%

+3.3%

-6.0%

-7.2%

+14.6%

+4.9%

-2.7%

OI

168

328

405

-49

197

80

352

-92

318

54

YoY

-32.9%

87.3x

+81.1%

-

+17.0%

-75.5%

-13.1%

-

+61.3%

-32.9%

* Apr-Sep results are shown on p. 38.

9

Now, I will explain the results of Base business by region. In the Americas, sales and OI decreased.

Sales decreased due the economic downturn and one-off large-lot orders in the same period of the previous fiscal year, despite the capture of large- scale projects for the retail market in the U.S. by providing solutions.

Sales in South America decreased due to lower demand caused by inflation. OI decreased due to the above-mentioned decrease in sales in the U.S. and South America and an increase in SG&A expenses such as R&D in the U.S.

9

Auto-ID Solutions Business (Overseas)

Jul-Sep*

Europe Base business

Millions of JPY

FY23

FY24

Change

YoY

In local currencies

Total Sales

2,714

3,028

+314

+11.6%

+6.4%

Operting Income

108

144

+36

+33.8%

+25.5%

Quarterly Sales OI

4,000

Sales (LHS)

OI (RHS)

600

400

2,000

200

0

0

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

FY22

FY23

FY24

Sales

  • Sales increased due to a recovery in sales to distributors following printer inventory adjustments and favorable foreign exchange effects.
  • Steady progress was seen with retail customers in Germany and the UK.

OI

  • OI increased due to the above- mentioned growth in sales.

Sales

3,195

3,268

3,149

2,789

2,991

2,714

3,008

2,999

3,221

3,028

YoY

+16.3%

+36.6%

+13.0%

+1.5%

-6.4%

-16.9%

-4.5%

+7.5%

+7.7%

+11.6%

OI

170

204

196

201

487

108

219

78

105

144

YoY

+46.9%

10.0x

-0.5%

+71.1%

2.9x

-47.1%

+11.2%

-60.9%

-78.3%

+33.8%

* Apr-Sep results are shown on p. 38.

10

In Europe, sales and OI increased.

In terms of sales, printer inventory adjustments by distributors have run their course and orders from distributors have recovered. In addition, sales increased due to the positive impact of foreign exchange.

Subsidiaries in Germany and the UK were affected by the economic downturn, but business in retail markets remained steady.

OI increased due to the above-mentioned growth in sales.

10

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SATO Holdings Corporation published this content on November 14, 2024, and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on November 14, 2024 at 07:44:13.145.