Seiko Epson : Financial Results for the Third Quarter ended December 31, 2021 (Consolidated)

Financial Results for the Third Quarter ended December 31, 2021 [IFRS](Consolidated)

		January 28, 2022
Name of the listed company: SEIKO EPSON CORPORATION	Stock Listing: TOKYO
Code: 6724	URL: global.epson.com
Representative: Yasunori Ogawa, President
Inquiries: Tatsuaki Seki, Director, General Administrative Manager, Corporate Strategy and Management Control Division Tel: [phone]
Scheduled date to file Quarterly Securities Report: February 1, 2022	Scheduled starting date of payment for the dividends: －
Reference materials regarding financial results for the period: Yes
Briefing on quarterly financial results: Yes (for analysts)

(Amounts are rounded down to the nearest million yen)

1. Results of Nine months ended December 31, 2021（From April 1, 2021 to December 31, 2021）

(1) Consolidated Operating Results

(%: Change from same period previous year)

Profit from

Profit

Profit for

Profit for the period

Revenue

Business profit

operating

attributable to owners

before tax

the period

activities

of the parent company

Millions of yen

%

Millions of yen

%

Millions of yen

%

Millions of yen

%

Millions of yen

%

Millions of yen

%

Nine months ended

846,743

17.9

76,958

67.8

78,471

131.5

79,018

165.0

61,526

202.7

61,515

203.1

December 31, 2021

Nine months ended

717,948

△9.8

45,859

24.5

33,901

△8.4

29,814

△18.2

20,326

△17.3

20,293

△17.3

December 31, 2020

Note: Total comprehensive income for the period: Nine months ended December 31, 2021 ¥79,171 million (183.6%)

Nine months ended December 31, 2020 ¥27,915 million (15.1%)

Business profit is calculated by subtracting Cost of sales and Selling, general and administrative expenses from Revenue.

Basic earnings

Diluted earnings

per share

per share

Yen

Yen

Nine months ended December 31, 2021

177.79

177.74

Nine months ended December 31, 2020

58.66

58.64

(2) Consolidated Financial Position

Total assets

Total equity

Equity attributable to owners

Equity attributable to owners

of the parent company

of the parent company ratio

Millions of yen

Millions of yen

Millions of yen

%

As of December 31, 2021

1,203,899

608,670

608,565

50.5

As of March 31, 2021

1,161,314

552,949

550,924

47.4

2. Cash Dividends

Cash dividends per share

1st Quarter

2nd Quarter

3rd Quarter

Year End

Year Total

Yen

Yen

Yen

Yen

Yen

Year ended March 31, 2021

－

31.00

－

31.00

62.00

Year ending March 31, 2022

－

31.00

－

Year ending March 31, 2022

31.00

62.00

（Forecast）

Note: Changes from the latest announced forecasts: None

3. Forecast for the Fiscal Year ending March 31, 2022 (From April 1, 2021 to March 31, 2022)

(%: Change from same period previous year)

						Profit from	Profit			Profit for	Profit for the year	Basic earnings
	Revenue		Business profit	operating				attributable to owners
						activities		before tax		the period	of the parent company	per share
For the year ending	Millions of yen		%	Millions of yen	%	Millions of yen		%	Millions of yen			%	Millions of yen	%	Millions of yen	%	Yen
1,130,000		13.5	85,000	37.9	84,000		76.3	83,000		84.7	63,000	103.3	63,000	103.7	182.07
March 31, 2022

Note: Changes from the latest announced forecasts: Yes

※Notes

1. Changes in significant subsidiaries during the period (changes in specified subsidiaries resulting from changes in the scope of consolidation): None
2. Changes in accounting policies, or changes in accounting estimates

1. Changes in accounting policies required by IFRS: None
2. Changes in accounting policies other than the changes above: None
3. Changes in accounting estimates: Yes

For details, please refer to "Notes to Consolidated Financial Statements 2. Changes in Accounting Estimates."

1. Number of shares outstanding

1. Issued shares (including treasury shares):
2. Treasury shares:
3. Average number of shares:

			(share)
As of December 31, 2021	399,634,778	As of March 31, 2021	399,634,778
As of December 31, 2021	53,617,095	As of March 31, 2021	53,655,825
Nine months ended	346,002,499	Nine months ended	345,964,539
December 31, 2021	December 31, 2020

※This report is not reviewed by certified public accountants nor auditors.

※Explanation of appropriate use of forecast and other special items

(Cautionary statement concerning forward-looking statements)

This report includes forward-looking statements that are based on management's view from the information available at the time of the announcement. These statements are subject to various risks and uncertainties. Actual results may be materially different from those discussed in the forward-looking statements. The factors that may affect Epson include, but are not limited to, general economic conditions, the ability of Epson to continue to timely introduce new products and services in markets, consumption trends, competition, technology trends, and exchange rate fluctuations.

Assumptions for the forecasts and warnings for users of the forecasts are available on "Qualitative Information Regarding the Consolidated Financial Outlook."

(How to access supplementary explanations and details of briefing on financial results)

The Company is scheduled to hold a briefing for analysts on financial results on Friday, January 28, 2022 and to post materials used at the briefing on the Company's website on that day.

U.S. dollar amounts are presented for the convenience of the readers. This translation should not be construed to imply that the yen amounts actually represent, or have been or could be converted into, equivalent amounts in U.S. dollars. The exchange rate of ¥115.060 = U.S.$1 at the end of the reporting period has been used for the purpose of presentation.

Operating Performance Highlights and Financial Condition

Overview of the Fiscal 2021 First Three Quarters (April 1 to December 31, 2021)

The global economy over the first three quarters of the year under review rebounded from the negative growth of the previous year and grew at a record pace amid a recovery in demand as nations emerged from lockdowns. However, China, Europe, the United States, and some other countries and regions are now seeing the momentum of a rapid recovery flag as fiscal and financial support measures lose effect and supply chain disruptions expand. In addition to a prolonged snarling of supply chains, serious risks are materializing that could lead to a slowdown in the global economy, such as the spread of COVID- 19 infections from the Omicron variant and inflationary pressure, so we will keep an even closer eye on trends going forward.

The average exchange rates of the yen against the U.S. dollar and of the yen against the euro during the first three quarters of the fiscal year were ¥111.08 and ¥130.58, respectively. This represents a 5% depreciation in the value of the yen against the dollar and a 7% depreciation in the value of the yen against the euro, year on year. The yen also weakened against the currencies of some emerging countries, in places such as China and Latin America.

Given this situation, revenue was hit harder by product supply shortages caused by persistent logistics delays and difficulty in procuring components. Nevertheless, revenue rebounded from the same period last year, when COVID-19 caused market demand to plummet, and ended at ¥846.7 billion, up 17.9% year on year. Business profit was ¥76.9 billion, up 67.8% year on year. Supply chain disruptions and component shortages, especially of semiconductors, negatively impacted sales, while transport and component costs soared, pushing manufacturing costs higher. However, these were outweighed by the positive effects of higher selling prices, curtailed spending on advertising and promotions, and foreign exchange. Profit from operating activities was ¥78.4 billion, up 131.5% year on year. Profit before tax was ¥79.0 billion, up 165.0% year on year. Profit for the period attributable to owners of the parent company was ¥61.5 billion, up 203.1% year on year.

A breakdown of the financial results in each reporting segment is provided below.

The reporting segments were changed in the first quarter of the current fiscal year based on the Epson 25 Renewed corporate vision established in March 2021. The three reporting segments are now printing solutions, visual communications, and manufacturing-related and wearables.

Printing Solutions Segment

Revenue in the office and home printing business increased. High-capacity ink tank printer and ink cartridge printer sales sharply increased. Print demand from people working and learning from home has been settling down compared to last fiscal year but still carried over into the current fiscal year. Revenue also rose because we were able to grow unit sales of high-capacity ink tank printers in North America and elsewhere while also sustaining higher selling prices, though revenue was tempered somewhat by constrained supply associated with logistics delays and component shortages. Sales of consumables decreased compared to the same period last year, when sales sharply increased on extra demand from those working and learning from home.

Revenue in the commercial and industrial printing business sharply increased. Large-format inkjet printer sales increased owing to the launch of new products and a recovery in demand compared to the

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same period last year, when printer sales activities and installations were stalled by lockdowns and restrictions on economic activity and when demand for in-store posters and other prints dropped. Consumables sales were adversely impacted by product supply shortages yet increased as sales recovered in Europe and the Americas. Small printer sales were hit hard by component shortages, which limited our ability to supply products, but we increased sales by meeting increased demand from the retail and food service industry in Europe, the Americas, and China. Printhead sales increased primarily on continued strong sales in China.

Segment profit in the printing solutions segment increased despite a decrease in sales of ink cartridge printer consumables and soaring transport costs and component prices, which hurt profitability. The increase in segment profit was primarily the result of a combination of increased revenue from sales of high-capacity ink tank printers, large-format inkjet printers, and small printers, high selling prices due to price hikes, ongoing reductions of advertising and promotion costs and other fixed costs, and positive foreign exchange effects.

As a result of the foregoing factors, revenue in the printing solutions segment was ¥580.9 billion, up 17.1% year on year. Segment profit was ¥85.9 billion, up 8.8% year on year.

Visual Communications Segment

Revenue in the visual communications business sharply increased compared to the same period last year, when demand plummeted as COVID-19 infections spread. Although product supplies continue to be constrained mainly due to component shortages, revenue was bolstered by a recovery in tender opportunities in the education sector in Europe, continued strong home demand, and an improved model mix.

Segment profit in visual communications sharply increased primarily due to a combination of higher revenue, continued cost containment associated with business restructuring, and positive foreign exchange effects.

As a result of the foregoing factors, revenue in the visual communications segment was ¥124.3 billion, up 22.0% year on year. Segment profit was ¥13.2 billion (versus a segment loss of ¥0.8 billion in the same period last year).

Manufacturing-Related & Wearables Segment

Revenue in the manufacturing solutions business increased despite a loss of sales associated with the transfer of the IC test handler business, the increase owing to increased sales in China and a recovery in demand for electronic equipment manufacturing contract services in Taiwan and for automotive products in Europe and the Americas.

Revenue in the wearable products business increased despite continued sluggishness in the domestic market. The increase was because of a recovery in overseas demand as well as a recovery in demand for watch movements.

Revenue in the microdevices business as a whole sharply increased. Crystal device revenue sharply increased on a continuing rise in demand for in-vehicle applications and a wider range of other applications. Meanwhile, semiconductor sales also increased on robust demand.

Segment profit in the manufacturing-related and wearables segment sharply increased owing to higher revenue and cost containment associated with business restructuring in the wearable products business. As a result of the foregoing factors, revenue in the manufacturing-related and wearables segment was ¥142.8 billion, up 17.8% year on year. Segment profit was ¥17.4 billion, up 281.4% year on year.

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Adjustments

Adjustments to the total profit of reporting segments amounted to negative ¥39.6 billion. (Adjustments in the same period last year were negative ¥36.8 billion.) The main components of the adjustment were basic technology research and development expenses that do not correspond to the reporting segments and revenue and expenses associated with things such as new businesses and corporate functions.

Liquidity and Financial Position

Assets, Liabilities, and Equity

Total assets at the end of the third quarter were ¥1,203.8 billion, an increase of ¥42.5 billion from the previous fiscal year end. Although property, plant and equipment decreased by ¥13.2 billion, total assets increased mainly due to a ¥30.7 billion increase in inventories and an ¥11.2 billion increase in cash and cash equivalents.

Total liabilities were ¥595.2 billion, a decrease of ¥13.1 billion compared to the end of the last fiscal year. Although trade and other payables increased by ¥11.2 billion, total liabilities decreased mainly due to a ¥23.1 billion decrease in bonds issued, borrowings and lease liabilities.

The equity attributable to owners of the parent company totaled ¥608.5 billion, a ¥57.6 billion increase compared to the previous fiscal year end. While Epson recorded ¥61.5 billion in profit for the period attributable to owners of the parent company and recorded ¥17.6 billion in other comprehensive income, the primary component of which was exchange differences on translation of foreign operations, the equity attributable to owners of the parent company increased mainly because there were ¥21.4 billion in dividend payments.

Cash Flows

Net cash from operating activities for the first three quarters of the year totaled ¥87.3 billion (compared to ¥93.1 billion in the same period last year). Whereas Epson recorded a ¥61.5 billion profit for the period, there were negative factors such as a ¥22.7 billion increase in inventories. However, net cash was positively affected by the recording of ¥48.5 billion in depreciation and amortization.

Net cash used in investing activities totaled ¥31.7 billion (compared to ¥45.6 billion in the same period last year), mainly because Epson used ¥31.4 billion in the purchase of property, plant, and equipment and the purchase of intangible assets.

Net cash used in financing activities totaled ¥49.6 billion (compared to ¥25.1 billion in net cash in the same period last year), chiefly due to ¥21.4 billion in dividends paid and ¥20.0 billion in redemption of bonds.

As a result of the foregoing, the balance of cash and cash equivalents at the end of the third quarter totaled ¥315.3 billion compared to ¥266.5 billion in the same period last year.

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