Toyo Ink SC : Briefing transcript of FY2022 Results Briefing

Financial Results Briefing for the Fiscal Year Ended December 31, 2022

Presentation(Transcript)

• Date/time: Feb. 21, 2023 10:00am - 11:00am (Japan time)
• Speakers:
• • Satoru Takashima: President and Representative Director, and Group CEO

· Hiroyuki Hamada : Managing Director, General Manager of Corporate Planning Division

• • Takeshi Arimura: Executive Officer, Group Financial Director
  • Hideki Okaichi: President and Representative Director, TOYOCOLOR CO., LTD.
• Presentation Material:https://schd.toyoinkgroup.com/en/ir/archives/pdflib/2022/frp_fy2022_q4_en.pdf

TRANSLATION:

This is a transcript of Financial Results Briefing for the Fiscal Year Ended December 2022, held on Feb. 21, 2023. This is an English translation of the Japanese original, prepared only for the convenience of shareholders residing outside Japan. The original Japanese version will prevail should there be any difference in the meaning between the English version and the Japanese version.

DISCLAIMER:

The forecast or projections in this material are based on the assumptions and beliefs of our management in light of the information available as of Feb. 21, 2023. Changes in global, economic and business conditions could cause actual results to differ materially from these forecasts.

The content of this transcript have been edited or revised by the company.

1

Presentation

Takashima: Good morning, everyone. I am Takashima, President. I would like to express my sincere appreciation to the many of you who participated in today's online financial results presentation. Thank you.

The contents of today's agenda are listed here.

First, I would like to give a general overview of our consolidated financial results for FY2022, and then I would like to talk about our plans for the next fiscal year.

2

Let me begin with the consolidated financial results for FY2022 and the plan for FY2023.

As shown here, net sales in FY2022 were JPY315.9 billion, an increase of 9.7% over the previous year. This includes JPY12,291 million from exchange rate fluctuations and JPY1,789 million in hyperinflation accounting adjustments in Turkey. Therefore, please consider a total of JPY14.08 billion as the foreign exchange-related impact.

Operating profit was JPY6.9 billion, down 47.2% from the previous year. Looking at domestic and overseas operations, consolidated operating profit in Japan was JPY4,329 million lower than the previous year, a particularly large decrease compared to the overall decrease in profit in Japan. I will explain the reasons for this later, but I believe that overseas operations have made great progress in responding to price revisions in response to soaring raw material prices.

Ordinary profit was JPY7.9 billion, down 48.8% from the previous year. Net profit was JPY9.3 billion, down 1.9% from the previous year. This net profit reflects a gain of JPY5,648 million from the sale of strategic shareholdings.

3

As you can see on the right, the FY2023 management plan calls for net sales of JPY330 billion, operating profit of JPY11 billion, ordinary profit of JPY9.5 billion, and net profit of JPY6 billion.

I will explain the assumptions underlying this plan, namely the exchange rate and then the naphtha assumptions. As you can see on the bottom left-hand side, the average exchange rates for the last year are shown, and the assumptions for the current year are JPY130 for the US dollar, JPY140 for the euro, and JPY19.5 for the renminbi.

As for naphtha, which affects raw materials, we have assumed that the naphtha price will be JPY65,000 this year, compared to the actual average for H1 and H2 of last fiscal year.

I will explain how we will achieve these planned values later, but there are two major management issues. For the short term, we will rebuild our earnings, and for the long term, we will reform management to achieve sustainable growth. We see these as the two main points, the specifics of which will be explained later.

The next slide is a summary of consolidated business performance. A chart of net sales and operating profit for Q1 through Q4 is shown below.

4

Sales increased. Overseas, sales in China were relatively sluggish, but overseas sales as a whole grew, and the ratio of overseas sales to total sales was the highest to date at 52.8%.

As for the products with particularly strong sales as varieties, liquid inks, mainly gravure ink, pressure sensitive adhesives/adhesives, and functional inks. Functional inks include metal ink, silk screen, and these types of inks.

Operating profit was affected by the sharp rise in raw material prices. That is one thing. Another factor was the sharp slowdown in the LCD panel and electronics markets, including smartphones.

Net profit was maintained at the same level as the previous year, partly due to the factors I mentioned earlier.

As you can see in the operating profit chart on the right below, operating profit fell sharply in Q3 and picked up slightly in Q4. This was affected by raw material prices as a whole until Q3. In Q4, some inventory adjustments in the LCD panel area have been completed, and the situation has improved a little. I think it's fair to say that the effects of the price revision, mainly in Japan, are gradually becoming apparent.

5