Meidensha : Financial Result for FY2022 Q4

FOR IMMEDIATE RELEASE

Meidensha Corporation Reports Earnings for

the Fiscal Year Ended March 31, 2023

Tokyo, Japan; May 12, 2023 - Meidensha Corporation (TSE: 6508) reported consolidated net sales of ¥272,578 million and a net income attributable to owners of the parent of ¥7,128 million, or ¥157.13 per share, for the fiscal year ended March 31, 2023.

1. Operating Results and Financial Position

(1) Analysis of Operating Results

During the fiscal year under review, the Japanese economy showed strength in demand such as progress in the resumption of investment by companies backed by the progress toward returning to normal from the COVID-19 pandemic, in addition to a high level of demand for upgrading facilities related to social infrastructure, while difficult conditions continued with pressure on profitability due to elements such as rising prices and deterioration of availability of various materials and components, and rising energy costs.

Furthermore, while COVID-19 was quickly confirmed to be subsiding, the global economy became increasingly uncertain against the backdrop of the continued effects arising from geopolitical risks that emerged in the previous fiscal year, in addition to monetary tightening in response to the progress of inflation in Europe and the United States, observation of a decline in the outlook for corporate performance associated with this, and loosening of supply and demand in the semiconductor market.

[Consolidated Results]

Amid such conditions, the Group focused on businesses and products contributing to the environment based on the policies set forth in Medium-Term Management Plan 2024, and promoted moves such as the implementation of various measures aimed at strengthening the earnings base in overseas business and the implementation of sustainability management.

Operating results for the year ended March 31, 2023 were as follows. (Unit: millions of yen)

	Fiscal year ended	Fiscal year ended
	March 31, 2022	March 31, 2023	Change	Change (%)
	Result	Result
Net sales	255,046	272,578	17,532	6.9
Operating income	9,468	8,539	(928)	(9.8)
Ordinary income	10,206	8,823	(1,382)	(13.5)
Net income attributable	6,733	7,128	394	5.9
to owners of the parent

The results for each business segment are presented below, with sales figures including inter- segment sales.

1) Power Infrastructure Business

Net sales in the segment increased 15.6% year on year to ¥60,470 million, and operating loss improved by ¥1,384 million to ¥515 million.

Sales and income increased in the Power T&D business mainly operating overseas due to the recovery of demand in Singapore and Germany, ramping up of operations of the US manufacturing subsidiary and increased demand for environmentally friendly products. Meanwhile, sales and income decreased in the Power and Energy business mainly operating in Japan due to factors such as the strong impact of prolonged delivery times for various parts and materials.

2) Public, Industrial & Commercial Sector Business

Net sales in the segment decreased 4.6% year on year to ¥90,392 million, and operating income deteriorated by ¥3,707 million to ¥2,396 million.

Sales and income increased in the Railways business due to a recovery in demand for equipment mainly in Japan. Meanwhile sales and income decreased in the Social Infrastructure business and Water Infrastructure business due to a reactionary fall from the previous fiscal year, in addition to delays in shipments associated with the prolonged deadlines of various parts and materials, and the impact of increased costs caused by rising material and component prices.

3) Mobility & Electrical Components Business

Net sales in the segment increased 22.4% year on year to ¥78,133 million, and operating loss improved by ¥1,931 million to ¥1,683 million.

Sales and income increased in the Motor Drive Solutions business where demand increased for electrical components for electric forklifts against the backdrop of rising momentum of environmental protection and the EV business where there was an increase in the number of models delivered. Furthermore, although sales decreased in the Mobility T&S business, which continues to face a difficult order environment, income increased due to the effect of revising business structure. Meanwhile, although sales increased in the Electronics Products business, income decreased due to production adjustments associated with changes in demand in the latter half of the fiscal year and the impact of rising prices of parts and materials.

4) Field Service Engineering Business

Net sales in the segment increased 0.4% year on year to ¥39,709 million, and operating income deteriorated by ¥676 million to ¥5,260 million.

Despite sales increasing slightly against the backdrop of steady demand related to maintenance services, income decreased due to factors such as a change in the product mix and the impact of rising component and material prices.

5) Real Estate Business

Net sales increased by 0.7% year on year to ¥3,230 million and operating income improved by ¥167 million to ¥1,321 million.

6) Other

In businesses not included in reportable segments, while net sales decreased by 1.6% year on year to ¥16,617 million, operating income improved by ¥127 million to ¥231 million due to factors such as the improvement of profitability of certain subsidiaries.

(2) Analysis of Financial Condition

Total assets at March 31, 2023 amounted to ¥307,390 million, an increase of ¥16,491 million (5.7%) from the end of the previous fiscal year (March 31, 2022).

Current assets rose ¥16,456 million (9.6%) from the end of the previous fiscal year to ¥187,751 million due to increases in inventories, and notes and accounts receivable-trade, and contract assets.

Fixed assets rose ¥35 million (0.0%) to ¥119,639 million due to an increase in construction in progress resulting from capital investment.

Total liabilities were ¥196,509 million, an increase of ¥11,032 million (5.9%) from the end of the previous fiscal year, attributable to an increase in commercial paper and an increase in short-term borrowings.

Net assets amounted to ¥110,881 million, an increase of ¥5,459 million (5.2%), owing to recording of net income attributable to owners of the parent and an increase in foreign currency translation adjustment.

As a result, the equity ratio came to 35.1% as of March 31, 2023, which is the same as at the end of the previous fiscal year.

(3) Cash Flows

Cash and cash equivalents at March 31, 2023, amounted to ¥14,116 million, an increase of ¥862 million from the previous fiscal year-end. The following are the main factors affecting changes in cash flows during the fiscal year under review.

Cash Flows from Operating Activities

Net cash provided by operating activities in the fiscal year ended March 31, 2023 amounted to ¥13,742 million, compared with ¥11,389 million provided in the previous fiscal year.

The major inflows were income before income taxes of ¥10,397 million and depreciation and amortization of ¥10,382 million. Major outflows included an increase of inventories of ¥6,698 million, and income taxes paid of ¥2,512 million.

Cash Flows from Investing Activities

Net cash used in investing activities totaled ¥10,506 million, compared with ¥7,503 million used in the previous fiscal year.

The major outflows was purchase of property, plant and equipment, and intangible assets of ¥12,395 million, while the main inflow consisted of ¥1,462 million in proceeds from sales of investment securities.

Cash Flows from Financing Activities

Net cash used in financing activities amounted to ¥2,685 million, compared with ¥4,266 million used in the previous fiscal year.

The major outflows were redemption of bonds of ¥5,000 million, repayment of short-term borrowings of ¥4,066 million and cash dividends paid of ¥2,405 million, which were partially offset by proceeds from issuance of commercial paper of ¥6,000 million and proceeds from long-term debt of ¥4,731 million.

(Reference) Trends in Cash Flow-Related Indices

For the years ended March 31	2019	2020	2021	2022	2023
Equity ratio (%)	31.5	32.2	34.6	35.1	35.1
Equity ratio on a market-	25.9	27.2	39.1	39.6	28.4
capitalization basis (%)
Ratio of interest-bearing debt to	3.1	4.9	3.7	4.8	4.1
cash flow (years)
Interest coverage ratio (times)	23.0	16.8	30.8	20.1	16.7

Equity ratio: Total equity / Total assets

Equity ratio on a market capitalization basis: Market capitalization / Total assets

Ratio of interest-bearing debt to cash flow: Interest-bearing debt / Cash flow

Interest coverage ratio: Cash flow / Interests paid

Note 1. All figures are based on consolidated financial results.

Note 2. Market capitalization is calculated based on the number of outstanding shares excluding treasury stock.

Note 3. Calculations involving cash flow use cash flows from operating activities.

Note 4. Interest-bearing debt includes all debt recorded on the consolidated balance sheets for which interest is paid.

(4) Future Outlook

The business environment surrounding the Company is anticipated to continue to be difficult in terms of profitability despite robust demand, due to the backdrop of prices of certain parts and materials remaining high, rising energy costs and the outlook of a slowdown in semiconductor market conditions.

Under these circumstances, the Group will continue to implement initiatives to improve efficiency of business activities and reduce costs. At the same time, it will work to create new social value by generating business synergies in the four focus areas of renewable energy, sustainable infrastructure, green mobility and smart industry, as designated in Medium-Term Management Plan 2024.

The current management forecast for consolidated financial results for the year ending March 31, 2024 is as follows.

(Unit: millions of yen)

	Fiscal Year ended	Fiscal year	Year-on-year
	March 31, 2023	ending March 31,
	change
	Result	2024 Forecast
Orders	302,938	285,000	(17,938)
Net sales	272,578	290,000	17,421
Operating income	8,539	10,000	1,460
Ordinary income	8,823	10,000	1,176
Net income attributable to	7,128	7,000	(128)
owners of the parent

1. Basic Policy on Dividend of Surplus and Dividends during the Current Fiscal Year and Next Fiscal Year

The Company positions appropriate returns to shareholders as an important management issue, and its basic policy is to increase shareholders' equity and enhance return on equity, in addition to paying appropriate dividends according to business performance.

Dividends of surplus for the fiscal year under review are scheduled to be ¥22 per share for the year-end dividend considering the above basic policy and consolidated performance for the fiscal year. Along with the ¥28 interim dividend, the dividends of surplus per share for the fiscal year under review will be ¥50. Dividends for the next fiscal year are yet to be determined at the present time.

2. Basic Approach to the Selection of Accounting Standards

The Meiden Group's policy for the time being is to prepare its consolidated financial statements based on the Japanese accounting standards after taking into account the comparability of the consolidated financial statements between terms and with other companies.

The Group plans to respond appropriately to the application of the International Financial Reporting Standards (IFRS) by considering the situation prevailing in Japan and abroad.

3. Consolidated Financial Statements
(1) Consolidated Balance Sheets
	As of March 31,	As of March 31,
	2022	2023
	millions of yen	millions of yen
Assets
Current assets
Cash and time deposits	14,070	14,917
Notes and accounts receivable-trade, and contract assets	93,772	99,354
Electronically recorded monetary claims - operating	7,034	8,760
Merchandise and finished goods	10,174	10,571
Work in process	32,159	36,617
Raw materials and supplies	8,381	11,550
Other current assets	5,890	6,163
Allowance for doubtful accounts	(188)	(184)
Total current assets	171,294	187,751
Fixed assets
Property, plant and equipment
Buildings and structures	97,947	98,385
Accumulated depreciation and accumulated	(57,650)	(59,676)
impairment loss
Buildings and structures, net	40,297	38,708
Machinery, equipment and vehicles	64,996	65,960
Accumulated depreciation and accumulated	(50,701)	(52,955)
impairment loss
Machinery, equipment and vehicles, net	14,294	13,004
Land	12,955	12,697
Construction in progress	2,349	6,107
Other property, plant and equipment	27,220	28,129
Accumulated depreciation and accumulated	(22,169)	(22,858)
impairment loss
Other property, plant and equipment, net	5,051	5,271
Total property, plant and equipment	74,947	75,788
Intangible assets
Software	5,325	4,862
Goodwill	3,272	2,675
Other	968	925
Total intangible assets	9,565	8,462
Investments and other assets
Investment securities	17,132	16,696
Long-term loans receivable	36	37
Deferred tax assets	15,914	16,535
Other assets	2,074	2,148
Allowance for doubtful accounts	(67)	(28)
Total investments and other assets	35,091	35,388
Total fixed assets	119,604	119,639
Total assets	290,899	307,390