Our Financial Results
We have announced our financial results for the first quarter of the fiscal year ending March 31, 2024 and our revised forecasts for Fiscal Year 2023’s first half and for the full year.
At the beginning of this fiscal year, we assumed that the widespread semiconductor shortage problem would continue throughout the first half of the year. Anticipating a low level of sales in the first half of this fiscal year, we planned to reduce inventories in order to deal with the expected reduction in production. Therefore, the profit plan we developed at the beginning of this fiscal year was based on a forecast that almost no profit would accrue in the first half of the year, due to the low level of operations. However, unexpectedly, semiconductor shortages in Japan and North America began to ease earlier than expected, and Japanese car manufacturers enjoyed a better recovery of production than had been foreseen. As a result, we reversed our inventory position from reduction to buildup, nearly six months earlier than we had expected, and our factories’ capacity utilization has improved significantly. The picture in China, on the other hand, with the slow recovery of the Chinese economy as a whole, the expansion of EV sales, and the alleged sacrifice sale of vehicles not in compliance to the national 6b vehicle emissions standards have resulted in continued sales difficulties for Japanese automakers. The production and sales of our product at our bases in China have also been sluggish. We suspect that EV sales will continue to expand. Regarding their national 6b vehicle emissions standards, as a transitional measure the Chinese government is permitting the sale of 6b non-compliant vehicles (including passenger cars) that weigh 3.5 tons or less, until the end of December 2023. Therefore, we expect that the impact of the enforcement of the 6b emission standards will continue to be felt until the inventory of finished vehicles that fails to meet the national 6b emissions standards is depleted.
On the other hand, raw material and other materials prices, and energy costs, which were a drag on earnings last year, are generally stable although at high levels, and as expected the Slide Gap has been eliminated. Many of our customers have been understanding about the necessity of price hikes for our products, caused by increased raw materials and energy costs, but there are some customers with whom we are still making requests to raise our product prices to reflect our increased raw materials and energy costs. We are in the process of pleading with these customers to accept that we need to raise product prices.
Taking into account the above-mentioned factors, we have revised our earnings forecast for the current fiscal year. This is the final year of our three-year mid-term management plan and, according to the up-to-the-moment forecast, we have not yet reached our mid-term earnings target. We will continue our efforts to improve productivity and reduce production costs, to get as close as possible to the target.
On the sales front, we have made significant progress in the sales expansion activities that we have been engaged in since last year, and we are now examining the possibility of incorporating those results into this term’s earnings by the end of the fiscal year.
Here are the financial results for the first quarter of this fiscal year.
We would like to ask our shareholders for their continued understanding and support in the days ahead.
