Q1 Results for the Fiscal Year

TSE Code: 5938

Ending March 31, 2024 (IFRS)

(From April 1, 2023 to June 30, 2023)

LIXIL Corporation

July 28, 2023

Copyright © LIXIL Corporation. All rights reserved.

LIXIL TRANSITIONED TO IFRS FROM FYE2016

CHANGE IN PROFIT LEVEL STRUCTURE IS AS SHOWN

JGAAPBELOW

IFRS (LIXIL Financial Reporting)

Continuing operations

Net sales

Revenue

Cost of sales

Cost of sales

Gross profit

Gross profit

SG&A

SG&A

Operating profit

Core earnings (CE)

Non-operating income/expenses

Other income/expenses

Ordinary income

Operating profit

Extraordinary income/loss

Finance income/costs

Share of profit (loss) of investments accounted for using equity method

Profit before income taxes

Profit before tax

Profit from continuing operations

Discontinued operations

Profit for discontinued operations

Net profit attributable to

Profit attributable to

Non-controlling interests

Owners of the parent

Owners of the parent

Non-controlling interests

"Core earnings" in IFRS is equivalent to JGAAP's "Operating profit"

1

KEY HIGHLIGHTS

Summary of results for Q1 FYE2024

Profits declined year-on-year for Q1 (3 months) FYE2024

  • Global demand for housing equipment and building materials, including Japan, remained generally sluggish in Q1
  • Higher fixed costs due to a decline in production volume is a challenge for profitability
  • Variable costs, including for raw materials, were stable compared to the prior year, contributing to positive growth
  • In Japan, LIXIL's price optimization was ahead of other companies, leading to a more difficult competitive environment through Q1
  • On the positive side, the earnings contribution from renovation demand for insulation products in Japan has materialized more quickly than forecast
  • In international markets such as Europe, demand decline has been the worst in 20 years
  • We are undertaking proactive structural reforms to prepare for demand recovery, especially in international markets
  • We anticipate that approximately 80% of the forecasted annual core earnings(1) will be realized in H2(2). Based on the current business environment and the Q1 (3 months) results, there is no change to our Q2 (3 months) core earnings forecast of around JPY4.5 billion (around JPY8.0 billion excluding one-time expenses for structural reforms and future investments (approximately JPY3.5 billion))
    1. The full-year forecast for core earnings for the fiscal year ending March 2024 is JPY40.0 billion, which was announced on April 28, 2023.
      Consolidated Financial Results for FYE2023 (IFRS)https://ssl4.eir-parts.net/doc/5938/tdnet/2268023/00.pdf2
    2. FYE2023 Earnings briefing transcripthttps://www.lixil.com/en/investor/ir_event/pdf/E_20230428_Earnings_trasncript.pdf#page=7

KEY HIGHLIGHTS

Business environment: Market trends in Europe

  • Continued softening of demand in Europe, our largest source of profit
  • Significant decreases in major markets such as Germany, France, and the Netherlands
  • Decline in housing-related investment due to continued inflation, while housing market prices fall and interest rates rise
    • Balance of household debt to GDP(1): over 100% in the Netherlands, 65% in France, 55% in Germany, 40% in Japan
    • The ECB policy rate has risen to 4% over the past 1½ years
    • Inflation, especially for energy and food, is continuing. In addition, housing prices have been declining since last year
    • This has shifted consumption and investment from household goods to other commodities as costs continue to rise
    • The continued rise in household costs differs from previous downturns where declining demand pushed down prices
  • In Germany in particular, spending is shifting to residential heat pumps and both consumers and installers are prioritizing the replacement of fossil-fuel heating systems, supported by government subsidies

(1) Source: Eurostat, LIXIL research

3

KEY HIGHLIGHTS

Business environment: Other regions and business segments Water Technology (Japan)

Bathroom units showing strong sales, but demand has been weak for kitchens and toilets While toilet sales are now starting to recover, kitchen sales are expected to pick up from

October

Overall sales are expected to increase from Q3 onwards due to normalization of the competitive environment

Water Technology (International)

  • Americas: Customer demand is sluggish, but shifting of products and sales channels is progressing steadily
  • Asia Pacific: Vietnam entering an economic adjustment, but other regions remain strong
  • China: Challenging real estate market conditions continue

Housing Technology

  • Solid sales of insulated windows for residential renovations
  • Overall sales are expected to recover from Q2 due to normalization of the competitive environment
  • Recovery of exteriors and wooden interior furnishing materials was slower than expected
  • Profitability of building business is on a recovery trend due to successful pricing policy in response to rising costs

4

KEY HIGHLIGHTS

Business outlook

  • Timing of economic recovery varies by region, but normalization is expected by end of December
  • Majority of forecasted core earnings for the fiscal year to be realized in Q3-Q4
  • While economic trends in Europe remain weak, renovation sales for higher-insulation products in Japan are progressing better than expected
  • LIXIL's market share is expected to recover with the normalization of the competitive environment from Q2 onwards. Decline in new housing starts (especially owner- occupied houses) has been a significant headwind, undercutting the benefits from mass production. Facing this trend, we will focus on capturing demand for higher-insulation and environmentally beneficial products to minimize the impact
  • Variable costs such as raw materials are expected to stabilize or decline, due partly to the global economic slowdown. However, we will continue to consider price optimization requests from suppliers that are attributable to their higher costs
  • International business will accelerate structural reforms to improve productivity

5

Q1 FYE2024 PERFORMANCE HIGHLIGHTS

Profits declined year-on-year

  • Revenue: JPY359.2 billion, down JPY1.1 billion year-on-year
    • Q1 (3 months) YoY: +2% in Japan and -6% in international markets (-13% excluding foreign exchange impact)
  • Core earnings: JPY3.7 billion, down JPY3.2 billion year-on-year
    • Q1 (3 months) breakdown: JPY5.3 billion in LWT Japan, -JPY1.6 billion in LWT International, JPY8.4 billion in LHT, and -JPY8.4 billion for consolidation adjustment/other factors
  • Profit for the quarter(1): JPY0.4 billion, down JPY5.4 billion year-on-year
    • Profit before tax decreased JPY11.7 billion primarily due to decrease in core earnings, the absence of last year's gain on the transfer of land and other assets, and an increase in finance costs

(1) Profit for the quarter = Profit for the quarter attributable to owners of the parent

6

Q1 FYE2024 CONSOLIDATED BUSINESS RESULTS

Q1 (3 months)

FYE2023

FYE2024

Increase/

%

JPY billion

decrease

(YoY)

Revenue

360.3

359.2

-1.1

-0.3%

Gross profit

116.4

115.6

-0.7

-0.6%

(%)

32.3%

32.2%

-0.1pp

-

SG&A

109.4

111.9

+2.5

+2.3%

Core earnings (CE)(1)

7.0

3.7

-3.2

-46.3%

(%)

1.9%

1.0%

-0.9pp

-

Profit for the quarter including

5.7

0.4

-5.4

-93.4%

Discontinued Operations(2)

EPS (JPY)

19.79

1.31

-18.48

-93.4%

EBITDA(3)

26.9

23.4

-3.5

-13.0%

(%)

7.5%

6.5%

-0.9pp

-

  • Gross profit margin: Declined by 0.1pp YoY
  • SG&A expenses: Increased by JPY2.5 billion YoY (Japan JPY2.3 billion decrease, International JPY2.3 billion increase, forex effect JPY2.5 billion increase) mainly due to personnel expenses for the international business including foreign exchange impact and expanded sales activities. SG&A ratio increased by 0.8pp
  • CE margin: Declined by 0.9pp YoY

(1)

Equivalent to "Operating profit" of JGAAP

7

(2)

Profit for the quarter attributable to owners of the parent

(3)

EBITDA=Core earnings + Depreciation + Amortization

Q1 FYE2024 BUSINESS RESULTS BY SEGMENT

Revenue and profits for LWT decreased due to sluggish demand in Europe and the Americas. Revenue and profits for LHT increased as higher renovation sales in Japan offset sluggish demand for new housing

Q1 (3 months)

FYE2023

FYE2024(1)

Increase/

JPY billion

decrease (YoY)

LWT

Revenue

221.0

214.1

-6.9

CE

13.2

3.8

-9.4

LHT

Revenue

143.0

147.4

+4.4

CE

3.1

8.4

+5.2

Consolidation,

Revenue

-3.7

-2.3

+1.4

adj. & other

CE

-9.4

-8.4

+1.0

LIXIL

Revenue

3,60.3

359.2

-1.1

CE

7.0

3.7

-3.2

Impact from segment reclassification(1)

LWT: Revenue: +JPY0.1 billion, CE -JPY0.9 billion

LHT: Revenue -JPY1.7 billion, CE +JPY1.0 billion

Consolidation adj.: Revenue +JPY1.5 billion, CE -JPY0.0 billion

Forex impact(2)

Q1 3 months: Revenue +JPY8.8 billion, CE +JPY0.5 billion

(1)

Reflects reclassification of a subsidiary from Q1 FYE2024 to encompass both LWT and LHT (originally classified only to LHT),

8

(2)

reflecting its P&L impact. The reporting segments changed to LWT and LHT.

Forex translation effect gain(loss) from international subsidiaries

CONSOLIDATED FINANCIAL POSITION

The total assets increased slightly, due mainly to foreign currency translations. Interest-bearing debt increased due to increase in working capital and fund-raising for bond redemptions. Equity ratio remains at 33.8%

JPY billion

Cash and Cash Equivalents

Mar-2023

Jun-2023

Mar-2023

Jun-2023

Interest-bearing debt

Mar-2023Jun-2023

9

Attachments

  • Original Link
  • Original Document
  • Permalink

Disclaimer

LIXIL Group Corporation published this content on 28 July 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 28 July 2023 06:38:03 UTC.