Rinnai : Financial Statements (607KB)

Consolidated Financial Results for Fiscal 2024

(April 1, 2023 - March 31, 2024)

May 9, 2024

Listed Company Name: Rinnai Corporation

Listings: Prime Section of the Tokyo Stock Exchange, and Premiere Section of Nagoya Stock

Exchange (Securities Code: 5947)

Website: https://www.rinnai.co.jp/

Representative: Hiroyasu Naito, President

Contact: Takuya Ogawa, Managing Executive Officer, Chief of Corporate Management Headquarters

TEL: [phone]

Date of the General Meeting of Shareholders: June 27, 2024

Anticipated date to begin distributing dividends: June 28, 2024

Anticipated date for releasing annual securities report: June 27, 2024

Supplemental information sheets of financial results: Yes

Information meeting of financial results: Yes (for analysts and institutional investors)

1. Performance for the Year Ended March 31, 2024

(April 1, 2023 to March 31, 2024; Amounts less than one million yen are omitted)

1. Consolidated Operating Results (Year ended March 31)
   (Percentage figures in columns indicate increase or decrease from the previous term.)

(¥ millions)

Net income

Net Sales

Operating Income

Ordinary Income

Attributable to

Owners of the

(% change)

(% change)

(% change)

Parent Company

(% change)

Fiscal 2024

430,186 (+1.2)

39,362

(-5.0)

46,071 (+3.4)

26,667 (+2.2)

Fiscal 2023

425,229 (+16.1)

41,418 (+15.5)

44,565 (+14.1)

26,096 (+9.9)

Note: Comprehensive income:

Year ended March 31, 2024: ¥51,643 million (+10.7%)

Year ended March 31, 2023: ¥46,633 million (+36.2%)

Net Income

Fully Diluted

Ratio of

Ratio of

Ratio of

Net Income per

Net Income

Ordinary

Operating Income

per Share

Share

to Equity Capital

Income to Total

to Net Sales

(¥)

(¥)

(%)

Assets (%)

(%)

Fiscal 2024

184.75

-

7.1

8.2

9.2

Fiscal 2023

176.92

-

7.4

8.4

9.7

References: Equity in earnings of companies accounted for using the equity method:

Year ended March 31, 2024: ¥- million

Year ended March 31, 2023: ¥- million

Note: On April 1, 2023, the Corporation conducted a 3-for-1 stock split of shares of common stock. Above figures for "Net income per share" are for after the stock split.

(2) Consolidated Financial Position (at March 31)		(¥ millions)
	Total Assets	Net Assets	Equity Ratio (%)	Net Assets per Share
				(¥)
Fiscal 2024	577,088	437,438	67.2	2,707.86
Fiscal 2023	547,114	407,199	66.6	2,487.60
(Reference) Equity capital:Year ended March 31, 2024; ¥387,774 million
	Year ended March 31, 2023; ¥364,151 million

Note: On April 1, 2023, the Corporation conducted a 3-for-1 stock split of shares of common stock. Above figures for "Net assets per share" are for after the stock split.

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(3) Consolidated Cash Flows (Years ended March 31) (¥ millions)

	Cash Flows from	Cash Flows from	Cash Flows from	Cash and Cash
	Operating	Investing	Financing	Equivalents at
	Activities	Activities	Activities	End of Year
Fiscal 2024	43,347	(19,968)	(23,664)	123,829
Fiscal 2023	19,387	(30,087)	(21,313)	120,213

2. Dividends

						Dividend per Share
	1st Quarter		Interim		3rd Quarter		Fiscal Year-	Full Year
					End
	(¥)			(¥)			(¥)				(¥)
						(¥)
Fiscal 2023	-			75.00			-		85.00		160.00
Fiscal 2024	-			30.00			-		30.00		60.00
Fiscal 2025	-			40.00			-		40.00		80.00
(anticipated)
	Total Dividends				Consolidated		Consolidated Ratio of
	(Full Year)				Payout Ratio			Dividends to
	(¥ millions)			(%)				Net Assets (%)
Fiscal 2023		7,807			30.1					2.2
Fiscal 2024		8,592			32.5					2.3
Fiscal 2025						40.0
(anticipated)

Note: On April 1, 2023, the Corporation conducted a 3-for-1 stock split of shares of common stock. The above figure for "Dividends" in the fiscal years ended March 31, 2023 is actual dividends declared before the stock split. Above figures for the year ended March 31, 2024, and the year ending March 31, 2025 (forecast) are for after the stock split.

3. Forecast for the Fiscal Year Ending March 31, 2025

(April 1, 2024, to March 31, 2025)

					(¥ millions)
				Net income	Net
		Operating	Ordinary	Attributable to
	Net Sales	Income
	Income	Income	Owners of the
	(% change)	per Share
	(% change)	(% change)	Parent Company
		(¥)
				(% change)
Two-quarter total	212,000 (+10.0)	17,300 (+70.9)	18,900 (+26.8)	11,500 (+45.5)	80.55
Full year	450,000 (+4.6)	45,000 (+14.3)	48,000 (+4.2)	28,300 (+6.1)	199.88

(Percentage figures in columns indicate increase or decrease from the previous term.)

Note: At its meeting held on May 9, 2024, the Board of Directors of the Corporation resolved to conduct a share buyback totaling up to ¥10 billion. The above figure for "Net income per share" (forecast) is calculated taking into account the impact of the share buyback. For details of the share buyback, please refer to the "Notice Concerning Share Buyback and Cancellation" (released May 9, 2024). In addition, the figure for "Consolidated payout ratio" for the fiscal year ending March 31, 2025 (forecast) in the above "2. Dividends" table takes the effect of the share buyback into consideration.

* Notes

1. Changes in scope of consolidation of major subsidiaries during the period: None
   Newly included one company - (Company name: -): Excluded - (Company name: -)
2. Changes in accounting policies; changes in accounting estimates; retrospective restatement
3. 1. Changes due to revision of accounting standard: None
   2. Other changes than (a): None
   3. Changes in the rules for the accounting estimates: None
   4. Retrospective restatement: None
4. Number of Outstanding Shares (Common Stock)

1. Number of outstanding shares at fiscal year-end (including treasury stock) Year ended March 31, 2024: 146,677,171 shares
   Year ended March 31, 2023: 150,063,171 shares

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1. Number of treasury stock at fiscal year-end Year ended March 31, 2024: 3,473,623 shares Year ended March 31, 2023: 3,676,692 shares
2. Average number of shares during the term

Year ended March 31, 2024: 144,340,347 shares

Year ended March 31, 2023: 147,508,523 shares

Note: On April 1, 2023, the Corporation conducted a 3-for-1 stock split of shares of common stock. The above figure for "Number of outstanding shares at fiscal year-end," "Number of treasury stock at fiscal year-end," and "Average number of shares during the term," are calculated on the assumption that the stock split was conducted at the beginning of the previous fiscal year.

References: Summary of Nonconsolidated Results

1. Nonconsolidated Performance for the Year Ended March 31, 2024

(April 1, 2023 to March 31, 2024; Amounts less than one million yen are omitted)

(1) Nonconsolidated Operating Results (Years ended March 31)	(¥ millions)
	Net Sales	Operating Income	Ordinary Income	Net Income
	(% change)	(% change)	(% change)	(% change)
Fiscal 2024	210,525 (-13.2)	15,107 (-24.0)	25,516 (+2.9)	19,828 (+7.0)
Fiscal 2023	242,442 (+18.3)	19,871 (+39.2)	24,796 (+24.1)	18,530 (+20.0)

(Percentage figures in columns indicate increase or decrease from the previous term.)

	Net Income	Fully Diluted
	per Share	Net Income per
	(¥)	Share (¥)
Fiscal 2024	137.37	-
Fiscal 2023	125.62	-

Note: On April 1, 2023, the Corporation conducted a 3-for-1 stock split of shares of common stock. Above figures for "Net income per share" are for after the stock split.

(2) Nonconsolidated Financial Position (at March 31)	(¥ millions)
	Total Assets	Net Assets	Equity Ratio (%)	Net Assets per Share
				(¥)
Fiscal 2024	287,873	231,055	80.3	1,613.47
Fiscal 2023	286,227	226,544	79.1	1,547.58

(Reference) Equity capital: Year ended March 31, 2024; ¥231,055 million Year ended March 31, 2023; ¥226,544 million

Note: On April 1, 2023, the Corporation conducted a 3-for-1 stock split of shares of common stock. Above figures for "Net assets per share" are for after the stock split.

• This report is exempt from an auditing process.
• Note on appropriate use of performance forecasts, and other specified notes

Performance forecasts contained in this document are based on information currently available and certain judgments deemed by the Corporation to be reasonable. No intent is implied of promise by the Corporation to achieve such forward-looking statements. Actual results may differ significantly from such forecasts due to various factors. For more information, please refer to "1. Consolidated Performance, (4) Outlook for the Year Ending March 2025" on page 7 of this report.

*Supplemental information sheets of financial results are posted on the Corporation's website on Thursday, May 9, 2024.

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1. Consolidated Performance

(1) Fiscal Year in Review

In the fiscal year under review (April 1, 2023-March 31, 2024), the global economy continued facing difficult conditions, including worsening business confidence due to rising prices and tight monetary policies worldwide, as well as a stagnant Chinese economy suffering from real estate issues and other problems and prolonged situations in the Middle East and Ukraine. The Japanese economy also faced unpredictable conditions due to the ongoing impact of COVID-19 on the supply-demand balance, as well as continuing price increases on the back of soaring raw material and energy costs and uncertain foreign exchange fluctuations.

In the domestic housing-related industry, new housing starts remained weak, especially for owner-occupied dwellings, which continued declining slowly. However, the household appliance sector showed signs of recovery in demand related to renovation.

Under these circumstances, the Rinnai Group pursued three key strategies under its medium-term business plan, New ERA 2025: "Advancement in addressing social challenges," "Expansion of business scale," and "Revolution of corporate structure." We are now at a turning in that five-year plan. During the past three years, we have been exposed to various disruptive events that have affected the supply-demand balance, supply chain, and logistics due to the worldwide pandemic. Nevertheless, we will strive to achieve the targets of New ERA 2025 based on the assumption that business conditions will return to normal in the remaining two years.

To address social issues set forth in our medium-term plan, we are working to become carbon neutral as a priority initiative. In the United States, where storage-type water heaters are the norm, the spread of tankless water heaters with higher energy-saving performance is helping reduce CO2 emissions. In Australia, there is a rapidly growing shift from fossil fuels to renewable energy as part of efforts to realize a decarbonized society, and we are responding by expanding our electricity-powered product lineup.

In Japan, We are expanding sales of our ECO ONE hybrid water heaters with heating systems which meet the needs of the times for higher energy-saving performance. We are taking advantage of a subsidy program offered by Japan's Ministry of Economy, Trade and Industry for ECO ONE, and promoting sales activities centered on the ECO ONE X5, featuring improved compactness and ease of installation. Furthermore, sales of dishwashers and gas clothes dryers, which meet the growing need for time-saving housework due to the increase in dual-income households, remained strong. In these ways, we made steady progress in fulfilling our promise to our customers ("Creating a healthier way of living") and achieving sustainable and solid long-term growth.

With respect to revenue, we faced weak consumer confidence due to rising global prices and high interest rates in some regions, while in-house and distribution inventories remained at high levels. However, these factors began to dissipate in the second half,

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resulting in a year-on-year increase in net sales. We also posted a significant recovery in earnings due to return of production to previous-year levels through optimization of inventory levels, and the entrenched effects of price revisions. However, these factors failed to compensate for our negative performance in the first half, resulting in a year-on-year decline in operating income.

As a result, consolidated net sales for the period amounted to ¥430,186 million, up 1.2% from the previous year. Operating income declined 5.0%, to ¥39,362 million, and ordinary income rose 3.4%, to ¥46,071 million. Net income attributable to owners of the parent company increased 2.2%, to ¥26,667 million.

Our results by geographical segment were as follows:

Japan

In Japan, distribution inventories reached optimal levels in the second half of the year, and production, which we had adjusted since April, the beginning of the fiscal year, returned to normal levels in the third quarter. Sales of key products were also strong, evidenced by growth in sales of our ECO ONE hybrid water heaters with heating systems, which benefited from government subsidies. However, these factors failed to compensate for our negative performance in the first half. As a result, sales in Japan declined 2.3%, to ¥192,354 million, and operating income fell 23.9%, to ¥17,965 million.

United States

In the United States, new housing starts showed signs of picking up, while consumer sentiment remained sluggish on the back of high interest rates. Due to foreign exchange factors, however sales in the United States increased 3.8%, to ¥57,875 million. On the earnings side, we posted an increase in fixed cost burden due to adjustments for production cutbacks made since the beginning of the fiscal year, resulting in a significant operating loss in the first half of the year. In the second half, however, profitability improved thanks to a decrease in storage costs stemming from inventory reductions, as well as containment of labor costs. These efforts helped reduce the operating loss posted in the first half. As a result, the operating loss for the year was ¥1,197 million.

Australia

Amid weakness in the housing market and a rapid shift toward electrification, sales of electrical products, such as heat pump water heaters and electric tank-based water heaters, remained strong. As a result, sales in Australia rose 9.7%, to ¥30,338 million, and operating income climbed 5.6%, to ¥1,245 million.

China

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Amid ongoing weakness in the real estate market and a continued decline in consumer sentiment, we benefited from strong e-commerce sales and expanded the sales territory of bricks-and-mortar stores owned by e-commerce platforms. Accordingly, sales in China grew 8.7%, to ¥71,886 million, and operating income rose 14.9%, to ¥12,146 million.

South Korea

Although housing starts showed signs of bottoming out toward the end of the period, intense price competition resulted in weak sales of mainstay boilers. As a result, sales in South Korea decreased 0.7%, to ¥31,874 million. On the earnings side, we worked rigorously to reduce fixed costs under difficult conditions, resulting in operating income of ¥16 million, down 97.7%.

Indonesia

Although sales remained sluggish due to continued weak personal consumption accompanying rising prices, we revised our sales prices, benefited from lower raw materials prices, and reduced costs. Consequently, sales in Indonesia declined 8.0%, to ¥14,913 million, and operating income increased 14.4%, to ¥2,745 million.

References 1: Net sales by product					(¥ millions)
		Year ended	Year ended
		March 31, 2023	March 31, 2024	Change
		(April 1, 2022,	(April 1, 2023,
		to March 31, 2023)	to March 31, 2024)
		Amount	% of total	Amount	% of total	Amount	(%)
	Water heaters	258,658	60.8	263,839	61.3	5,181	2.0
	Kitchen appliances	91,780	21.6	90,495	21.0	(1,285)	(1.4)
	Air conditioning appliances	21,941	5.2	21,746	5.1	(194)	(0.9)
	Commercial-use equipment	10,669	2.5	11,212	2.6	543	5.1
	Others	42,179	9.9	42,891	10.0	712	1.7
	Total	425,229	100.0	430,186	100.0	4,957	1.2

References 2: Overseas sales							(¥ millions)
	Year ended March 31, 2023	Year ended March 31, 2024
		(April 1, 2022,			(April 1, 2023,
	to March 31, 2023)	to March 31, 2024)
	Asia		Other		Total	Asia	Other	Total
		regions		regions
I. Overseas sales	136,541		100,873		237,415	141,162	105,693	246,856
II. Consolidated net sales	-		-		425,229	-	-	430,186
III. Composition ratio of
overseas sales to consolidated	32.1%		23.7%		55.8%	32.8%	24.6%	57.4%
net sales

Note: Overseas sales of the above indicate sales of the Corporations in overseas countries or regions.

(2) Financial Position

As of March 31, 2024, the Rinnai Group had total assets of ¥577,088 million, up ¥29,974 million from a year earlier. This rise stemmed mainly from an increase in property, plant and equipment.

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Total liabilities decreased ¥264 million, to ¥139,650 million, due to a decrease in electronically recorded obligations and an increase in deferred tax liabilities.

Net assets were up ¥30,238 million, to ¥437,438 million, boosted by net income attributable to owners of the parent company and foreign exchange translation adjustment, in addition to share buyback and cancellation.

As a result, the equity ratio at fiscal year-end was 67.2%.

(3) Cash Flows

Cash and cash equivalents at March 31, 2024, stood at ¥123,829 million, up 3,616 million, or 3.0%, from a year earlier.

Net cash provided by operating activities amounted to ¥43,347 million, up 123.6% from the previous year. Main factors included the secured operating income and a cash decrease due to income taxes paid.

Net cash used in investing activities totaled ¥19,968 million, down 33.6% from the previous year. Main factors were purchases of property, plant and equipment.

Net cash used in financing activities was ¥23,664 million, up 11.0% from the previous year. Main factors were acquisition of treasury stock and payment of dividends.

(4) Outlook for the Year Ending March 2025

Looking ahead, we expect the operating environment to be highly uncertain, reflected by deteriorating business confidence stemming from rising prices and interest rates globally, as well as an unstable financial system and the protracted situation in the Middle East and Ukraine. Under these conditions, we expect the costs of procuring raw materials, components, and energy to remain high, while the market shifts from fossil fuels to renewable energy. Accordingly, we predict that business conditions will remain challenging.

In response, the Rinnai Group, committed to creating healthy and comfortable lifestyles, will provide a variety of products and services with the themes of "improving quality of life" and "addressing global environmental issues" under its medium-term business plan, New ERA 2025. At the same time, we are promoting compliance with the Rinnai Carbon Neutral Declaration, RIM2050, aimed at realizing a carbon neutral society. In Japan, we will expand sales of gas clothes dryers and dishwashers, which help improve people's quality of life. We will also contribute to the fight against global warming by promoting spread of our ECO ONE hybrid water heaters with heating systems, which meet the needs of the times for higher energy-saving performance. In addition, we will work to further strengthen our supply chain to ensure a more stable supply of our products, which are daily necessities.

In the United States, we will help reduce CO2 emissions by expanding sales of tankless water heaters, which are more energy-efficient than the storage-type water heaters widely used in that key market. In China, we will strengthen Internet sales, which are expected to grow, and expand the capacity of local production plants to broaden our range

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of offerings. At the same time, we will continue expanding our business into emerging countries and untapped regions. We will also flexibly review our business portfolio with a view to realizing a decarbonized society in the future by introducing electric products in countries and regions where efforts to shift from fossil fuels to renewable energies are progressing.

Our consolidated forecasts for the year ending March 2025 are as follows: Net sales of ¥450.0 billion (up 4.6% year on year), operating income of ¥45.0 billion (up 14.3%), ordinary income of ¥48.0 billion (up 4.2%), and net income attributable to owners of the parent company of ¥28.3 billion (up 6.1%).

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2. Outline of Rinnai Group Companies

The Rinnai Group consists of the parent company, 45 subsidiaries, and two affiliated companies, for a total of 48 companies. These include 38 consolidated subsidiaries. The Group is primarily engaged in the manufacture and sale of heating appliances and components, and related businesses. The Group's structure and business flow are shown below.

Overseas (35 companies)

Holding Company / Sale of Products

(1 company)

Rinnai Holdings (Pacific) Pte Ltd. (i)

Sale of Products (10 companies)

Rinnai Italia s.r.l. (i) Rinnai Hong Kong Ltd. (i) Rinnai Canada Holdings Ltd. (i) Guangzhou Rinnai Gas and Electric Appliance Co., Ltd. (i)

Central Heating New Zealand Ltd. (i) Rinnai Plus Corp. (ii)

1. Rinnai (Malaysia) Sdn. Bhd. (ii) Rinnai UK Ltd. (ii)

1. Rinnai Trading B.V. (ii)

I	Hainan Rinnai Minsheng Kitchen (iii)

E

1. Manufacture and Sale of Products (12 companies)

1. Rinnai America Corporation (i) Rinnai Australia Pty., Ltd. (i)

Shanghai Rinnai Co., Ltd. (i) Rinnai Korea Corporation (i)

P.T. Rinnai Indonesia (i) Rinnai New Zealand Ltd. (i) Rinnai Taiwan Corporation (i) Rinnai (Thailand) Co., Ltd. (i) Rinnai Viet Nam Co., Ltd. (i)

Rinnai Brasil Heating Technology Ltd. (i) Rinnai Manufacturing Malaysia Sdn Bdh (i) Industrias MASS SA de CV(i)

Manufacture and Sale of

Components (3 companies)

RB Korea Ltd. (i)

Shanghai RB Controls Co., Ltd. (ii)

Mikuni RK Corporation (iii)

Domestic (12 companies)

Sale of Products (1 companies)

Rinnai Net Co., Ltd. (i)

R

I

N

N

1. Manufacture and Sale of

1. Products (3 companies)

Yanagisawa Manufacturing Co., Ltd. (i)

Rinnai Technica Co., Ltd. (i)

Gastar Co., Ltd. (i)

Manufacture and Sale of

Components (5 companies)

RB Controls Co., Ltd. (i)

Rinnai Precision Co., Ltd. (i)

RT Engineering Co., Ltd. (i)

Noto Tech Co., Ltd. (i)

Techno Parts Co., Ltd. (i)

C L I

E

N T

Other Business (9 companies)

i Zone Co., Ltd. (i) and others

Other Business (3 companies)

Rinnai Enterprises (i) and others

i. Consolidated subsidiary	Production and consignment
ii. Nonconsolidated subsidiary	Product purchases and processing
iii. Affiliated company (equity method not applied)	by outsourcing

3. Basic Policy Regarding Selection of Accounting Standard

The Rinnai Group has prepared these consolidated financial statements based on to the "Ordinance on Terminology, Forms, and Preparation Methods of Consolidated Financial Statements" (Ordinance of the Ministry of Finance No. 28 of 1976), except for Chapters 7 and 8. With respect to application of international accounting standards, the Group's policy is to respond appropriately after considering various circumstances in Japan and overseas.

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4. Consolidated Financial Statements

(1) Consolidated Balance Sheets

		(¥ millions)
	At March 31, 2023	At March 31, 2024
	(Year ended	(Year ended
	March 31, 2023)	March 31, 2024)
	Amount	Amount
ASSETS
Current assets
Cash and deposits	150,883	147,600
Notes and accounts receivable, and
contract assets	78,886	91,694
Electronically Recorded Monetary Claims	10,413	12,879
Marketable securities	7,737	8,068
Products	53,265	41,699
Raw materials and stores	39,562	39,953
Other	6,141	5,717
Less allowance for doubtful accounts	(5,369)	(6,175)
Total current assets	341,520	341,437
Fixed assets
Property, plant and equipment
Buildings and structures	96,515	110,907
Accumulated depreciation	(46,315)	(50,274)
Buildings and structures (net)	50,200	60,632
Machinery and vehicles	75,467	81,327
Accumulated depreciation	(55,591)	(59,785)
Machinery and vehicles (net)	19,875	21,542
Tools and fixtures	40,899	42,374
Accumulated depreciation	(36,230)	(37,681)
Tools and fixtures (net)	4,668	4,692
Land	25,878	49,306
Lease assets	6,659	8,433
Accumulated depreciation	(2,071)	(2,827)
Lease assets (net)	4,588	5,605
Construction in progress	12,954	5,645
Total property, plant and equipment	118,166	147,425
Intangible fixed assets	3,743	3,642
Investments and advances
Investments in securities	48,205	40,834
Net defined benefit assets	26,372	33,379
Deferred income taxes	4,774	5,325
Other	4,379	5,091
Less allowance for doubtful accounts	(47)	(48)
Total investments and advances	83,683	84,582
Total fixed assets	205,593	235,650
Total assets	547,114	577,088

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