Sakai Heavy Industries : 2023/ 8/7 Annual Report 2023

For the Fiscal Year Ended March 31, 2023

Annual Select® 2023

SAKAI HEAVY INDUSTRIES, LTD.

Nomura Shibadaimon Bld. 5F, 1-9-9 Shibadaimon,

Minato-ku, Tokyo 105-0012

(Securities Code: 6358)

[phone]

Corporate Profile

Japan has a network of roads which exceeds 1.2 million kilometers (750,000 miles), and it is the technology of SAKAI HEAVY INDUSTRIES, LTD. that has supported this construction. It will soon be 100 years since SAKAI introduced the very first road roller ever built in Japan. Over this time, we have continued to conduct technological research and develop innovative products to meet the ever increasing sophistication of highway construction, maintenance and repair as the pioneer in road construction equipment.

We believe our company mission is threefold. First, we provide reliable products and services to our clients. Second, we always try to introduce new technologies to further develop our road construction business. Third, we apply the technologies we have so acquired to other related business areas.

Today, in the field of road construction where higher technologies, greater diversification and deeper consideration to the environment is becoming increasingly necessary, we at SAKAI HEAVY INDUSTRIES, LTD. are determined to address the needs of our era and to make every effort to help countries throughout the world with their road infrastructure using our untiring exploration of innovative technology and our know-how, which has been acquired through years of experience.

Ichiro Sakai

President and Representing Director

I. Summary of Selected Financial Data (Consolidated)

	71st term	72nd term	73rd term	74th term	75th term
	Fiscal year ended	Fiscal year ended	Fiscal year ended	Fiscal year ended	Fiscal year ended
	March 31, 2019	March 31, 2020	March 31, 2021	March 31, 2022	March 31, 2023
Net sales	24,775,064	22,744,492	21,624,456	26,599,084	31,459,945
(Thousands of yen)
Ordinary profit (loss)	1,199,970	829,906	659,186	1,407,714	2,327,800
(Thousands of yen)
Profit (loss) attributable to	825,088	470,286	4,001	1,427,334	1,694,399
owners of parent
(Thousands of yen)
Comprehensive income	236,623	15,551	402,360	1,859,664	2,841,805
(Thousands of yen)
Net assets	22,285,287	21,919,981	22,038,259	23,161,371	25,295,837
(Thousands of yen)
Total assets	35,402,964	35,448,327	35,101,001	37,858,583	40,804,658
(Thousands of yen)
Net assets per share	5,218.13	5,103.57	5,100.49	5,489.91	5,957.01
(Yen)
Basic earnings (loss) per share	193.77	109.95	0.93	336.87	400.75
(Yen)
Diluted earnings per share	-	-	-	-	-
(Yen)
Equity ratio	62.8	61.7	62.7	61.1	61.8
(%)
Return on equity (ROE)	3.7	2.1	0.0	6.3	7.0
(%)
Price earnings ratio (PER)	14.07	22.01	2,413.98	9.35	10.01
(Times)
Net cash provided by (used in)	(3,633,169)	3,448,160	1,525,854	2,359,626	1,893,239
operating activities
(Thousands of yen)
Net cash provided by (used in)	(2,335,221)	(825,877)	(508,901)	(263,604)	(399,429)
investing activities
(Thousands of yen)
Net cash provided by (used in)	(1,173,694)	(226,644)	(812,505)	(1,227,318)	(2,242,051)
financing activities
(Thousands of yen)
Cash and cash equivalents at	4,210,496	6,682,986	6,847,106	7,926,252	7,416,549
end of period
(Thousands of yen)
Number of employees	628	633	602	620	611

(Persons)

Notes: 1. The Company has applied the "Accounting Standard for Revenue Recognition" (ASBJ Statement No. 29, March 31, 2020) and relevant ASBJ regulations from the beginning of the 74th term, and the figures for the 74th term and subsequent terms in this summary of selected financial data have been adjusted to reflect the application of the aforementioned standard, etc.

2. Diluted earnings per share is not provided because there were no potential shares.

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II. Overview of Operations

The business environment affecting SAKAI HEAVY INDUSTRIES, LTD. and its subsidiaries (the "Group") during the fiscal year ended March 31, 2023 (April 1, 2022 to March 31, 2023) experienced a prolonged rise in security tensions caused by a sharp confrontation between the U.S. and China and Russia's invasion of Ukraine. However, the environment was on a solid recovery path even under drastically changing global conditions, such as worldwide inflation of energy, material, and other various prices, supply chain disruptions resulting in decreased supply capacity, and interest rates raised by central banks in Europe and the U.S. that affect trends in international capital markets.

Under such conditions, the Group continued to promote strengthening its pricing and product supply capabilities, creating a sustainable management structure through ESG and DX, and medium- to long-term growth strategies based on overseas businesses and next-generation businesses.

As a result, net sales for the fiscal year under review were 31,459 million yen, an increase of 18.3% year on year. This achievement was supported by expanded overseas sales even while supply chain issues put downward pressure on production and sales activities. Operating profit was 2,506 million yen, an increase of 81.2% year on year. This was contributed by the overseas business that focused on price revisions and streamlining to improve its earnings structure. Consequently, ordinary profit was 2,327 million yen, an increase of 65.4% year on year, and profit attributable to owners of parent was 1,694 million yen, an increase of 18.7% year on year.

Trend of operating results

		Net sales:	Japan	North America	Asia	Others
Net sales		Operating profit:
(Millions of yen)
32,500						31,459
30,000						Operating profit
					(Millions of yen)
27,500				26,599
24,775				3,000
25,000
	22,744				2,506
22,500		21,624
				2,500
20,000
17,500						2,000
15,000	1,414			1,383		1,500
12,500
	959
10,000
		701			1,000
7,500
5,000						500
2,500
0						0
	71st term	72nd term	73rd term	74th term		75th term

The following presents net sales on a consolidated basis by geographic segment.

Net sales in Japan were 15,208 million yen, an increase of 6.4% year on year, due to continued solid demand against the backdrop of measures to accelerate national land resilience.

Net sales to overseas were 16,251 million yen, an increase of 32.0% year on year, reflecting a further recovery in demand at North American and Southeast Asian markets.

Net sales to North America were 7,751 million yen, an increase of 53.8% year on year, as the Infrastructure Investment Act boosted road construction investments although higher interest rates caused a decline in housing starts.

Net sales to Asia were 7,796 million yen, an increase of 20.1% year on year, supported by large markets, mainly Indonesia and Vietnam, with continuous solid environments, while some markets showed signs of

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deceleration in growth.

Net sales to other markets were 703 million yen, a decrease of 9.3% year on year, despite a steady trend in Oceanian markets.

74th term	75th term
Ratio of net sales by geographic segment	Ratio of net sales by geographic segment

North America 19.0%

Asia 24.4%

Others	Others
2.9%	2.2%

North America

24.7%

Japan

53.7%Japan

48.3%

Asia 24.8%

Operating results by segment are as follows: Japan

Although the parts shortage continued in an environment with solid demand, total net sales were 24,556 million yen, an increase of 14.9% year on year, as domestic sales, product exports, and parts exports to overseas factories were robust, and operating profit was 836 million yen, a decrease of 5.4% year on year, due to delays in domestic sales price revisions in response to cost increases.

Overseas

In the United States, although there were supply constraints due to the parts shortage in an environment with strong demand, total net sales were 7,802 million yen, an increase of 53.4% year on year, and because of the improvement of the earnings structure due to sales price revisions and the reduction of transportation costs, operating profit was 688 million yen, an increase of 109.8% year on year.

In Indonesia, total net sales were 7,012 million yen, an increase of 35.9% year on year, and operating profit was 836 million yen, an increase of 204.4% year on year, due to steady recovery in domestic sales and robust exports to third countries.

In China, total net sales were 1,589 million yen, an increase of 63.3% year on year, and operating profit was able to return to profitability at 133 million yen, which is an improvement of 213 million yen year on year, as a result of the expansion of product and parts exports to group companies amid domestic demand continuing to decline.

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III. Consolidated Financial Statements

(1) Consolidated Balance Sheets

			(Thousands of yen)
		As of March 31, 2022	As of March 31, 2023
Assets
Current assets
Cash and deposits	7,993,405	7,484,336
Notes and accounts receivable - trade	7,137,752	8,068,886
Electronically recorded monetary claims - operating	1,400,265	1,395,360
Merchandise and finished goods	2,751,053	3,406,701
Work in process	1,347,188	1,228,708
Raw materials and supplies	3,109,380	4,816,726
Other	1,336,688	1,039,755
Allowance for doubtful accounts	(59)	(97)
Total current assets	25,075,675	27,440,377
Non-current assets
Property, plant and equipment
Buildings and structures	8,179,050	8,662,423
Accumulated depreciation	(5,213,645)	(5,575,278)
Buildings and structures, net	2,965,404	3,087,145
Machinery, equipment and vehicles	3,785,378	3,884,022
Accumulated depreciation	(3,123,370)	(3,236,642)
Machinery, equipment and vehicles, net	662,008	647,380
Land	3,010,196	3,238,498
Leased assets	644,530	467,324
Accumulated depreciation	(417,142)	(191,750)
Leased assets, net	227,387	275,573
Other	1,519,689	1,541,577
Accumulated depreciation	(1,399,524)	(1,406,559)
Other, net	120,164	135,018
Total property, plant and equipment	6,985,162	7,383,615
Intangible assets	480,763	307,527
Investments and other assets
Investment securities	3,421,772	3,826,612
Deferred tax assets	456,786	390,867
Other	1,438,685	1,455,915
Allowance for doubtful accounts	(261)	(258)
Total investments and other assets	5,316,982	5,673,136
Total non-current assets	12,782,908	13,364,280
Total assets		37,858,583	40,804,658

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