Quarterly trends and results

Cumulative		FY03/21				FY03/22				FY03/22
(JPYmn)		Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4	% of Est.	FY Est.
Revenue		187,315	424,503	709,830	1,043,534	166,862	350,668	539,068	-	65.7%	820,000
	YoY	-8.8%	-10.1%	-0.1%	10.5%	-10.9%	-17.4%	-24.1%	-		-21.4%
Gross profit		15,666	33,233	55,019	81,851	14,465	29,699	44,682	-
	YoY	-6.0%	-16.5%	-6.9%	0.5%	-7.7%	-10.6%	-18.8%	-
	Gross profit margin	8.4%	7.8%	7.8%	7.8%	8.7%	8.5%	8.3%	-
SG&A expenses		11,036	22,379	33,817	46,823	10,071	19,893	29,805	-
	YoY	-2.3%	-6.7%	-5.0%	-3.7%	-8.7%	-11.1%	-11.9%	-
	SG&A ratio	5.9%	5.3%	4.8%	4.5%	6.0%	5.7%	5.5%	-
Operating profit		4,629	10,853	21,201	35,028	4,393	9,806	14,877	-	52.2%	28,500
	YoY	-13.8%	-31.4%	-9.9%	6.7%	-5.1%	-9.6%	-29.8%	-		-18.6%
	Operating profit margin	2.5%	2.6%	3.0%	3.4%	2.6%	2.8%	2.8%	-		3.5%
Recurring profit		4,786	11,052	21,630	35,781	4,521	9,883	15,066	-	52.9%	28,500
	YoY	-11.8%	-30.3%	-8.3%	7.8%	-5.5%	-10.6%	-30.3%	-		-20.3%
	Recurring profit margin	2.6%	2.6%	3.0%	3.4%	2.7%	2.8%	2.8%	-		3.5%
Net income		4,290	8,803	16,369	25,715	3,114	7,015	10,478	-	56.6%	18,500
	YoY	17.1%	-17.0%	7.4%	21.4%	-27.4%	-20.3%	-36.0%	-		-28.1%
	Net margin	2.3%	2.1%	2.3%	2.5%	1.9%	2.0%	1.9%	-		2.3%
Quarterly		FY03/21				FY03/22
(JPYmn)		Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Revenue		187,315	237,188	285,327	333,704	166,862	183,806	188,400	-
	YoY	-8.8%	-11.0%	19.6%	42.9%	-10.9%	-22.5%	-34.0%	-
Gross profit		15,666	17,567	21,786	26,832	14,465	15,234	14,983	-
	YoY	-6.0%	-24.1%	12.8%	20.0%	-7.7%	-13.3%	-31.2%	-
	Gross profit margin	8.4%	7.4%	7.6%	8.0%	8.7%	8.3%	8.0%	-
SG&A expenses		11,036	11,343	11,438	13,006	10,071	9,822	9,912	-
	YoY	-2.3%	-10.6%	-1.5%	-0.3%	-8.7%	-13.4%	-13.3%	-
	SG&A ratio	5.9%	4.8%	4.0%	3.9%	6.0%	5.3%	5.3%	-
Operating profit		4,629	6,224	10,348	13,827	4,393	5,413	5,071	-
	YoY	-13.8%	-40.4%	34.3%	48.4%	-5.1%	-13.0%	-51.0%	-
	Operating profit margin	2.5%	2.6%	3.6%	4.1%	2.6%	2.9%	2.7%	-
Recurring profit		4,786	6,266	10,578	14,151	4,521	5,362	5,183	-
	YoY	-11.8%	-39.9%	36.9%	47.1%	-5.5%	-14.4%	-51.0%	-
	Recurring profit margin	2.6%	2.6%	3.7%	4.2%	2.7%	2.9%	2.8%	-
Net income		4,290	4,513	7,566	9,346	3,114	3,901	3,463	-
	YoY	17.1%	-35.0%	63.3%	57.4%	-27.4%	-13.6%	-54.2%	-
	Net margin	2.3%	1.9%	2.7%	2.8%	1.9%	2.1%	1.8%	-

Note: The company began applying the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29; March 31, 2020). Its FY03/22 earnings forecast reflects this standard’s application. Ratios indicating YoY change between the company’s FY03/22 forecast and actual results in FY03/21 are reference values calculated by Shared Research and do not account for impact from the company’s application of the Accounting Standard for Revenue Recognition.
Source: Shared Research based on company data
Notes: Figures may differ from company materials due to differences in rounding methods.

By segment (cumulative)			FY03/21				FY03/22				FY03/22
(JPYmn)			Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4	% of Est.	FY Est.
Revenue			187,315	424,503	709,830	1,043,534	166,862	350,668	539,068	-	65.7%	820,000
	YoY		-8.8%	-10.1%	-0.1%	10.5%	-10.9%	-17.4%	-24.1%	-		-21.4%
	IT Infrastructure Distribution		169,523	386,870	655,037	969,748	149,878	315,155	485,355	-	65.4%	742,000
		YoY	-8.3%	-9.4%	1.6%	13.2%	-11.6%	-18.5%	-25.9%	-		-23.5%
		% of total	90.5%	91.1%	92.3%	92.9%	89.8%	89.9%	90.0%	-		90.5%
	Fiber		15,824	31,179	46,000	61,033	14,460	29,360	43,446	-	67.1%	64,700
		YoY	-12.4%	-17.2%	-16.6%	-15.4%	-8.6%	-5.8%	-5.6%	-		6.0%
		% of total	8.4%	7.3%	6.5%	5.8%	8.7%	8.4%	8.1%	-		7.9%
	Industrial Machinery		1,783	5,994	7,979	11,582	2,333	5,727	7,827	-	70.5%	11,100
		YoY	-15.8%	-7.9%	-12.1%	-10.8%	30.8%	-4.5%	-1.9%	-		-4.2%
		% of total	1.0%	1.4%	1.1%	1.1%	1.4%	1.6%	1.5%	-		1.4%
	Other		183	459	813	1,169	190	424	2,439	-		-
		YoY	-61.7%	-55.6%	-58.1%	-37.7%	3.8%	-7.6%	200.0%	-
		% of total	0.1%	0.1%	0.1%	0.1%	0.1%	0.1%	0.5%	-
Operating profit			4,629	10,853	21,201	35,028	4,393	9,806	14,877	-	52.2%	28,500
	YoY		-13.8%	-31.4%	-9.9%	6.7%	-5.1%	-9.6%	-29.8%	-		-18.6%
	Operating profit margin		2.5%	2.6%	3.0%	3.4%	2.6%	2.8%	2.8%	-		3.5%
	IT Infrastructure Distribution		3,838	10,749	20,234	33,226	3,558	8,556	12,981	-	53.2%	24,400
		YoY	-17.1%	-18.9%	1.1%	18.0%	-7.3%	-20.4%	-35.8%	-		-26.6%
		Operating profit margin	2.3%	2.8%	3.1%	3.4%	2.4%	2.7%	2.7%	-		3.3%
		% of total	82.9%	99.0%	95.4%	94.9%	81.0%	87.3%	87.3%	-		85.6%
	Fiber		887	-194	659	1,350	729	957	1,394	-	40.4%	3,450
		YoY	1.1%	-	-77.1%	-65.2%	-17.8%	-	111.5%	-		155.6%
		Operating profit margin	5.6%	-0.6%	1.4%	2.2%	5.0%	3.3%	3.2%	-		5.3%
		% of total	19.2%	-1.8%	3.1%	3.9%	16.6%	9.8%	9.4%	-		12.1%
	Industrial Machinery		-45	375	362	537	124	302	354	-	55.3%	640
		YoY	-	-3.8%	-22.0%	-28.7%	-	-19.5%	-2.2%	-		19.2%
		Operating profit margin	-2.5%	6.3%	4.5%	4.6%	5.3%	5.3%	4.5%	-		5.8%
		% of total	-1.0%	3.5%	1.7%	1.5%	2.8%	3.1%	2.4%	-		2.2%
	Other		-51	-77	-54	-87	-19	-12	144	-		-
		YoY	-	-	-	-	-	-	-	-
		Operating profit margin	-27.9%	-16.8%	-6.6%	-7.4%	-10.0%	-2.8%	5.9%	-
		% of total	-1.1%	-0.7%	-0.3%	-0.2%	-0.4%	-0.1%	1.0%	-
	Company-wide, eliminations		0	0	0	0	0	1	3	-
By segment (quarterly)			FY03/21				FY03/22
(JPYmn)			Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Revenue			187,315	237,188	285,327	333,704	166,862	183,806	188,400	-
	YoY		-8.8%	-11.0%	19.6%	42.9%	-10.9%	-22.5%	-34.0%	-
	IT Infrastructure Distribution		169,523	217,347	268,167	314,711	149,878	165,277	170,200	-
		YoY	-8.3%	-10.2%	23.2%	48.0%	-11.6%	-24.0%	-36.5%	-
		% of total	90.5%	91.6%	94.0%	94.3%	89.8%	89.9%	90.3%	-
	Fiber		15,824	15,355	14,821	15,033	14,460	14,900	14,086	-
		YoY	-12.4%	-21.7%	-15.2%	-11.7%	-8.6%	-3.0%	-5.0%	-
		% of total	8.4%	6.5%	5.2%	4.5%	8.7%	8.1%	7.5%	-
	Industrial Machinery		1,783	4,211	1,985	3,603	2,333	3,394	2,100	-
		YoY	-15.8%	-4.0%	-22.8%	-7.9%	30.8%	-19.4%	5.8%	-
		% of total	1.0%	1.8%	0.7%	1.1%	1.4%	1.8%	1.1%	-
	Other		183	276	354	356	190	234	2,015	-
		YoY	-61.7%	-50.3%	-61.0%	-	3.8%	-15.2%	469.2%	-
		% of total	0.1%	0.1%	0.1%	0.1%	0.1%	0.1%	1.1%	-
Operating profit			4,629	6,224	10,348	13,827	4,393	5,413	5,071	-
	YoY		-13.8%	-40.4%	34.3%	48.4%	-5.1%	-13.0%	-51.0%	-
	Operating profit margin		2.5%	2.6%	3.6%	4.1%	2.6%	2.9%	2.7%	-
	IT Infrastructure Distribution		3,838	6,911	9,485	12,992	3,558	4,998	4,425	-
		YoY	-17.1%	-19.9%	40.6%	59.3%	-7.3%	-27.7%	-53.3%	-
		Operating profit margin	2.3%	3.2%	3.5%	4.1%	2.4%	3.0%	2.6%	-
		% of total	82.9%	111.0%	91.7%	94.0%	81.0%	92.4%	87.3%	-
	Fiber		887	-1,081	853	691	729	228	437	-
		YoY	1.1%	-	15.9%	-30.8%	-17.8%	-	-48.8%	-
		Operating profit margin	5.6%	-7.0%	5.8%	4.6%	5.0%	1.5%	3.1%	-
		% of total	19.2%	-17.4%	8.2%	5.0%	16.6%	4.2%	8.6%	-
	Industrial Machinery		-45	420	-13	175	124	178	52	-
		YoY	-	-19.7%	-	-39.4%	-	-57.6%	-	-
		Operating profit margin	-2.5%	10.0%	-0.7%	4.9%	5.3%	5.2%	2.5%	-
		% of total	-1.0%	6.7%	-0.1%	1.3%	2.8%	3.3%	1.0%	-
	Other		-51	-26	23	-33	-19	7	156	-
		YoY	-	-	-84.4%	-	-	-	578.3%	-
		Operating profit margin	-27.9%	-9.4%	6.5%	-9.3%	-10.0%	3.0%	7.7%	-
		% of total	-1.1%	-0.4%	0.2%	-0.2%	-0.4%	0.1%	3.1%	-
	Company-wide, eliminations		0	-	-	-0	0	1	2	-

Source: Shared Research based on company data
Notes: Figures may differ from company materials due to differences in rounding methods.

Cumulative Q3 FY03/22 results (out February 8, 2022)

Summary

Revenue: JPY539.1bn (-24.1% YoY). The company has adopted the Accounting Standard for Revenue Recognition starting in FY03/22. Hereinafter, YoY revenue comparisons are Shared Research estimates for reference and do not take into account the change in accounting standards.
Operating profit: JPY14.9bn (-29.8% YoY)
Recurring profit: JPY15.1bn (-20.3% YoY)
Net income*: JPY10.5bn (-36.0% YoY)
*Net income attributable to owners of the parent
The company maintained its full-year FY03/22 forecast announced on May 13, 2021.

Key takeaways from earnings results

Revenue was JPY539.1bn. The company adopted the Accounting Standard for Revenue Recognition starting in FY03/22. As a result, cumulative Q3 FY03/22 revenue was JPY49.1bn lower than it would have been under the previous accounting standard. According to the company’s estimates, cumulative Q3 FY03/22 revenue fell 18.4% YoY when compared against cumulative Q3 FY03/21 revenue adjusted to reflect the new accounting standard.

Factors contributing to lower revenue (excluding the change in accounting standard): In the IT Infrastructure Distribution segment, sales of PCs and other products for the education market fell YoY due to the falloff of GIGA School concept-related demand seen during the same period in FY03/21. Sales of PCs and peripheral equipment for the consumer market also declined compared with a year ago when the shift to teleworking fueled strong demand. In the Fiber segment, revenue suffered from a reactionary drop in demand for masks and antibacterial sheets from FY03/21, as well as lower sales of casual clothing for children.

Operating profit fell 29.8% YoY to JPY14.9bn. Operating profit improved by 111.5% YoY in the Fiber segment, but fell YoY in the IT Infrastructure Distribution and Industrial Machinery segments.

Cumulative Q3 progress versus the full-year FY03/22 forecast was 65.7% for revenue (68.0% of full-year FY03/21 result in cumulative Q3 FY03/21), 52.2% for operating profit (60.5%), 52.9% for recurring profit (60.5%), and 56.6% for net income attributable to owners of the parent (63.7%).

Results by segment

IT Infrastructure Distribution segment

Revenue: JPY485.4bn (-25.9% YoY; progress of 65.4% vs. full-year FY03/22 forecast [in cumulative Q3 FY03/21, revenue reached 67.5% of the FY03/21 result]). The company has adopted the Accounting Standard for Revenue Recognition starting in FY03/22. YoY sales comparisons are Shared Research estimates for reference and do not reflect the change in accounting standards.
Operating profit: JPY13.0bn (-35.8% YoY; 53.2% [60.9%])
OPM: 2.7% (3.1% in cumulative Q3 FY03/21)

In the corporate market, with many regions placed under emergency declarations related to the COVID-19 pandemic, the company pushed forward with sales efforts with a close focus on local communities by looking at its nationwide sales locations to identify where in-person sales were possible and being flexible with teleworking. In the business targeting companies and government agencies, contract numbers for subscription services rose as customers shifted to building cloud environments and using cloud services. Sales of PCs, software, and monitors to these customers were also on a recovery track.

Shipments of PCs and tablets for the education market declined YoY as GIGA School-related orders, which began shipping in earnest during cumulative Q3 FY03/21, were largely completed.

In the consumer market, demand stemming from teleworking and online learning remained robust, but sales of PCs and peripheral equipment fell YoY.

Company performance in the domestic PC market

Number of PCs shipped: 2,014,000 units (-35.6% YoY)
Number of servers shipped: 41,000 units (-5.3% YoY)

Company performance in the subscription business

Trading volume from subscription-based services: JPY51.0bn (+5.6% YoY)

Of which, trading volume from sales partners through the iKAZUCHI subscription management portal: JPY10.6bn (+31.6% YoY)

Fiber segment

Revenue: JPY43.4bn (-5.6% YoY; progress of 67.1% vs. full-year FY03/22 forecast [in cumulative Q3 FY03/21, revenue reached 75.4% of the FY03/21 result])
Operating profit: JPY1.4bn (+111.5% YoY; 40.4% [48.8%])
OPM: 3.2% (1.4% in cumulative Q3 FY03/21)

In the synthetic fibers and rayon divisions, sales of low environmental impact rayon materials were strong, but synthetic nonwoven fabrics for masks and antibacterial sheets fell due to a drop in demand versus cumulative Q3 FY03/21. In the industrial material division, orders increased for the company’s high-demand cartridge filters and some heavy cloth products. In the clothing products division, sales of clothing and innerwear for the US market continued on a recovery trend, but sales of children's clothing fell YoY. The sharp rise in raw material and fuel prices had a downward impact on operating profit in the synthetic fibers and rayon division.

In 1H FY03/21, improper transactions negatively affected revenue by JPY640mn and operating profit by JPY2.0bn.

Industrial Machinery segment

Revenue: JPY7.8bn (-1.9% YoY; progress of 70.5% vs. full-year FY03/22 forecast [in cumulative Q3 FY03/21, revenue reached 68.9% of the FY03/21 result])
Operating profit: JPY354mn (-2.2% YoY; 55.3% [67.4%])
OPM: 4.5% (4.5% in cumulative Q3 FY03/21)

Orders

Machine tools division: Orders rose 58.2% YoY (The Japan Machine Tool Builders’ Association reported an 83.3% YoY increase in total orders between April and December 2021.)
Automatic machinery division: Orders rose 60.3% YoY

In the machine tools division, orders increased in the Chinese market, where capital investment has been expanding, while orders in Japan have also been gradually recovering. However, cumulative Q3 FY03/22 revenue and profit were both down YoY due to the decline in orders in FY03/21 and impact from the soaring price of materials. In the automatic machinery division, performance improved with the capture of orders for multiple production lines and for parts replacement and other services.

Daiwabo Holdings 3107